The European Commission and the European Investment Bank (EIB) have signed the agreement on the Public Sector Loan Facility, the third pillar of the Just Transition Mechanism.
The facility will finance public investments in the regions most affected by Europe’s transition to a climate-neutral economy.
It will combine up to €10 billion in EIB loans with €1.5 billion in EU budget grants.
The agreement paves the way for the territories and regions most affected by Europe’s transition to a climate-neutral economy to benefit from grants and loans under a Public Sector Loan Facility. This facility is part of the European Green Deal’s Just Transition Mechanism, which supports a fair shift away from fossil fuels while leaving no one behind, including communities that have relied on coal mining and polluting industries.
The Public Sector Loan Facility offers public sector entities planning investment projects in affected regions a combination of EIB loans and EU grants, effectively reducing the financial burden for public coffers. To be eligible, projects must be located in or benefit territories that Member States have identified in their Commission-approved territorial just transition plans as facing the biggest challenges related to moving away from fossil fuels and carbon-intensive industries. In less developed regions (those with a GDP per capita of less than 75% of the EU average), the EU grant component can be up to 25% of the EIB loan amount for each project.
The agreement makes up to €10 billion in EIB financing available by 2027 to spur investment to reduce the socioeconomic costs of the transition, facilitating the creation of new businesses, jobs and infrastructure. It follows the call for proposals for the EU grants component under the facility launched by the European Commission in July. Potential beneficiaries can also request advisory support from the InvestEU Advisory Hub to prepare and implement projects.
EIB Vice-President Ricardo Mourinho Félix said: “The transition to a net zero emissions economy entails profound socioeconomic challenges for all of us and especially for those regions that heavily depend on carbon-intensive activities today. Big challenges require all stakeholders to combine and coordinate their efforts so that their action can be impactful. That’s what we do here by blending EIB and European Commission funds and by working closely with public entities in just transition regions. Making full use of the facility will help regions transform their economies in a way that is acceptable to societies.”
Commissioner for Cohesion and Reforms Elisa Ferreira said: “The European Green Deal is our strategy to achieve a climate-neutral economy and Cohesion Policy will help delivering our green objectives in a fair way. Thanks to this agreement with the EIB, the Public Sector Loan Facility will offer public authorities in the regions and territories that most need support preferential lending conditions for projects that do not generate sufficient revenue to be financially viable. The European Commission and the EIB will keep working together to support a fair transition that will leave no one behind.”
To find out more about how to benefit from the EU grant and the EIB loan, public sector entities can join a virtual Info Day event on Wednesday, 14 September 2022 organised by the European Climate, Infrastructure and Environment Executive Agency (CINEA) with the participation of the European Commission’s department for regional and urban policy (DG REGIO) and the EIB.
The Just Transition Mechanism
Moving away from coal mining and CO2-intensive energy and industrial production implies a series of transitions:
An energy transition to find new sources for heat and electricity production;
An environmental transition to depollute mining sites, for example;
A socioeconomic transition to attract new employers to compensate for the losses in jobs and tax revenues;
An infrastructure transition as a precondition for attracting new sectors to the regions.
The Just Transition Mechanism, a key part of the European Green Deal, addresses the social and economic effects of moving towards climate neutrality. The mechanism supports projects located in or benefiting one of the just transition regions jointly identified by Member States and the Commission in territorial just transition plans.
The European Investment Bank is active in some 160 countries and is the world’s largest multilateral lender for climate action projects. The EIB Group has set “ensuring a just transition for all” as one of the four overarching objectives in its Climate Bank Roadmap 2025. The EIB’s ambition is to support €1 trillion of climate action and environmental sustainability investments in the decade to 2030 and align all its new operations with the goals and principles of the Paris Agreement.
Today, the European Commission presents its proposal for a public sector loan facility under the Just Transition Mechanism. The facility will be implemented with the involvement of the EIB and will encourage investments that support the transition towards a climate-neutral economy by public sector authorities to the benefit of coal- and carbon-intensive regions. The facility will include €1.5 billion in grants from the EU budget and up to €10 billion in loans from the European Investment Bank’s own sources. The facility will mobilise up to between €25 and €30 billion of investments for helping territories and regions most affected by the transition to a climate-neutral economy, prioritising those that have less capacity to deal with the costs of the transition.
The European Investment Bank (EIB) welcomes the adoption by the Council of the Regulation on the Public Sector Loan Facility on 12 July, which completes the Just Transition Mechanism. The latter is a key part of the European Green Deal, ensuring that no one will be left behind in the EU effort to achieve climate neutrality by 2050.
The European Investment Bank is joining seven other Multilateral Development Banks (MDBs) in committing to a just transition that supports countries and other clients moving towards net-zero emission economies.