In a Nutshell

The Just Transition Mechanism is the European Union’s main tool to ensure that the transition to a climate-neutral economy happens in a fair and just way. Through its three pillars, it aims to mobilise an estimated EUR 55 billion over 2021-2027 to support the European regions, sectors and workers most affected by the transition.

The EU regions identified as most at risk or overburdened by the transition, and thus most in need of justice-oriented policies, are those whose economies rely heavily on fossil fuel extraction and production, particularly coal. Poland, Germany, Romania, Bulgaria, the Czech Republic and Spain face the greatest potential job losses in this sector.

The policy establishes three financial mechanisms to work towards a Europe-wide just transition: the Just Transition Fund (JTF), a dedicated transition scheme under InvestEU, and a loan facility provided by the European Investment Bank. Respectively, they offer grants, mobilise private investments and leverage public finance. Whereas the eligibility criteria for the JTF promote the diversification and modernisation of economies and the reskilling of workers, the other mechanisms are broader in scope and include a wide range of sectors.

As a nascent sector set to grow in scale and importance in the coming decades, carbon dioxide removal falls under the scope of the Just Transition Mechanism. To function, the EU CDR industry will need a large workforce, making it a natural candidate for reskilling programmes across multiple sectors, including academic research, engineering and technical jobs.

What's on the Horizon?

By June 2025, the Commission will need to review the implementation of the Joint Transition Fund.

Each member state has a national share reserved under the Public Sector Loan Facility until 31 December 2025. There are regular deadlines to apply for grants under the facility, with the next one on 17 January 2024.

The territorial Just Transition plans cover the period up to 2030.

Deep Dive

The Just Transition Fund

The JTF is the first pillar of the Just Transition Mechanism. The fund primarily supports the economic diversification and reconversion of the most affected regions through grants. EUR 17.5 billion was attributed to the fund through a regulation, with EUR 7.5 billion coming from the Multiannual Financial Framework for the period 2021-2027 (MFF) and EUR 10 billion from the NextGenerationEU for the period 2021-2023.

To access allocated funds, member states must prepare territorial just transition plans covering territories “most negatively affected based on the economic and social impacts resulting from the transition”. Special consideration should be given to islands and outermost regions.

The InvestEU “Just Transition” scheme

The second pillar of the JTM provides budgetary guarantees to ‘implementing partners’ that the EU Commission will provide direct or indirect financing. It can support investments detailed in national territorial just transition plans spanning a wide range of projects, including energy and transport infrastructure decarbonisation, economic diversification and social infrastructure. This scheme is expected to mobilise EUR 10-15 billion, coming mostly from the private sector, with some support from InvestEU implementing partners such as the European Investment Bank.

The public sector loan facility with the European Investment Bank

The third pillar of the JTM and its accompanying regulation provides a mix of EUR 1.5 billion in grants from the EU budget and approximately EUR 10 billion of loans from the European Investment Bank. A further EUR 18-25 billion of public investments is expected to be mobilised. The loan facility mainly targets energy and transport infrastructure, district heating networks, energy efficiency measures and social infrastructure. Applications must be linked to the relevant territorial just transition plan to demonstrate how the project supports specific national ‘green transitions’. Each member state is reserved a part of the budget under the facility until 2025, after which any unused amount will be made available to projects across the entire EU.

While the two other pillars of the JTM provide rather broad requirements, the Just Transition Fund outlines a specific list of actions and sectors that can be supported. CDR in its broadest sense could directly or indirectly fall under multiple categories. For example, it could help funnel productive investments in SMEs and investments in the creation of new firms. On the research side, CDR can be a destination for investments in research and innovation activities. On the social side, it could accompany the upskilling and reskilling of workers and job seekers. Finally, on the infrastructure side, it could be applied to upgrade district heating networks, especially combined heat and power plants, to unlock investments in the deployment of climate technology and systems, and for investments in renewable energy.

Evaluating the Just Transition Mechanism

Being the EU’s flagship mechanism to ensure no one is left behind in the green transition, the JTM’s main lever consists of requiring the development of territorial just transition plans. These are intended to ensure a high level of ambition whilst allowing civil society and the affected publics to have visibility over the just transition plan. There is also a certain degree of technical assistance provided for local public authorities, mostly through the Just Transition Platform, a one-stop shop platform providing information on all aspects of the JTM.

However, the JTM has several potential drawbacks. Firstly, the JTM might inadvertently reward countries that have delayed climate action by providing funds to member states with carbon-intensive industries that would not have decarbonisation plans otherwise. Secondly, the initial budget of the JTF was set at about EUR 44 billion, whereas it has now been downsized to EUR 17.5 billion, which will inevitably mean that fewer projects will be supported. Thirdly, the vision of fairness set out in the JTM and the European Green Deal in general has been criticised as a short-term, dirigiste solution to systemic challenges. Only specific sectors and regions are included, whereas other meaningful activities involving other types of actors and regions are left out of the JTM. Finally, the JTM’s operationalisation of climate justice is focused on those who are adversely affected by the transition, rather than on those who are adversely affected by climate change at large.

Timeline

11 December 2019
14 January 2020
28 May 2020
29 June - 3 July 2020
9 March 2021
July 2021
August 2021
11 December 2019

European Green Deal communication and announcement of the Just Transition Mechanism

14 January 2020

Commission adopts the Just Transition Fund Proposal

28 May 2020

Commission adopts the Public Sector Loan Facility Proposal

29 June - 3 July 2020

Launch of the Just Transition Platform

9 March 2021

Adoption of the InvestEU Guidelines, including guidelines for the Just Transition Special Scheme

July 2021

Entry into force of the Just Transition Fund Regulation

August 2021

Entry into force of the Public Sector Loan Facility Regulation

Unofficial Title

Just Transition Mechanism

Year

2021

In a Nutshell

The National Energy and Climate Plans (NECPs) outline the EU member states’ 2021-2030 strategy to meet the EU 2030 energy and climate targets. The Regulation on the governance of the energy union and climate action (EU) 2018/1999, requires member states to regularly submit NECPs and update them. It also outlines how the European Commission should review the plans.

In their NECPs, member states outline their plans for delivering on 2030 targets across five dimensions: decarbonisation, energy efficiency, energy security, internal energy market and research, development and innovation (RD&I). Member states use a template when outlining their plans to facilitate transborder collaboration and efficiency gains. So far, the 2030 climate and energy targets aim for at least 55% greenhouse gas emissions reductions, 32% of the total energy production coming from renewable energy, and a 32.5% improvement in energy efficiency. The Fit-for-55 package called for more ambitious targets, some of which are still under review, including raising the share of renewable energy within the Renewable Energy Directive to 42.5% by 2030.

Out of the 26 draft updated NECPs that have been submitted by member states – noting that Austria’s draft was submitted but later withdrawn -, only seven submissions include some sort of target for removals. These are either legally enshrined, such as in Portugal, or indicative targets based on the modelling of residual emissions, such as in the Netherlands. Furthermore, only ten NECPs mention novel CDR methods, such as Direct Air Capture and Carbon Storage (DACCS) and biochar. These technologies are predominantly mentioned as part of countries’ RD&I needs.

Several countries have also signalled that their submitted drafts are incomplete and are expected to change substantially as part of the final updated NECPs.

What's on the Horizon?

As required by the  Regulation on the Governance of the Energy Union and Climate Action, member states must have submitted an updated draft of their NECPs by 30 June 2023, and the final version by 30 June 2024.

The Regulation also requires that by 1 January 2029 and every ten years thereafter, member states will need to submit a new final NECP covering ten years, with draft NECPs due one year prior.

Deep Dive

Assessment of the drafts by the Commission

Most of the draft updated NECPs were submitted late. By 3 July 2023, only six countries had submitted their draft updated NECPs: Spain, Croatia, Slovenia, Finland, Denmark and Italy. On 18 December 2023, the European Commission published its general assessment of the 20 out of 27 drafts submitted thus far, as well as a detailed assessment of each draft plan. It found that the measures presented in the drafts would only result in a net 51% emissions reductions by 2030, falling short of the 55% net emissions reductions target. The measures foreseen in the submitted NECPs would also fail to deliver the 40% emissions reductions target in the sectors covered by the Effort Sharing Regulation, resulting only in emissions reductions of 33.8%.

The assessment also showed that the LULUCF net removals target of 310MtCO2e set in the LULUCF Regulation would be missed by 40 to 50Mt with the current measures, showing a significant gap between the target and the actual measures in place to deliver on the target. The 8th Environment Action Programme Mid-Term Review further underscored the presence of such a gap, stressing that maintaining and enhancing the capacity of Europe’s natural sinks should be a top priority in the final updated NECPs, alongside increasing the sinks’ resilience to climate change.

 

Current versions versus draft updated versions

The current versions of the NECPs in force, which were submitted at the end of 2019, fail to consider the role of carbon dioxide removal (CDR) in reaching national and EU climate targets. None of the 27 plans include targets for CDR, nor do they take into consideration novel carbon removal methods. Even conventional CDR methods such as afforestation or soil carbon sequestration are insufficiently addressed in the majority of NECPs.

Compared to the current versions, the draft updated NECPs submitted by member states show improvements on several fronts when it comes to CDR. Over half of current NECPs discuss the role of CCS and CCU in achieving national 2030 climate targets; yet almost all new draft NECPs now consider these technologies. Yet, despite some overlaps, CCS, CCU and CDR vary in terms of their climate benefit and CDR must be distinguished as a separate suite of methods. Specific to CDR, more than half of member states included at least one measure that would be relevant specifically to its research, development and innovation. Moreover, more than a third of member states now include some sort of removal target, compared to zero in the current versions, and several other NECPs mention novel CDR methods. Finally, close to half of the NECPs include some considerations around the need to develop CO2 transport and storage infrastructure.

 

 

Rating of all draft updated NECPs

We have rated all draft NECPs based on a previous report from the Ecologic Institute.

Denmark has produced the strongest submission when it comes to CDR, including provisions such as:

  • It includes indicative targets for CCUS and bio-CCS for 2030;
  • It provides details about national deployment incentives for CDR (through its NECCS and CCUS funds);
  • It explores the role that several novel CDR methods could play, such as bio-CCS and biochar;
  • It gives a clear overview of potential CO2 storage capacities, as well as the projects currently being developed.

 

However, the Danish submission leaves room for improvement. The Danish draft lacks measures to increase net LULUCF removals, which is especially concerning since the LULUCF sector is currently a net emitter in Denmark. The NECP also lacks a clear RD&I plan to develop CDR technologies. By addressing these missing elements in its final NECP, Denmark would stand out as a champion of CDR in the EU.

Other countries are on the right path to producing a coherent NECP when it comes to CDR. For example, Sweden and Germany score well in some of the seven criteria. In general, deployment incentives and CDR targets are the least addressed criteria.

 

Why all types of CDR should be considered as part of the NECPs

As highlighted by the European Commission in the Sustainable Carbon Cycles communication, the EU should aim for a minimum annual capacity of 5MtCO2 of permanent removals by 2030. Following the publication of the European Commission 2040 Target and ICMS communications, it is clear that the EU will need to develop large permanent CDR capacities to reach its 2040 climate goals and a state of climate neutrality by 2050. Reaching these ambitious goals in time requires urgent action to develop and start to deploy permanent CDR already today.

 

Recommendations for the final updated NECPs

To align their updated NECP to the 2030 climate targets and the EU-wide objective of climate neutrality by 2050, member states should consider the following aspects in their final updated versions:

  1. National (binding) twin targets for emissions reductions and CDR, and separate CDR targets for LULUCF and permanent removals;
  2. A plan for restoring and maintaining LULUCF sinks;
  3. Dedicated research, development and innovation funding for CDR;
  4. The needs and the potential to transport and store CO2.

Timeline

24 December 2018
31 December 2018
June 2019
31 December 2019
17 September 2020
30 June 2023
18 December 2023
30 June 2024
1 January 2028
1 January 2029
31 December 2018

Deadline for member states to submit their draft NECPs for the period 2021-2030

June 2019

EU Commission communicated an overall assessment and country-specific recommendations

31 December 2019

Deadline for member states to submit their final NECPs

17 September 2020

EU Commission published a detailed EU-wide assessment of the final NECPs. Later on, it also published individual assessments.

30 June 2023

Deadline for member states to submit draft updated versions of their NECPs

18 December 2023

The EU Commission published its assessment of EU member states’ draft updated NECP

30 June 2024

Deadline for member states to submit final updated versions of the NECPs

1 January 2028

Deadline for member states to submit draft NECPs covering the period 2031-2040

1 January 2029

Deadline for member states to submit final NECPs covering the period 2031-2040

Status

Policy Type

Year

2018

Unofficial Title

NECPs

Last Updated

23/06/2023