COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the public sector loan facility under the Just Transition Mechanism
Date: 2020-05-28
Institutions: Directorate-General for Regional and Urban Policy, European Commission
Subjects: EU aid, EU environmental policy, EU loan, circular economy, climate change, green economy, public sector, regional aid, regional development

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  EN 

   EUROPEAN COMMISSION  Brussels, 28.5.2020  SWD(2020) 92 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a   REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the public sector loan facility under the Just Transition Mechanism {COM(2020) 453 final}  
 
 
INTRODUCTION  

This  analytical  document  accompanies  the  legislative  proposal  for  a  public  sector  loan 
facility, which constitutes the third pillar of the Just Transition Mechanism. 

It aims to provide the rationale and policy objectives that underpin this legislative proposal, 
as  well  as  the  envisaged  implementation  mechanisms  to  attain  its  objectives.  It  provides 
criteria for assessing the performance of the instrument as well as for its evaluation. 

I. 

CONTEXT AND RATIONALE FOR THE LEGISLATIVE PROPOSAL  

On 11 December 2019, the Commission  adopted a  Communication on the European Green 
Deal1,  drawing  its  roadmap  towards  a  new  growth  policy  for  Europe,  based  on  ambitious 
climate and environmental objectives.  

This transition towards a sustainable and climate-neutral economy will nonetheless represent 
a significant challenge for some territories. It will require a fundamental structural change in 
their  economies,  changes  in  their  business  models  and  new  skills  for  their  labour  force.  In 
several  instances,  those  changes  are  already  at  work.  The  most  vulnerable  regions  and 
territories  are  those  most  affected  by  the  transition  given  their  dependence  on  fossil  fuels, 
including coal, peat and oil shale or greenhouse gas-intensive industrial processes, and among 
those  in  particular  the  regions  and  territories  with  less  resources  to  deal  with  the  economic 
and social costs of that transition.  

Some  key  economic  sectors  are  or  will  be  declining;  those  where  reduction  in  economic 
output and employment levels will be inevitable and irreversible given the high greenhouse-
gas  emission  levels,  in  particular  economic  activities  based  on  the  production  and  use  of 
fossil fuels, in particular coal, lignite, peat and oil shale. Other areas of economic activity will 
be transforming; these are sectors where, in spite of currently high greenhouse-gas emission 
levels, economically efficient alternative technologies for carbon-intensive processes exist or 
can be found in order to sustain economic output and employment. 

Coal  infrastructure  currently  is  present  in  108  European  regions  (defined  at  NUTS3  level). 
Close  to  237 000  people  are  employed  in  coal-related  activities,  whereas  almost  10 000 
people are employed in peat extraction activities and around 6 000 in the oil shale industry. 
Numerous  additional  indirect  jobs  also  depend  on  the  fossil  fuel  value  chain  and  the 
greenhouse  gas-intensive 
the  necessary  accompanying 
measures, there are limited chances for a just and socially sustainable transition to happen in 
these territories given the socio-economic costs involved. 

industrial  processes.  Without 

On 26 February 2020, the Commission published Country Reports for all 27 Member States 
setting  out  its  analysis  regarding  the  territories  that  are  expected  to  be  the  most  negatively 
impacted by transition. The high level of potential job losses was a major factor in identifying 
these territories, together with the high level greenhouse-gas emission levels.   

II. 

OBJECTIVES PURSUED BY THE LEGISLATIVE PROPOSAL 

In order to address the specific challenges encountered by the most vulnerable territories, the 
Commission  has  proposed,  through  its  Communication  on  the  European  Green  Deal 
Investment  Plan2,  a  Just  Transition  Mechanism.  It  aims  at  providing  targeted  support  to 

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COM(2019) 640 final. 
COM(2020) 21 final. 

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generate the necessary investments in these territories, in order to alleviate the corresponding 
economic and social costs. The Just Transition Mechanism consists of three pillars: 

1.  a Just Transition Fund,  

2.  a dedicated just transition scheme under the InvestEU programme, and  

3.  a public sector loan facility in order to leverage additional public investments.  

The proposal for establishing the Just Transition Fund was adopted by the Commission on 14 
January 20203. It sets up the content, scope and rules applicable for the implementation of the 
Fund.  

In  particular,  it  requires  Member  States  to  submit  territorial just  transition  plans,  which  are 
instrumental to the programming and implementation of the Fund. The plans need to set out 
the key steps and timeline for the transition process, identify the territories most negatively 
affected  by  the  transition  towards  climate-neutral  economy  and  the  envisaged  types  of 
operations  for  each  territory  concerned  that  contribute  to  a  successful  transition.  They  also 
need  to  identify  synergies  and  complementarities  between  the  three  pillars  of  the  Just 
Transition Mechanism, as well as with other Union programmes. 

The  proposal  for  a  Just  Transition  Fund  also  includes,  in  its  Annex  I,  a  methodology  for 
calculating the national allocations under this Fund. The Fund will have an allocation of EUR 
7.5 billion over and above of the Commission’s MFF proposal, to be matched with additional 
resources from the ERDF and the ESF. It is expected to mobilise investments worth EUR 30-
50 billion (taking into account national co-financing and mandatory transfers from the ERDF 
and the ESF+). 

The Just Transition Fund focuses on economic diversification and revitalisation measures for 
the impacted territories along with support for their workers. The scope of intervention and 
its  geographical  scope  are  limited  to  allow  for  concentrating  support,  consistently  with  its 
political objective.  

Given  the  transition  challenge  territories  and  regions  face,  additional  investments  will, 
however,  be  necessary.  In  particular,  the  broader  development  needs,  stemming  from  the 
transition process and detailed in the territorial just transition plans will need to be addressed. 
This  may  involve  a  wider  scope  for  investments  and  a  wider  geographical  area  for 
implementation but still with the aim of benefitting the territories most exposed, as identified 
in the territorial just transition plans. 

In particular, new economic activities and the local economy should be promoted to replace 
activities that need to be phased out given their harmful effects on climate and environment. 
The  second  and  third  pillars  of  the  Just  Transition  Mechanism  aim  at  providing  additional 
support  to  these  territories.  The  wider  range  of  investments  both  from  a  sectoral  and, 
potentially,  geographical  perspective,  will  reinforce  the  effectiveness  of  support  under  the 
Just  Transition  Fund  and  maximise  the  effect  of  those  investments  including  through  the 
additional  resources  leveraged.  The  adoption  of  the  territorial  just  transition  plans  will 
provide  access  to  additional  support  under  the  second  and  third  pillars  for  the  territories 
concerned.  

The just transition scheme under InvestEU will target economically viable projects, promoted 
mostly  by  private  beneficiaries.  It  is  expected  to  crowd  in  private  investments  through 

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COM(2020) 22 final. 

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guarantee mechanisms which would offer risk coverage and leverage investments supporting 
transition territories. 

However, major public investments will also be needed to accompany the transition that most 
affected  territories  face.  Those  development  needs  should,  in  principle,  be  satisfied  by  the 
public sector or actors with a public service mission. However, public project promoters may 
not have easy access to financing and may not be bankable, especially where their projects do 
not generate a sufficient stream of own revenues. It is key that additional resources are made 
available to them in conditions that make those essential investments possible. 

The  third  pillar  of  the  Just  Transition  Mechanism  therefore  aims  at  providing  additional 
resources  for  these  public  sector  projects  in  view  of  addressing  the  social,  economic  and 
environmental challenges resulting from the climate transition. The support is taking in this 
regard the form of a public sector loan facility, combining grant support from the EU budget 
with loan support from the European Investment Bank. To that end, a cooperation framework 
will be put forward, providing for a just distribution of these additionally available resources 
for public sector projects with insufficient market revenue streams.  

The  objective  of  the  legislative  proposal  is  therefore  to  provide  public  sector  projects, 
targeted  funding  resources  to  implement  measures  in  order  to  facilitate  the  transition  to  a 
climate-neutral economy and benefitting the just transition territories.  

While aspiring for supporting the best quality projects, this instrument should also ensure that 
the distribution of resources remains fair and just across all territories and Member States of 
the  EU  in  order  to  provide  for  a  level  playing  field  for  all  public  sector  projects.  It  is  also 
necessary  that  public  sector  projects  in  less  developed  territories  with  a  lower  capacity  of 
financing receive additional support to increase chances for receiving support from the public 
sector loan facility. 

III.  MECHANISMS PROPOSED TO MEET THE OBJECTIVES 

The  legislative  proposal  provides  for  a  set  of  forceful  measures  in  a  comprehensive 
framework to enable the instrument to meet the above-described objectives. 

First,  it  ensures  a  fair  and  balanced  access  to  the  public  sector  loan  facility  across  the  27 
Member States: 

  Until  31  December  2024,  calls  for  projects  will  be  launched  based  on  earmarked 
national allocations. These will be calculated pursuant to the relative national shares 
as a result of the allocation methodology provided for in Annex I of the proposed Just 
Transition Fund Regulation. This will ensure a fair chance for all Member States that 
their  concerned  territories  effectively  benefit  from  these  resources  once  their 
territorial  just  transition  plans  are  adopted  by  the  Commission  in  the  programme 
providing Just Transition Fund support.  

  From  2025  onwards,  calls  will  be  launched  on  a  competitive  basis  without  further 
earmarked allocations. However, both the Commission and the European Investment 
Bank  will  ensure  fair  access  to  the  public  sector  loan  facility  across  all  Member 
States,  taking  into  account  the  need  to  ensure  predictability  of  investment  and  the 
promotion of regional convergence.  

  The EU grant rate, calculated on the basis of the amount of the loan provided by the 
European Investment Bank or another finance partner, will be modulated with regard 
to  the  level  of  development  of  the  concerned  regions.  The  maximum  ceiling  is 
increased in this regard by 5 percentage points for projects located in less developed 
regions, taking into account their lower investment capacity. 

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Secondly, it ensures fair access to the public sector loan facility to all public sector entities, 
irrespective of their size as borrower: 

  For smaller scale projects, typically promoted by smaller municipalities, loan schemes 
may  be  implemented  –  enabling  support  where  the  relatively  small  size  of  projects 
could otherwise prevent individual project-based lending by the European Investment 
Bank  (due  to  its  lending  policy).  Financing  Agreements,  therefore,  could  be  put  in 
place  with  public  intermediaries  in  view  of  reaching  out  to  smaller  public  sector 
projects and entities. 

  Advisory  support  will  be  channeled  through  the  advisory  hub  set-up  under  the 
InvestEU  programme  to  support  project  preparation  and  implementation,  in  view  of 
supporting notably public project promoters with weaker administrative capacities. 

Moreover,  the  legislative  proposal  remains  flexible  through  envisaging  a  large  sectoral 
coverage, which corresponds to the lending policy of the European Investment Bank or other 
future financing partners as well as the objectives of the Just transition Mechanism defined in 
the European Green Deal Investment Plan. This wide scope of intervention will ensure that 
the public sector loan facility can address, in essence, all development needs identified in the 
territorial just transition plans. Investments to be supported may include energy and transport 
infrastructure,  district  heating  networks,  public  transport,  energy  efficiency  measures 
including  renovation  of  buildings,  as  well  as  social  infrastructure  or  environmental 
investments  such  as  those  supporting  the  transition  towards  the  circular  economy  and  land 
restoration  and  decontamination  –  always  for  the  benefit  of  the  just  transition  territories  as 
identified in the just transition plans.  

Prioritisation criteria will be further developed in the Commission’s work programme where 
priority  areas  could  be  identified,  for  example  through  favouring  investments  which 
contribute directly to the climate transition – for instance, in energy efficiency or sustainable 
energy  sources.  The  selection  and  award  criteria  to  be  included  in  the  calls  can  further 
reinforce  and  operationalise  these  priorities.  These  mechanisms  will  ensure  that  the  public 
sector projects selected represent the best value for money and that an appropriate mechanism 
is elaborated in order to ensure the ranking of project applications where demand exceeds the 
available (national) allocations.  

Additionally,  the  application  and  other  administrative  processes  for  applicants  and 
beneficiaries have been largely simplified through providing for a one-stop shop approach. A 
single application process and subsequent coordinated handling between the Commission and 
the European Investment Bank should lead to minimising the administrative cost and burden 
for applicants and beneficiaries. 

IV.  MONITORING THE ACHIEVEMENTS  

In  line  with  the  current  requirements  of  Better  Regulation  and  the  Inter-institutional 
Agreement on Better Law-Making, the proposed legislation includes specific monitoring and 
evaluation provisions aiming at verifying that the specific objectives of the public sector loan 
facility are achieved.  

The public sector loan facility aims at supporting public investments benefiting the territories 
most  negatively  impacted  by  the  transition  towards  climate  neutrality.  The  type  of 
investments  supported  will  vary  across  territories,  depending  on  the  specific  development 
needs  to  be  met  as  defined  in  the  territorial  just  transition  plans.  Therefore,  sectoral  result 
indicators  cannot  be  established  in  advance  and  may  be  difficult  to  monitor  even 
subsequently.  Instead,  the  success  of  the  public  sector  loan  facility  will  be  measured  in  the 
light  of  its  capacity  to  support  public  investments  and  their  contribution  to  the  transition 

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process  in  the  context  of  the  above-mentioned  territories,  irrespectively  of  the  sectors  at 
stake. However, the evaluations to be carried out will take into account the sectoral split of 
the interventions and will also be assessed against the context of the territorial just transition 
plans. Evaluations (cf. below) are better placed to mesure the success of the instrument in this 
regard given the longer time horizon giving a better perspective for measuring impacts and 
results the instrument will bring about. 

The  geographical  location  of  the  investments  will  also  be  monitored.  As  the  public  sector 
loan facility is designed, with the recourse to national allocations for the calls launched until 
31 December 2024, to be fairly accessible to all eligible territories, such achievement should 
also be reported.  

Specific performance monitoring indicators are therefore envisaged with a view to reporting 
the results of the public sector loan facility, on the following elements: 

  Financial execution, through the volume of grants and loans granted. It will be used in 
particular  to  monitor  the  implementation  pace  and  detect  possible  implementation 
shortcomings 

  Overall investment mobilised, broken down by sectors in view of identifying the key 
objectives pursued by projects supported in the context of promoting a climate-neutral 
economy 

  Beneficiaries  supported,  including  information  on  the  territorial  coverage.  Such 
information  will  be  used  to  monitor,  in  particular,  the  fairness  of  the  territorial 
coverage: 

o  until December 2024, for territories located within the Member State; 
o  beyond this date, distribution of support within and between Member States. 

These  performance  monitoring  indicators may be further adjusted  to  provide more accurate 
information based on experience with implementation after the first calls. 

Monitoring and reporting provisions will be included: 

 

 

In the administrative agreements to be signed with the European Investment Bank and 
possible future other financing partners. Beneficiaries will need to report both to the 
Commission  and  the  European  Investment  Bank,  pursuant  to  their  own  procedures. 
However, for simplification purposes and to avoid unnecessary administrative burden 
for beneficiaries, the requested data have been largely harmonised. 
In  the  grant  agreement  signed  with  the  beneficiaries.  For  loan  schemes,  the 
obligations  of  the  intermediary  will  be  detailed  as  regards  the  data  to  be  collected 
from final recipients (and to be processed subsequently). 

In addition, evaluations will be carried out to feed into the decision-making process. 

In particular, an interim review of the public sector loan facility will be performed by 30 June 
2025, when sufficient information is expected to be available about the implementation of the 
public sector loan facility.  

The  evaluation  will  need  to  demonstrate  in  particular  how  Union  support  will  have 
contributed in addressing the needs of territories implementing territorial just transition plans. 
In addition, a final evaluation report on the results and long-term impact of the programme 
will be issued at the end of the implementation period, not later than December 2031. 

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