ESPON DATASTORIES

Structural change in coal phase-out regions

Οn Wednesday 16 September, the European Parliament adopted with an overwhelming majority its position on the Commission’s proposal on the Just Transition Fund. The Parliament asks for an increased budget (up to 25 billion EUR) and to broaden the types of potential beneficiaries and its scope to also include investments related to natural gas, “for regions heavily reliant on the extraction and combustion of coal, lignite, oil shale or peat if they qualify as “environmentally sustainable”. The parliament also proposes a number of measures like the creation of a “Green awarding mechanism, special allocation for the islands and outmost regions.

On the same day, the ESPON EGTC introduced its work on structural change in coal phase-out regions to the Network of Territorial Cohesion Contact Points (NTCCP). This work is commissioned by the German Presidency of the Council of the European Union and is strongly relating to the investment actions proposed by the JTF. ESPON had embarked on efforts to advance the current policy-research discourse through territorial evidence.

Towards a Carbon Neutral Europe

The Regulation Perspective

Coal is the most carbon intensive fossil fuel and phasing it out is a key step to achieve the emissions reductions targets set in the European Green Deal. Historically, coal been one of the European economy’s main fuels. Today, it accounts for 16% of gross inland energy consumption in the EU, and 24% of the power generation mix. Nevertheless, most emissions from coal are in the electricity sector and, as renewable technologies that can replace coal emerge, coal phase out becomes a relatively cheap and easy option to reduce emissions.

As part of the European Green Deal, the Commission proposed in September 2020 to raise the 2030 greenhouse gas emission reduction target, including emissions and removals, to at least 55% compared to 1990. It looked at the actions required across all sectors, including increased energy efficiency and renewable energy, and started the process of making detailed legislative proposals by July 2021 to implement and achieve the increased ambition. This will enable the EU to move towards a climate-neutral economy and implement its commitments under the Paris Agreement by updating its Nationally Determined Contribution.

Just Transition Mechanism

The Market Perspective

While emission targets and energy efficiency are in the top of the EU agenda, policy makers need to account for the market implications of the phase out plan. Coal activities offer direct employment to around 237,000 people across Europe. 78% of these jobs are in the mining sector. An integral part of the European "Green Deal", the "Just Transition Mechanism" (JTM) aims to reconcile the Union's exceptional climate ambition with social justice. Through grants and investment programmes, it aims to secure the professional transition of people likely to lose their jobs, to revitalise and diversify local economies, and to restore land.

Coal

120,823

Direct employment, source: JRC

Lignite

63,946

Direct employment, source: JRC

The challenge is crucial: supporting the territories and populations most directly affected by the necessary extinction of the most polluting activities enables an improvement of the future of the most deprived, and thus demonstrates that Europe can bring added value to these citizens.

To support the Just Transition Mechanism the EU The prospective Just Transition Fund (JTF) is to be the first of three pillars that constitute the Just Transition Mechanism (JTM), the others being a dedicated scheme under InvestEU and a public sector loan facility managed by the EIB Group.The Just Transition Fund is a new instrument with an overall budget of €17.5 billion, of which €7.5 billion are coming from the Multiannual Financial Framework (MFF) and €10 billion from the NextGenerationEU. The JTF is a key element of the European Green Deal and the first pillar of the Just Transition Mechanism (JTM). It aims to alleviate the social and economic costs resulting from the transition towards a climate-neutral economy, through a wide range of activities directed mainly at diversifying the economic activity and helping people adapt in a changing labour market.

ESPON territorial evidence

Reconciling the different angles of the ‘just’ epithet.

We turn attention to the place-invariant challenge that can be expected across all regional economies, albeit to different extents. The decarbonised economy commitments will bring about a paradigm shift in coal-dependent and arguably coal-independent regions alike. However, regions have different levels of potential to embark on this paradigm.

In other words, regions have different levels of potential to induce structural change because of the different levels of dependency on incumbent industries, which may exacerbate the socioeconomic implications of such a paradigm shift. We plug in ESPON territorial evidence that will be useful for informed decisions on actions under the Just Transition Fund (JTF) related to research and development (R&D) investments and productive investments, as well as business incubation and consultancy for firm creation and development.

Want to know more?

This brief synthesizes extant literature, recent research and policy advice in relation to structural change in coal phase-out regions and plugs in ESPON territorial evidence for policy questions that have not been addressed as yet. These relate to the efficient use of JTF resources, potential links with other funding streams and the design of interventions based on territorial parameters relating to the knowledge and entrepreneurial stock in coal-dependent localities.

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