Funding and Transition

October 27, 2020

To achieve the 2030 guidelines, the EU predicts it will have to spend €260 billion annually, just 1.5 percent of the EU’s 2018 Gross Domestic Product (GDP). The Commission also intends to commit at least 25 percent of its long-term budget to fighting climate change.  The European Green Deal Investment Plan also aims to mobilize at least €1 trillion in the next decade. The majority of this money will come from private funding, but the European Investment Bank will also play a large role. The EC will provide incentives to “unlock and redirect public and private investment.” It also plans to encourage investment by placing the Green Deal at the center of the financial system and by facilitating approval of state aid.

While many industries might have suffered from these new programs, the Just Transition Mechanism (JTM) aims to ease the social and economic impacts of the transition towards a climate-neutral economy. It will act from 2021 to 2027 and focus on regions and industries most affected by the transition, mobilizing €150 billion. This will establish the Just Transition Fund (JTF), designed to give research grants, environmental rehabilitation, clean energy production, and job creation. The JTM will also create a dedicated InvestEU scheme, supporting projects in energy, infrastructure, decarbonization,  economic diversification, and social infrastructure. The third pillar of the JTM is a new European Investment Bank loan facility, meant to aid Member States in their transition by backing public and private investment.

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