A long history of investment for cohesion in Europe’s poorer regions is a foundation for the EIB’s role in the European Commission’s Just Transition Mechanism

When you’re struggling day to day to keep an old district heating system in operation, it’s hard to make plans that respect new developments in EU energy policy, too. So the western Romanian city of Oradea turned to a special unit at the European Investment Bank to help with its transition to cleaner energy. “It’s hard to see the forest for the trees,” says Ioan Maghiar, planning manager for the Oradea Municipality. “We needed to look for a creative solution at a higher level.”

In 2019, the Bank’s Project Advisory Support Unit delivered an eight-month study that Oradea is already implementing – with positive implications for the city’s economy and climate action. With new sources of energy and efficiency measures recommended by the Bank, Oradea’s district heating system will cut carbon emissions by 44% by 2050. The city will also be able to end subsidies to the heating system’s private operator in 10 years. “That’s an important impact on the local budget,” says Emmanuel Morel, a senior EIB environment expert based in Bucharest.

The project is part of a long tradition of EIB lending that ensures Europe’s poorer regions get a fair chance at prosperity. From 2014 to 2019, the EU bank provided more than €100 billion of financing in cohesion regions (read more about the EIB financing to build an inclusive Europe).

Now that the EU aims to decarbonise the continent by 2050, there’s a new and urgent element to the Bank’s cohesion investment with the European Commission’s Just Transition Mechanism, part of the European Green Deal. The European Investment Bank will be a crucial element of the mechanism, which aims to ensure that regional economies and industries dependent on fossil fuels are not left behind in the transition to lower emissions. “Just Transition is an expansion of an area in which the EIB has a lot of expertise,” says Leonard Reinard, head of the Bank’s regional development division. “For every city or region, the transition will be unique. It’s not one-size-fits-all. Each region has to find its own tailor-made, place-based transition plan, and the Bank will help turn that into concrete investment plans and projects.”

The Project Advisory Support Unit’s work helped Oradea and two other Romanian cities figure out a cleaner, more efficient future for their district heating systems. Oradea is already testing geothermal power from water two kilometres underground, providing 7% of the energy for its district heating system. The district heating provides heat and hot water to 70% of the city’s 200 000 residents. “It would have taken a lot longer to understand what’s happening at the European level without the EIB,” Maghiar says.

Service is increasingly reliable, which boosts Oradea’s ability to attract people and businesses. “A city that’s taking on this challenge has found the holy grail of urban planning,” says Sebastian Hyzyk, who heads the EIB unit. “They’re making their space attractive to citizens, and citizens are where knowledge and growth come from these days.” In 2020, the unit is taking on similar projects for four other Romanian cities as part of its €70 million, seven-year advisory programme.

You can read more about how the EU Bank supported Oradea’s urban infrastructure.

Good for Europe

In the mineral mining region around Plovdiv, Bulgaria’s second-largest city, KCM has long refined metals, primarily zinc and lead. The company’s manufacturing process is being upgraded to provide greater resource efficiency, better protect the health of its 1 500 workers and comply with future, more stringent environmental regulations in the metallurgical industry.

The EIB backed KCM with a €65 million loan in 2019 to help upgrade its processes and increase its use of “secondary materials” – zinc and lead from recycled materials such as batteries, furnace dust and oxides. KCM’s new facilities will result in more automated and environmentally- friendly zinc and lead production, and increase recycling capacity. “It’s good for Europe, because this project shows how metallurgy should be in the 21st century,” says Ivan Dobrev, KCM’s chief executive. “The loan helps us increase the value of our technology by scaling it up.”

The loan is backed by the European Fund for Strategic Investments, as it supports an innovative company that is the only provider of lead and zinc in Central and South-East Europe. “These materials are vital to other industries in the region, such as the automotive and construction sectors,” says Venera Gandzhova, the project’s loan officer. It will also bring a number of environmental benefits. “The project follows the trend of the sector to move towards more recycled materials, which are processed with highly energy- and resource-efficient technology” says Liesbet Goovaerts, an EIB engineer. “That aligns it with the Paris Agreement.”

Just Transition for the environment and people

In May 2020 the EIB and the European Commission joined forces in a public loan facility to finance green investments in Europe.

However, the Just Transition is not only about business. It has an important social aspect. That aspect is illustrated by the EIB project signed in 2019 to finance rehabilitation and energy efficiency measures for 9 600 social housing units in the former mining region of Nord-Pas-de-Calais in northern France. The €153 million loan contributes to climate action by cutting the energy use of 22 457 beneficiaries. It also brings annual savings of €1 200 per household on energy bills.

The loan is part of a €765.2 million project by Maisons & Cités, a local public housing company. “It’s not only about making a house that’s better to live in or that’s good for the environment,” says Souad Farsi, an EIB engineer. “This is for the environment and also for people.” And that’s the concept of a Just Transition in a nutshell.