The European Union Policy Toolbox to Support Just Transition

The European Union (EU) is strongly committed to steering its economy away from high-carbon and pollution-intensive production and toward climate-neutral technologies and business models by 2050. If this transition is not accompanied by adjustment assistance, however, making deep reductions in greenhouse gas (GHG) emissions could disproportionately burden certain segments of society that are dependent on producing or using carbon-intensive energy resources as a primary employer or mainstay of the economy (Vona 2021). Many regional economies in Europe rely on fossil fuel extraction (oil, coal, or gas) or energy- and carbon-intensive production (e.g., steel production and electricity generation). As European Commission president Ursula von der Leyen has frequently stated, the large-scale deployment of low-carbon energy can succeed only if conducted in a fair and inclusive way for all European citizens (European Commission 2019k), what many refer to as just transition.The aim of this report is to distill important lessons learned from the EU experience in promoting just transition to help US policymakers identify key components of a comprehensive and effective energy transition policy package. The report examines EU-level programs implemented over the period 2014–20 and summarizes the policy changes proposed in the European Green Deal for 2020–25.The just transition concept originated in the US labor movement during the 1970s to describe the need for a support system for workers unemployed because of environmental protection policies (Henry et al. 2020). In the EU, the quality of work and life of its citizens has been a policy goal since its founding. One of the guiding principles of European policymaking is a commitment to reduce social, economic, and territorial development disparities among EU regions to promote integration and the economic growth of all member states. This is referred to as cohesion policy, which is enshrined in the Treaty on the Functioning of the European Union (Art. 174) and plays a crucial role in setting political priorities at the EU level (European Commission 2022g). Cohesion policy is the term used in the EU context to refer to regional policy. In the EU, socioeconomic development is promoted as an expression of solidarity between the EU member states and their regions. Programs and funding targeting socioeconomic development aim to remove economic, social, and territorial disparities across the EU, supporting the restructuring of declining industrial areas and diversification of declining rural areas. The rationale for cohesion policy is to mitigate the negative side effects from the creation of a single market and ensure that all EU citizens can reap the benefits (Samecki 2009). These policies and programs have been used as building blocks to shape EU just transition policy over time, including in the European Green Deal. For discussion of the evolving interpretation of just transition, see ILO (2015); Stevis and Felli (2015); Verdolini (2023).It is important to note that most of the EU programs we discuss are ultimately implemented and used by the member states, which have a fair degree of autonomy in selecting the projects to be funded within the broader design principles set up at the EU level. Other reports in this series have reviewed some of the ways these EU-level programs have been implemented in specific countries. Reports on just transition measures related to reductions in the coal sector in Germany, Poland, and the UK can be found on the RFF website at https://www.rff.org/publications/all-publications/?offset=12&topic=10098. The report on “Just Transition in Poland” examines the topic in the broader context of economic restructuring and increased regional integration of the country.Within the EU, the concept of just transition indicates the need to support and help territories and regions most affected by the transition to a climate-neutral economy, prioritizing those that have less capacity to deal with the costs of transition (European Commission 2019b). The EU currently distinguishes between regions dependent on extraction of coal and fossil fuels and those dependent on carbon-intensive industries (Alves Dias et al. 2021).This report does not present an exhaustive list of all programs and investments at the EU level that have been used to support workers and communities; rather, it identifies the key relevant EU policies and programs, describes their main features, and gives several examples of specific funded projects and activities. Many of these policies and programs have been motivated by other energy and economic issues, such as improving energy efficiency for energy security and enhanced productivity, but they include tools that are also applicable to just transition in the context of decarbonization.Sections 2 and 3 of this report focus on the policies and programs during the full EU long-term budget cycle from 2014 to 2020. Section 4 then discusses more recent EU policy priorities and programs, some of which are still being shaped under the European Green Deal. The report thus provides a broad picture of how the debate around just transition is reshaping and adjusting EU policies and programs. Section 5 concludes by summarizing the relevant lessons learned from the EU experience.The review of EU just transition policies provides several relevant insights for policymakers seeking to address equity and fairness issues in the United States’ energy transition. See Look et al. (2021) for a review of key issues for the US energy transition. We briefly summarize the key points here, with discussion of them in Section 5.The multiannual and investment-focused EU budget provides long-term, stable funding, which supports addressing many of the challenges associated with just transition.The EU Just Transition Mechanism aims to mobilize substantial public and private investment between 2021 and 2027 to support just transition efforts in Europe.The Just Transition Mechanism includes a Just Transition Platform to serve as a single access point for related EU-wide resources and a centralized source for technical assistance. The Biden administration has established a similar resource.The EU just transition policy framework requires EU member states to develop Territorial Just Transition Plans before accessing funds. The Biden administration has established a mechanism for rapid response teams to support local transition planning.One of the three pillars of EU just transition policy in the Green Deal is access to the Public Sector Loan Facility to support the implementation of just transition projects. The United States does not have a financing program explicitly dedicated to supporting transition in energy communities, although the creation of the Greenhouse Gas Reduction Fund in the Inflation Reduction Act may lead to a green bank that could support just transition efforts.EU R&D policy supports not only technology development but also innovation in the creation of stronger social institutions as a tool for responding to just transition challenges. The US federal government could do more to support research and pilot implementation of innovative approaches for addressing just transition.