Germany eats Poland’s green lunch

A proposal for the Commission’s Just Transition Fund would significantly dilute its focus.

The European Commission wants to get all EU countries on board with its new Just Transition Fund by widely spreading the cash — but in doing so risks alienating its biggest opponents on climate policy.

Around 50 regions in 18 EU countries could be eligible for financial support under the fund intended to help minimize the pain of decarbonization, according to a draft Commission proposal dated October 31 and seen by POLITICO.

That’s raising fears among some of the bloc’s poorer and more coal-dependent countries that the money would also flow to richer EU members. The plans list Germany as the country with the second-highest number of eligible regions after Poland.

The draft proposal, currently being discussed within the Commission, is due to be published December 11 along with a political communication on the European Green Deal, ahead of an EU leaders’ summit where the bloc’s future climate goal is on the agenda. 

Poland, Hungary and the Czech Republic are resisting a push to adopt a goal of slashing greenhouse gas emissions to net-zero by mid-century for fear it will hurt their economies. The timing of the transition fund proposal is meant to help sway their support. 

The fund was originally proposed by the European Parliament as a way to offer support to the bloc’s most coal-dependent regions for the fuel’s phase out, something countries are under pressure to achieve as the EU tightens its climate targets.

Cash for all

The incoming Commission took on the idea but enlarged its proposed scope beyond just coal. Commission President-elect Ursula von der Leyen said it “should offer tailored support for the most affected, for instance those in industrial, coal and energy-intensive regions.”

The October draft lists three criteria for regions to qualify for the fund: employment figures in coal and lignite mining; carbon intensity “beyond [X] times above the EU average” (the proposal does not specify how many times); and peat production “beyond [X] times the EU average.”

According to the proposal, up to 50 regions would be eligible in 18 EU countries under the first two criteria: 10 in Poland, eight in Germany, six in Spain, five in Greece, four in Italy, two each in Bulgaria, the Czech Republic, Romania and Slovakia, and one each in Belgium, Croatia, Cyprus, Estonia, Hungary, the Netherlands, Portugal, Slovenia, and even the Indian Ocean island of la Réunion in France’s overseas territories.

If the third criteria were to be used as well, Irish and Finnish regions would likely also be eligible for funding.

The Commission acknowledges in the draft proposal that the large number of regions involved could generate widespread support for the proposal in the Council, while raising the risk of diluting the fund’s resources and purpose.

Indeed the proposal is unlikely to satisfy Poland, which has argued for the fund to prioritize coal regions. Poland hosts half of the EU’s coal mining and coal-fired power-generation workforce, and is set to suffer the biggest job losses as the fuel is phased out, according to Commission research.

Other countries at risk of job losses such as the Czech Republic, Romania, Bulgaria and Greece are likely to share Warsaw’s concerns.

The fund would be financed out of the bloc’s future budget, as POLITICO previously reported, with €5 billion coming out of already allocated cohesion funds and another €5 billion to be pulled from other budget streams or fresh funding.

The Commission is hoping a further €5 billion of co-financing would be provided by EU countries; while €500 million of the EU funds would be used to leverage a €1.5 billion guarantee by the European Investment Bank, and attract up to €20 billion in private capital.

Based on those speculative multipliers, the total available would then be €35 billion, according to the proposal.

Spreading cash

The Commission would have to allocate Just Transition Fund money among eligible EU countries. According to the proposal, national governments would then be able to choose which of the eligible regions they want to support. 

Nevertheless, the proposed funding scheme could raise concerns among regions already facing significant cuts to cohesion funding. The proposal would tie up some of the funding even as both the U.K.’s departure and a push to spend more money on areas like research, innovation and migration risks seeing funding for regional development becoming more limited in the coming years.

In its plan for the 2021-2027 EU budget, the Commission proposed that cohesion policy, which is aimed at reducing disparities across the bloc, will be reduced from 34 percent of the current budget (when calculated for the EU27) to 29.1 percent. Cohesion policy includes the European Regional Development Fund, Cohesion Fund and European Social Fund — with allocations based largely on economic development.

Due to rapid economic growth in Central Europe in recent years, under the Commission’s current proposal, Poland, the Czech Republic, Hungary, and Estonia are set to lose nearly a quarter of their cohesion money. Germany faces a cut of about 20 percent, while others, including Romania, Bulgaria, Greece, Italy and Spain would see more modest increases in their allocations. 

“If the [EU budget] going greener is an [EU budget] going Western it’s unacceptable, and fairly so,” French MEP Pascal Canfin, chair of the environment committee, said this month at a POLITICO event. 

“We should find a mechanism that makes sure that when we go greener, for CAP [the Common Agricultural Policy], for cohesion policy and so on, we have a lock-in effect that makes sure there is no unfair distributional or regional effect. That would be a double pain for Hungary, for Poland, for the Czech Republic and so on,” he said. 

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