The European Parliament and the Council of the European Union reached an interim agreement on the proposal for a ‘Public Sector Loan Facility’, the third pillar of the Just Transition Mechanism (JTM), during their third session of interinstitutional negotiations (‘trilogues’) on Monday 26 April.
Presented by the European Commission at the end of May 2020 (see EUROPE 12495/6), this loan Facility aims to provide financial support to public sector entities to implement projects contributing to help the EU territories most affected by the climate transition, based on the needs and challenges identified in the territorial Just Transition Plans.
The aim is to mobilise between €25 and 30 billion of public investment over the 2021-2027 period.
Financing
As foreseen by the Commission, the Facility will consist of €1.525 billion in grants from the EU budget and €10 billion in loans from the European Investment Bank (EIB).
According to the interim agreement, grants will be allocated to eligible Member States according to the ‘Just Transition Fund’ allocation method (JTM Pillar 1 - see EUROPE 12620/12) until the end of 2025. From 2026 onwards, they will be allocated on a competitive basis until resources are exhausted, with priority given to the least developed regions (those with a GDP per capita of less than 75% of the EU average).
If new resources are allocated in the future, the Facility may also be opened up to financial partners other than the EIB. They will have to have a lending policy that complies with EU environmental and social standards and EU requirements on good fiscal governance, anti-money laundering, and transparency of projects financed.
Priorities
Only projects that do not generate a sufficient flow of own revenues will be eligible.
In addition, priority should be given to projects located in less developed regions, projects contributing to climate objectives, and public entities with a decarbonisation plan.
The Facility will also have to “be in line” with the principle of “do no significant harm” to the environment and climate, although Parliament wanted stronger wording by making this principle one of the eligibility criteria for projects (see EUROPE 12583/18).
Other items
Another important point of the agreement is that the amount of the European subsidy can reach up to 25% of the amount of the loan for the least developed regions (the Commission had proposed 20%), compared to a ceiling of 15% for the other regions.
EU co-legislators also agreed to exclude fossil fuels (including natural gas) and nuclear power from the scope of the mechanism, in line with the agreement on the ‘Just Transition Fund’.
The interim agreement must now be formally approved by European Parliament and the EU Council. In Parliament, the vote in committee is scheduled for May and in plenary probably in July.
The Commission expects the first calls for proposals under the Facility to be launched in the second half of 2021. (Original version in French by Damien Genicot)