Commission welcomes the political agreement on the proposal for a Public Sector Loan Facility of the Just Transition Mechanism

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This article is brought to you in association with the European Commission.


The Commission welcomes today’s political agreement by the European Parliament and the Council on the Commission’s proposal for a new Public Sector Loan Facility (PSLF). With this, all the proposals of the Just Transition Mechanism (JTM) have been agreed, and are pending the final approval by the European Parliament and the Council.

The Facility specifically targets public entities, creating preferential lending conditions for projects that do not generate sufficient revenue to be financially viable. It consists of a combination of grants (€1.5 billion) from the EU budget and loans (€10 billion) provided by the European Investment Bank (EIB). The grant support will be added to the EIB loan and reduce the financial burden for beneficiaries and increase the attractiveness of the investments concerned. Advisory support will be provided to beneficiaries through the advisory hub set up under InvestEU.

Commissioner for Cohesion and Reforms, Elisa Ferreira said: “This Facility is an important tool to help our regions and communities meet the challenges stemming from climate transition. It will complete our tool kit for supporting those living in just transition regions to develop new skills and create new businesses and jobs. It is very important that we could do so today, only a few days after the agreement on a climate law. By easing the costs of the transition, we will help the EU as a whole to meet the 2050 climate neutrality goals. I look forward to the Regulation’s final adoption so that additional funding can start flowing for a cohesive transition and a fresh start for the affected regions and people.

In delivering the European Green Deal, the Facility will help to address the socio-economic challenges of the transition to climate neutrality in the most affected territories as identified in the territorial Just Transition Plans. It will complement the two other pillars of the Just Transition Mechanism, namely the Just Transition Fund (JTF) and a dedicated just transition scheme under InvestEU.

Overall, the Facility is expected to mobilise between €25 and €30 billion of public investments over the next 7 years. The EIB will be the main finance partner. However, the Regulation provides for the possibility to cooperate with other finance partners, in case of a possible future increase of resources.

The Facility will be implemented under direct management, by the Commission and the European Climate, Infrastructure and Environment Executive Agency (CINEA), and will either provide support to individual projects or through framework loans.

The main elements of the compromise include:

  • Resources: €1.525 billion from the EU budget for the grant component and €10 billion of loans from the EIB.
  • Objective: supporting public entities in addressing the socio-economic challenges of the territories most negatively impacted by the EU climate transition, as identified in the Territorial Just Transition Plans (TJTPs).
  • The grant component shall be implemented under direct management.
  • Grants shall be awarded in two steps: grants pursuant to calls for proposals not exceeding the national shares and grants awarded on a competitive basis at Union level until exhaustion of remaining resources.
  • Advisory support for the preparation, development and implementation of eligible projects shall be provided to beneficiaries through the advisory hub set up under InvestEU.
  • Work programmes specifying eligibility conditions and criteria for project selection and for their prioritisation in case demand exceeds funding resources under national allocations.
  • Award criteria, to be later detailed in the work programmes, which may be applied in case the number of eligible projects exceeds the available resources. Priority would be given to beneficiaries located in less developed regions.
  • A list of horizontal principles to be respected by all investments, including the respect for fundamental rights, gender equality, non-discrimination, and social and environmental protections. The “do no significant harm” principle is also part of these elements.
  • An increased grant component for less developed regions, which could go up to 25% of the loan component.
  • An increased allocation for technical assistance, to the benefit of project promoters in the less developed regions.

Next Steps

Following the technical finalisation of the text reflecting the political agreement, the European Parliament and the Council will have to endorse the text to allow the Regulation to enter into force. In parallel, the JTF Regulation needs to be published in the official journal and the TJTPs need to be submitted to the Commission and adopted.  First calls for proposals under the Facility should be launched in the second half of 2021.

Background

The Public Sector Loan Facility (PSLF) is one of the three pillars of the Just Transition Mechanism (JTM), which is part of the European Green Deal to achieve EU climate neutrality by 2050. The PSLF was proposed by the Commission on 28 May 2020. The other two pillars of the JTM are the JTF (on which a political agreement was reached by the co-legislators in December 2020) and a dedicated just transition scheme under InvestEU (agreed as part of the InvestEU Regulation) on 17 March 2021.

The governance framework of the JTM is centred on the TJTPs that Member States will prepare to identify the territories most negatively affected by the transition to climate-neutrality by 2050 and the investments that will help socio-economic change in these territories.

The preparation of the TJTPs is a key condition for programming and subsequently implementing resources from the JTF and the other pillars of the JTM. Each Member State will prepare them together with the relevant internal partners, in dialogue with the Commission, and by ensuring they are consistent with the regional smart specialisation strategies and the National Energy and Climate Plans. The Commission will adopt the plans together with the programmes entailing the JTF support.

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