It is not just the Fund, stupid!

11.12.2019

Decarbonising Europe’s economy is probably the most critical collective effort needed since the end of the Second World War. The European Union needs to define a clear and workable pathway to achieve its climate objectives urgently. This is a must. But this responsibility not only falls on those governing now, it is also the duty of the next generation of leaders.

By Máximo Miccinilli, CERRE Energy Director

Today, the European Commission publishes its Green Deal. The long-awaited pan includes an almost endless list of proposals, ranging from revisions of existing legislation to the creation of the so-called Just Transition Fund (JTF). This fund is the object of my concern.

It may seem reassuring to announce a fund to help those that may suffer the consequences of climate change policies and regulation. It is also politically handy to secure new funding for some countries that may fight against more ambitious GHG targets for 2030. One cannot be naive and must accept that there will always be huge political trade-offs when generous new EU funding opportunities are launched. But let’s park this political debate and go back to the nature of the fund. 

There are reasons to believe that the size of the JTF will simply not deliver on its purpose. The reason is simple: we have no idea how strong, how lengthy, or how distributed the impacts of multiple targets, policies, regulations and initiatives will be on complex European economic and social structures. The necessary harmonisation of policies and regulation to accelerate the decarbonisation of the energy, mobility, industrial and agricultural systems will impact regions differently based on their ability and preparedness to transition to a low carbon economy.

The scope of the JTF also raises significant concerns. Decarbonisation efforts are needed across the entire EU, from production to consumption. Old criteria and categories to support regions with low levels of GDP are becoming obsolete in the face of climate change efforts. We need to reinvent the eligibility criteria based on the system’s decarbonisation needs. Funding will need to be secured for those communities that need to decarbonise faster, for regions that may face re-industrialisation issues while struggling to find new energy sources, and for cities that will need to invest in low carbon technologies independently of their income levels. The regional dimension in policy-making will, therefore, be more relevant than ever.

Yes, the JTF is a positive and necessary initiative that should support and stabilise economic regions facing intrusive climate change policies. The financial support, however, cannot be a carte blanche. It should always respond to specific needs and follow a strict timeline with an end-date.

In other words, the JTF cannot and should never replace the need to rethink regulation so that it provides mitigation measures over time. These should be constantly supported by sophisticated monitoring tools to measure the impacts of policies throughout Europe. To do so, the creation of a European Observatory on Distributional Effects is needed, more than ever.

It is not just the fund, stupid. It is much more than that.

Máximo Miccinilli is Director of the Energy Practice at the Centre on Regulation in Europe (CERRE), a think tank specialised in the regulation of the energy, digital and mobility sectors.

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