Is the EU Just Transition Fund all for naught?

Whether €5 billion or €35 billion, the EU’s upcoming Just Transition Fund alone is unlikely to be enough to pay for the energy transition of Europe’s remaining coal countries. Nor is it necessary, argue Pieter de Pous and Rebekka Popp.

Pieter de Pous is senior policy adviser at E3G, a climate think tank. Rebekka Popp is a researcher at E3G’s Berlin office.

In a surprise announcement Wednesday (4 December), the European Commission President announced publication of a full legal proposal in January on the Just Transition Fund to help member states ditch coal.

In a bid to win support for new climate plans, the fund can now make an impact, but only if it aligns with the EU’s 2050 climate neutrality goal planned for adoption at next week’s summit, on 12-13 December.

Countries with a high use of coal in their energy mix undoubtedly face a major challenge in achieving zero emissions by 2050. And the creation of a Just Transition fund will undoubtedly help them overcome the difficulties of becoming climate neutral.

At the same time however, expectations for what this fund can deliver should be tamed. Whether €5 billion or €35 billion, the new fund alone is unlikely to be enough to pay for the energy transition of Europe’s remaining coal countries.

Nor is it necessary. Costs of decarbonisation are going down dramatically and will continue dropping, also in Central and Eastern European countries which are coal heavy. In Czechia, costs of new renewables are expected to be competitive with existing coal as early as 2021.

Analysis by WWF found additional investment needs for Poland are between €7.5 and €18 billion, providing a direct savings of €55 billion in reduced energy costs only. Other funds in the EU budget such as the European Social Fund, Cohesion Funds and the Modernisation Fund are available to help too.

If today’s priority is phasing out coal, and other fossil energies like gas and oil, than slashing emissions from other sectors like manufacturing, transport and livestock farming is rapidly climbing to the top of the political ladder.

Clean energy transition ‘is a social policy issue’, Poles insist

The social policy dimension was largely overlooked when the European Union decided energy and climate change objectives for 2030, Poles have warned, calling on policymakers to endorse a “just transition fund” to support the country’s coal phase-out.

Unfortunately, the impacts this will have on European employment are still poorly understood. With the right parameters, this is where the Just Transition fund can differentiate itself from existing funds, for example by closing knowledge gaps.

To set itself up for real success, the Just Transition Fund must do two things:

First, rather than just throw money at the problem, it should help coal and carbon intensive regions in drawing up Just Transition strategies. These plans should be made with active participation by the people living in affected regions as well as help secure additional funding sources to implement them.

Most importantly, to ensure a Just Transition, the fund should require all recipients to outline their 2030 coal phase-out plans as part of their efforts to achieve climate neutrality by 2050. A review of draft national energy and climate plans by the NGO CAN Europe and Think Tank Sandbag revealed Poland, Czechia, Bulgaria and Romania are currently still on course to be Europe’s major coal countries by 2030. If the EU is to become climate neutral by 2050 this must change.

Second, the fund must close knowledge gaps on the employment effects of climate policy in other sectors. For example, how will shifting to e-mobility influence jobs in the car industry, largely located in countries like Hungary, Slovakia or Czechia? Paying for studies and dialogues in affected regions are two first steps to understanding the best way to tackle the social impacts of going climate neutral. These results could further feed into a revision of the Fund at a later stage.

The proposed Just Transition Fund has the potential to accelerate the EU’s transition to a carbon neutral economy, but only if it is designed right.

Next week EU leaders will gather in Brussels to reach an agreement on carbon neutrality by 2050, a crucial first step in get the Fund’s governance right. The Commission should then use the additional time it now has for preparing the legal proposal to fully align it with the EU’s new-found climate ambition.

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