Green transition fund should be performance-related: EU auditors

A proposal amending the EU's Just Transition Fund needs to establish a clearer link to the EU's climate and environmental goals, according to an Opinion published Wednesday by the EU's Court of Auditors.

While significant additional resources are put forward to help achieve the transition to a climate-neutral economy by 2050, the Just Transition Fund (JTF) funding should be more need-based and performance-oriented. Otherwise, the auditors say there is a risk that the necessary structural change will not take place and the transition towards a green economy will need to be financed again, the auditors warn.

The Commission's January 2020 proposal planned that the JTF would receive some €7.5 billion of fresh EU money. In May 2020, following the COVID-19 outbreak, the Commission amended its proposal, topping up the support to €40 billion. The conclusions of the European Council meeting of 17-21 July saw this budget reduced by €20 billion.

The legislative proposals establishing the Just Transition Fund (JTF) aim to support the EU's transition to a climate-neutral economy by 2050, addressing the social, economic and environmental impacts on the sectors and regions affected. Budget appropriations of €7.5 billion (2018 prices) were allocated initially. Following the COVID-19 outbreak, the European Commission amended its proposal by significantly increasing funding by €32.5 billion, mainly from the European recovery instrument. However, yesterday, the new budget plan agreed cut the JTF by €20 billion.

The auditors point out that the Commission has not carried out a prior impact assessment to support the amended amount. A sound needs analysis is essential to both ensure better allocation of the EU's financial resources, and target and quantify the objectives to be achieved. This is all the more important because the proposal provides further funding for regions that have already received money for energy modernisation out of other dedicated funds.

"The Just Transition Fund is a key tool of the EU Green Deal to ensure that the transition towards a climate-neutral economy happens in a fair way, leaving no one behind", said Nikolaos Milionis, the Member of the European Court of Auditors responsible for the Opinion. "However, the Commission should make sure that the new legislative proposal, together with the territorial just transition plans it will approve, have a solid performance framework to achieve the ambitious EU objectives".

s relatively weak. The proposed allocation method provides weak incentives for the deep, significant, structural change required to achieve the EU's climate objectives. Moreover, while common output and result indicators are proposed, they do not clearly capture the objective of transitioning out of carbon-intensive sectors. There is therefore a significant risk that the JTF will not help end the heavy reliance of some regions on carbon-intensive activities, the auditors say.