EIB to provide up to €10 billion in support of regions most affected by the shift away from fossil fuels

ByEuropean Investment Bank

EIB to provide up to €10 billion in support of regions most affected by the shift away from fossil fuels

The European Commission and the European Investment Bank (EIB) have signed the agreement on the Public Sector Loan Facility, the third pillar of the Just Transition Mechanism.

The facility will finance public investments in the regions most affected by Europe’s transition to a climate-neutral economy. It will combine up to €10 billion in EIB loans with €1.5 billion in EU budget grants.

The agreement paves the way for the territories and regions most affected by Europe’s transition to a climate-neutral economy to benefit from grants and loans under a Public Sector Loan Facility. This facility is part of the European Green Deal’s Just Transition Mechanism, which supports a fair shift away from fossil fuels while leaving no one behind, including communities that have relied on coal mining and polluting industries.

The Public Sector Loan Facility offers public sector entities planning investment projects in affected regions a combination of EIB loans and EU grants, effectively reducing the financial burden for public coffers. To be eligible, projects must be located in or benefit territories that Member States have identified in their Commission-approved territorial just transition plans as facing the biggest challenges related to moving away from fossil fuels and carbon-intensive industries. In less developed regions (those with a GDP per capita of less than 75% of the EU average), the EU grant component can be up to 25% of the EIB loan amount for each project.

The agreement makes up to €10 billion in EIB financing available by 2027 to spur investment to reduce the socioeconomic costs of the transition, facilitating the creation of new businesses, jobs and infrastructure. It follows the call for proposals for the EU grants component under the facility launched by the European Commission in July. Potential beneficiaries can also request advisory support from the InvestEU Advisory Hub to prepare and implement projects.

“The transition to a net zero emissions economy entails profound socioeconomic challenges for all of us and especially for those regions that heavily depend on carbon-intensive activities today. Big challenges require all stakeholders to combine and coordinate their efforts so that their action can be impactful. That’s what we do here by blending EIB and European Commission funds and by working closely with public entities in just transition regions. Making full use of the facility will help regions transform their economies in a way that is acceptable to societies,” said EIB Vice-President Ricardo Mourinho Félix.

The Just Transition Mechanism

Moving away from coal mining and CO2-intensive energy and industrial production implies a series of transitions:

  • An energy transition to find new sources for heat and electricity production;
  • An environmental transition to depollute mining sites, for example;
  • A socioeconomic transition to attract new employers to compensate for the losses in jobs and tax revenues;
  • An infrastructure transition as a precondition for attracting new sectors to the regions.

The Just Transition Mechanism, a key part of the European Green Deal, addresses the social and economic effects of moving towards climate neutrality. The mechanism supports projects located in or benefiting one of the just transition regions jointly identified by Member States and the Commission in territorial just transition plans.

The mechanism consists of three pillars of financing: (i) the Just Transition Fund, (ii) a dedicated just transition scheme under InvestEU, and (iii) the Public Sector Loan Facility. The EIB supports all three pillars as outlined in its orientation paper Supporting the Just Transition Mechanism – a comprehensive proposal of the EIB Group.