Just Transition Mechanism (JTM)
- Category: European Union Carbon Market Glossary
According to the European Commission's Proposal of 14 January 2020 for a Regulation of the European Parliament and of the Council establishing the Just Transition Fund (COM(2020) 22 final, 2020/0006 (COD)), the Just Transition Mechanism (JTM) will consist of three pillars:
- a Just Transition Fund implemented under shared management,
- dedicated scheme under InvestEU, and
- a public sector loan facility with the EIB Group to mobilise additional investments to regions concerned.
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The Just Transition Fund will be used primarily to provide grants; the dedicated transition scheme under InvestEU will crowd in private investments, and the partnership with the EIB will leverage public financing.
The focus of the Just Transition Fund will be on the economic diversification of the territories most affected by the climate transition and the reskilling and active inclusion of their workers and jobseekers.
The eligibility of investments under the other two pillars of the Just Transition Mechanism will be broader to support activities related to the energy transition.
The dedicated Invest EU scheme will cover projects for energy and transport infrastructure, including gas infrastructure and district heating, as well as decarbonisation projects.
Under the public loan facility with the EIB, public authorities will be enabled to implement measures to facilitate the transition to climate neutrality.
Projects will range from energy and transport infrastructure, to district heating networks, and energy efficiency measures including renovation of buildings.
Just Transition Fund (JTF)
According to the European Commission’s draft Regulation, the JTF shall only support activities which contribute to the implementation of the territorial just transition plans in the following fields:
(a) productive investments in SMEs, including start-ups, leading to economic diversification and reconversion;
(b) investments in the creation of new firms, including through business incubators and consulting services;
(c) investments in research and innovation activities and fostering the transfer of advanced technologies;
(d) investments in the deployment of technology and infrastructures for affordable clean energy, in greenhouse gas emission reduction, energy efficiency and renewable energy;
(e) investments in digitalisation and digital connectivity;
(f) investments in regeneration and decontamination of sites, land restoration and repurposing projects;
(g) investments in enhancing the circular economy, including through waste prevention, reduction, resource efficiency, reuse, repair and recycling;
(h) upskilling and reskilling of workers;
(i) job-search assistance to jobseekers;
(j) active inclusion of jobseekers;
(k) technical assistance.
Additionally, the JTF may support (provided that such investments have been approved as part of the territorial just transition plan):
- productive investments in areas designated as assisted areas (as defined in the Treaties), in enterprises other than SMEs,
- investments to achieve the reduction of greenhouse gas emissions from activities listed in Annex I to the EU ETS Directive (2003/87/EC).
The JTF shall not support:
(a) the decommissioning or the construction of nuclear power stations;
(b) the manufacturing, processing and marketing of tobacco and tobacco products;
(c) undertakings in difficulty, as defined in Article 2(18) of Commission Regulation (EU) No 651/201416;
(d) investment related to the production, processing, distribution, storage or combustion of fossil fuels;
(e) investment in broadband infrastructure in areas in which there are at least two broadband networks of equivalent category.
Territorial just transition plans
The draft Regulation imposes on the EU Member States the obligation to prepare one or more territorial just transition plans in accordance with the template set out in Annex II to the Regulation.
The territorial just transition plans are intended to cover territories that are most negatively affected based on the economic and social impacts resulting from the transition, in particular with regard to expected job losses in fossil fuel production and use and the transformation needs of the production processes of industrial facilities with the highest greenhouse gas intensity.
The draft Regulation requires a territorial just transition plan to contain the following elements:
(a) a description of the transition process at national level towards a climate-neutral economy, including a timeline for key transition steps which are consistent with the latest version of the National Energy and Climate Plan (‘NECP’);
(b) a justification for identifying the territories as most negatively affected by the transition process referred to in point (a) and to be supported by the JTF;
(c) an assessment of the transition challenges faced by the most negatively affected territories, including the social, economic, and environmental impact of the transition to a climate-neutral economy, identifying the potential number of affected jobs and job losses, the development needs and objectives, to be reached by 2030 linked to the transformation or closure of greenhouse gas-intensive activities in those territories;
(d) a description of the expected contribution of the JTF support to addressing the social, economic and environmental impacts of the transition to a climate-neutral economy;
(e) an assessment of its consistency with other national, regional or territorial strategies and plans;
(f) a description of the governance mechanisms consisting of the partnership arrangements, the monitoring and evaluation measures planned and the responsible bodies;
(g) a description of the type of operations envisaged and their expected contribution to alleviate the impact of the transition;
(h) where support is provided to productive investments to enterprises other than small and medium enterprises (SMEs), an exhaustive list of such operations and enterprises and a justification of the necessity of such support through a gap analysis demonstrating that the expected job losses would exceed the expected number of jobs created in the absence of the investment;
(i) where support is provided to investments to achieve the reduction of greenhouse gas emissions from activities listed in Annex I to the EU ETS Directive (2003/87/EC), an exhaustive list of operations to be supported and a justification that they contribute to a transition to a climate neutral economy and lead to a substantial reduction in greenhouse-gas emissions going substantially below the relevant benchmarks established for free allocation under the EU ETS Directive and provided that they are necessary for the protection of a significant number of jobs;
(j) synergies and complementarities with other Union programmes and pillars of the Just Transition Mechanism to address identified development needs.
Territorial just transition plans shall be consistent with National Energy and Climate Plans.