A Fund just for transition, or an EU fund for the Just Transition?

June 19, 2020

By Imke Lübbeke - Head of Climate and Energy, WWF European Policy Office
and Pedro Dias - Secretary General, Solar Heat Europe

The EU’s Just Transition Fund offers a lifeline to Europe’s most vulnerable regions. To succeed, the Fund must exclude all fossil fuels and put people first, not subsidise private investments in energy companies.

In January, the European Commission announced a fund to help poorer regions make their economies more sustainable. Last month it massively boosted its offer to €40 billion, recognising that the challenges facing regions in transition have been aggravated by the COVID-19 crisis.

From the very start, industries, utilities and political groups have been clamouring for a say in how the fund should be divided.

Some want it to finance the transition to clean energy. But  €40 billion across 27 Member States is still far smaller than what’s required for the transition; the European Commission itself estimates that current renewables targets alone would require annual investments of €30 billion. Instead, the Fund should tackle the socioeconomic challenges people and regions face. In this way, it will complement investments in the transition itself.

How we use the Fund, and which investments it complements, are crucial decisions. We can no longer afford to invest in activities which make economies more vulnerable, delay the move to climate neutrality or push transition costs down the line. Since fossil fuels – coal, oil and gas – would do all of those things, no funds should go to activities that would prolong their use, or lock in new fossil infrastructure.

Workers in Bulgaria

IMAGE: WWF-Greece / Marianna Plomariti

The gas delusion

The gas industry is clamouring for gas to be directly or indirectly eligible for Just Transition Fund money. This makes no sense: not only does fossil gas have no role as a transitional fuel - it can even accelerate climate change1 - there is also no evidence it would create many or decent jobs. In contrast, investment in renewable energy has high job creation potential2, generating over twice as many jobs as fossil investment3.

So-called ‘hydrogen-ready gas infrastructure’ is very unlikely to be relevant to a Just Transition. Any truly renewable and carbon neutral hydrogen will be an expensive and scarce resource, something that will need to be prioritised for certain industries (such as steel and basic chemicals) and forms of heavy transport. Renewable hydrogen should not be used for the supply of low grade heat to buildings or as a means of addressing energy poverty.

The Bełchatów Power Plant in Poland is Europe's largest lignite-fired power plant

IMAGE: ClientEarth

The fund is for the most vulnerable

What about the companies lobbying to receive grants from the Just Transition Fund? Giving sums from the fund to large companies ignores the multitude of EU money pots already available to help them to get clean. For instance, InvestEU provides guarantees for investments of over €100 million euros in sustainable infrastructure. Meanwhile the Innovation Fund may provide - depending on the price of carbon - over €10 billion over the next seven years for such investments and can be complemented by the €100 billion Horizon 2020 fund and national funds, including ETS revenues and other sources. In addition to the EU public funding available, it is also the companies’ responsibility to invest in their own future.

Coal mining in Kinhasa, Democratic Republic of Congo

IMAGE: WWF-US / Julie Pudlowski

What should the fund target?

First, there is no one size that fits all, nor one single activity that will enable a Just Transition. But there are important principles to guide all activities supported by the fund.

Second, investments must be consistent with EU climate and environment objectives. This both increases investor confidence and avoids the worst impacts of climate change. All investments should apply the “do no harm” environmental principle from the forthcoming EU ‘taxonomy’ tool, which will define which investments are sustainable.

Third, the fund must support the diversification of economies and not reinforce the status quo. Support to SMEs and community initiatives, in complement to other instruments, will help build resilience to future crises and policy shifts, while facilitating transformative change in regions.

Fourth, the fund should be both fresh and additional. It should complement – not replace - investments from Cohesion Policy, InvestEU, the Emissions Trading System’s Innovation and Modernisation Funds, as well as national sources and private investment in the transition.

Finally, but crucially, the fund must put people at its heart. Investments should increase society’s resilience to future changes, spread the costs of the transition fairly and reduce inequalities. Investment decisions should be guided by territorial transition plans, developed in an open process that includes workers, civil society and community representatives. They must contain a clear commitment to climate neutrality, and a pathway to get there.

The best investments will result in diversified, sustainable industries and value chains, generating decent and secure jobs while tackling inequality and energy poverty. For example, the massive renovation of public and residential buildings to improve sustainable energy efficiency and heating. It is even better if activities have a direct link back into the community, such as helping develop a wind farm owned by people from the local village.

To enable a truly Just Transition to climate neutrality, we cannot afford to prop up the status quo. All EU funds must pull in the same direction to enable a transition that is socially fair and can reap the huge opportunities for people and the environment of a climate-friendly, sustainable economy. As the dust settles and minds turn to recovery, now more than ever we need to invest in resilience and in leaving no one behind.

Keep track of our work on www.wwf.eu and Twitter (@WWFEU)

1 http://energywatchgroup.org/natural-gas-makes-no-contribution-to-climate-protection

2 Working towards a climate neutral Europe: Jobs and skills in a changing world, Corporate Leaders Group Europe, April 2018 https://www.corporateleadersgroup.com/reports-evidence-and-insights/Jobs-and-skills-in-a-changing-world

3 Garrett-Peltier, Economic Modelling, “Green versus brown: Comparing the employment impacts of energy efficiency, renewable energy, and fossil fuels using an input-output model”, 2017.

Available here: https://www.sciencedirect.com/science/article/abs/pii/S026499931630709X?via%3Dihub