GREEN ECONOMY

EU launches Green Deal Investment Plan

The European Union plans to become the first climate-neutral entity in the world by 2050. In order to reach such an ambitious goal, the EU has announced the launch of the Green Deal's Investment Plan - the Sustainable Europe Investment Plan, which will unlock access to funds for both private and public bodies for at least €1 trillion.

To ensure the sustainability of the plan, the Commission has pledged to support those countries and regions which will be the most affected by the transformation from an economic and social perspective, through the Just Transition Mechanism.

The President of the European Commission, Ursula von der Leyen, said: “People are at the core of the European Green Deal, our vision to make Europe climate-neutral by 2050. The transformation ahead of us is unprecedented. And it will only work if it is just - and if it works for all. We will support our people and our regions that need to make bigger efforts in this transformation, to make sure that we leave no one behind.”

Her sentiments are echoed by Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People: “For Europe to transition to a climate-neutral economy, we need both political commitment and massive investments. The Green Deal shows our determination to tackle climate change, which we are now backing up with a funding plan. First, we will use the EU budget to leverage private funds for green projects across Europe and support the regions and people most affected by the transition. Second, we will create the right regulatory incentives for green investments to thrive. Last but not least, we will help public authorities and market players to identify and develop such projects.”

 

The European Green Deal Investment Plan

The plan is based on three main pillars:

  1. Financing: the goal is to mobilise at least €1 trillion of sustainable investments by 2030, with the European Investment Bank to play a pivotal role;
  2. Enabling: the Commission will provide incentives for investors by placing sustainable finance at the heart of the financial system and will promote sustainable investment by public authorities by encouraging green budgeting and procurement, and by designing ways to facilitate procedures to approve State Aid for just transition regions;
  3. Practical support: support will be provided for the planning, designing, and deployment of sustainable projects by public authorities and project promoters.

 

The Just Transition Mechanism 

The aim of the Just Transition Mechanism (JTM) is to ensure that the switch to a sustainable economy, will not generate inequalities for those countries and regions still heavily dependent from the fossil fuel value chain. The JTM will provide support to help mobilise at least €100 billion over the period 2021-2027 in the most affected regions, and it will come in addition to the substantial contribution of the EU's budget through all instruments directly relevant to the transition. The Mechanism is about more than funding: relying on a Just Transition Platform, the Commission will be providing technical assistance to Member States and investors and make sure the affected communities, local authorities, social partners and NGOs are involved. The Just Transition Mechanism will include a robust governance framework centred on territorial just transition plans.

The three primary sources of financing for the JTM will be:

  1. A Just Transition Fund: will receive €7.5 billion of fresh EU funds, coming on top of the Commission's proposal for the next long-term EU budget. In order to tap into their share of the Fund, Member States will, in dialogue with the Commission, have to identify the eligible territories through dedicated territorial just transition plans. They will also have to commit to match each euro from the Just Transition Fund with money from the European Regional Development Fund and the European Social Fund Plus and provide additional national resources. Taken together, this will provide between €30 and €50 billion of funding, which will mobilise even more investments. The Fund will primarily provide grants to regions. It will, for example, support workers to develop skills and competences for the job market of the future and help SMEs, start-ups, and incubators to create new economic opportunities in these regions. It will also support investments in the clean energy transition, for example in energy efficiency;
  2. A dedicated just transition scheme: under InvestEU to mobilise up to €45 billion of investments. It will seek to attract private investments, including in sustainable energy and transport that benefit those regions and help their economies find new sources of growth;
  3. A public sector loan facility with the European Investment Bank: will be backed by the EU budget to mobilise between €25 and €30 billion of investments. It will be used for loans to the public sector, for instance, for investments in district heating networks and renovation of buildings. The Commission will come with a legislative proposal to set this up in March 2020.