The European Commission will propose on Tuesday (14 January) how the EU can pay for shifting the region’s economy to net-zero CO2 emissions by 2050 while protecting coal-dependent regions from taking the brunt of changes aimed at fighting climate change.

The EU executive is to unveil details of its Sustainable Europe Investment Plan, aimed at mobilising investment of €1 trillion over 10 years, using public and private money to help finance its flagship project – the European Green Deal.

The “Green Deal” is an ambitious rethinking of Europe’s economy, transport and energy sectors aimed at turning the EU into a global leader on the clean technologies that will shape the coming decades.

Overall, the Commission estimates that an extra €260 billion in investments are needed per year to finance the switch to clean energy and reduced emissions.

But behind the sweeping rhetoric of the endeavour, that will be debated later today at a sitting of the European Parliament in Strasbourg, are a number of knotty problems that have to be worked out.

€7.5 billion “fresh money”

A main one is how to set coal-dependent EU regions – think Poland, the Czech Republic, or parts of Germany – on the path of renewable energy.

European Commission President Ursula von der Leyen has proposed a Just Transition Mechanism meant to bankroll the sort of deep changes needed, which would make available up to €100 billion a year. She also wants to review the EU’s strict state aid rules in order to seed investments into clean technologies.

According to early drafts, the Just Transition Mechanism will be composed of three pillars:

A Just Transition Fund established under the EU’s regional policy budget, staffed with €7.5 billion additional money. The new fund will reach an overall financing capacity of €30-50 billion when including other Cohesion Policy resources and national co-financing;

established under the EU’s regional policy budget, staffed with €7.5 billion additional money. The new fund will reach an overall financing capacity of €30-50 billion when including other Cohesion Policy resources and national co-financing; A dedicated investment scheme under the EU budget’s InvestEU plan, formerly known as the Juncker plan;

under the EU budget’s InvestEU plan, formerly known as the Juncker plan; A new public loan facility managed by the European Investment Bank (EIB).

However, the extra €7.5 billion “fresh money” made available under the EU’s long-term budget (2021-2027) is considered insufficient by critics who argue much more cash is needed to finance the energy transition.

The Commission retorts that the fund will be augmented by money from the EU’s long-term budget, loans from the European Investment Bank and the InvestEU programme, using the principle of leveraging limited public funds to attract private cash by covering the riskiest parts of an investment.

Worries over ‘fresh money’ as EU cooks up energy transition fund Eastern EU countries, backed by trade unions, are putting pressure on EU leaders to come up with “fresh money” to support the energy transition in coal-dependent regions as part of a Green Deal due to be unveiled this week.

Eligibility criteria

The Commission announcement on Tuesday will also spell out eligibility criteria for the funds, which are widely expected to be looser than for traditional regional funds, and tilted in favour of Europe’s most coal-dependent regions like Silesia in Poland.

Green campaigners, for their part, have welcomed that the proposed €7.5 billion fund will be available only for projects that are low-carbon and climate-resilient, including re-skilling programmes for miners, jobs in new economic sectors and energy-efficient housing.

In order to access EU money, countries will need to propose territorial just transition plans, in line with the bloc’s climate goals, that will be vetted by the European Commission.

“We can’t afford the money from the Mechanism ending up in the wrong pockets,” said Raphael Hanteaux, a clean energy campaigner at CEE Bankwatch Network, a green NGO.

“Clear and strict criteria must be established and adhered to so as to ensure that this money is used for the purpose for which it is intended: to alleviate the economic and social impacts of the transition away from fossil fuels for the most vulnerable communities,” Hanteaux said.

EU ‘confident’ €100bn green transition fund will see the light A draft €100-billion “Just Transition Mechanism” outlined by the European Commission as part of its Green Deal last week will eventually see the light in January, EU officials have said. The amount of “fresh money” under the new fund is however expected to be limited.

Poland so far unconvinced

Warsaw has so far refused to sign on to Europe’s carbon-neutrality goal for 2050, saying it is worried about the economic and social costs involved.

There is also a tricky debate over nuclear energy to be navigated.

France champions atomic power as a low-carbon energy source which can help abate climate emissions. The Czech Republic and Hungary too defend nuclear as part of their energy mix.

But other member states, such as Luxembourg and Austria, are opposed to nuclear energy being painted as “green”.

The Commission document excludes transition fund money to finance the construction of nuclear power plants.

But, under pressure from France and some eastern EU countries, a summit last month described nuclear energy as an option on the way to securing climate neutrality, leaving the broader question open for debate.