(1)

The regulatory framework governing the Union’s cohesion policy for the period from 2021 to 2027, in the context of the next multiannual financial framework, contributes to the fulfilment of the Union’s commitments to implement the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (5) (the ‘Paris Agreement’), pursuing efforts to limit the temperature increase to 1,5 °C above pre-industrial levels, and the United Nations Sustainable Development Goals by concentrating Union funding on green objectives. This Regulation should implement one of the priorities set out in the Commission Communication of 11 December 2019 entitled ‘The European Green Deal’ and is part of the Sustainable Europe Investment Plan that provides dedicated financing under the Just Transition Mechanism in the context of cohesion policy to address the social, economic and environmental costs of the transition to a climate-neutral and circular economy, where any remaining greenhouse gas emissions are compensated by equivalent absorptions.

(2)

The transition to a climate-neutral and circular economy constitutes one of the most important policy objectives for the Union. On 12 December 2019 the European Council endorsed the objective of achieving a climate-neutral Union by 2050, in line with the objectives of the Paris Agreement. While fighting climate change and environmental degradation will benefit all in the long term and provides opportunities and challenges for all in the medium term, not all regions and Member States start their transition from the same point or have the same capacity to respond. Some are more advanced than others, and the transition entails a wider social, economic and environmental impact for those regions that rely heavily on fossil fuels for energy use - especially coal, lignite, peat and oil shale - or greenhouse gas intensive industries. Such a situation not only creates the risk of a variable speed transition in the Union as regards climate action, but also of growing disparities between regions, detrimental to the objectives of social, economic and territorial cohesion.

(3)

In order to be successful and socially acceptable for all, the transition has to be fair and inclusive. Therefore, the Union, Member States and their regions must take into account its social, economic and environmental implications from the outset, and deploy all possible instruments to mitigate adverse consequences. The Union budget has an important role in that regard.

(4)

As set out in the European Green Deal and the Sustainable Europe Investment Plan, a Just Transition Mechanism should complement the other actions under the next multiannual financial framework for the period from 2021 to 2027. It should contribute to addressing the social, economic and environmental consequences, in particular for workers affected in the process of transitioning towards a climate-neutral Union by 2050, by bringing together the Union budget’s spending on climate and social objectives at regional level and by aiming for high social and environmental standards.

(5)

This Regulation should establish the Just Transition Fund (JTF) which is one of the pillars of the Just Transition Mechanism implemented under cohesion policy. The aims of the JTF are to mitigate the adverse effects of the climate transition by supporting the most affected territories and workers concerned and to promote a balanced socio-economic transition. In line with the JTF’s single specific objective, actions supported by the JTF should directly contribute to alleviating the impact of the transition by mitigating the negative repercussions on employment and by financing the diversification and modernisation of the local economy. The JTF’s single specific objective is established at the same level and listed together with the policy objectives set out in Regulation (EU) 2021/1060 of the European Parliament and of the Council (6).

(6)

Reflecting the European Green Deal as the Union’s sustainable growth strategy and the importance of tackling climate change in line with the Union’s commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, the JTF is intended to contribute to the mainstreaming of climate action and environmental sustainability and to the achievement of an overall target of 30 % of Union budget expenditure supporting climate objectives and to the ambition of providing 7,5 % of annual spending under the multiannual financial framework to biodiversity objectives in 2024 and 10 % of annual spending under the multiannual financial framework to biodiversity objectives in 2026 and 2027, while taking into account the existing overlaps between climate and biodiversity goals. Resources from the JTF’s own envelope are additional to the investments needed to achieve the overall target of 30 % of the Union budget expenditure contributing to climate objectives. Those resources should contribute fully to the achievement of this target along with resources transferred on a voluntary basis from the European Regional Development Fund (ERDF) established by Regulation (EU) 2021/1058 of the European Parliament and of the Council (7) and the European Social Fund Plus (ESF+) established by Regulation (EU) 2021/1057 of the European Parliament and of the Council (8). In this context the JTF should support activities that respect the climate and environmental standards and priorities of the Union and do no significant harm to the environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852 of the European Parliament and of the Council (9), and that ensure the transition towards a low carbon economy in the pathway to achieving a climate-neutral Union by 2050.

(7)

The resources from the JTF should complement the resources available under cohesion policy.

(8)

Transitioning to a climate-neutral economy is a challenge for all Member States. It will be particularly demanding for those Member States that rely, or which until recently have relied, heavily on fossil fuels or greenhouse gas intensive industrial activities which need to be phased out or which need to adapt due to the transition towards a climate-neutral economy and that lack the financial means to do so. The JTF should therefore cover all Member States, but the distribution of its financial means should focus on those territories that are the most affected by the climate transition process, and that distribution should reflect the capacity of Member States to finance the necessary investments to cope with the transition towards a climate-neutral economy.

(9)

Horizontal financial rules adopted by the European Parliament and by the Council pursuant to Article 322 of the Treaty on the Functioning of the European Union (TFEU) apply to this Regulation. Those rules are laid down in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (10) (the ‘Financial Regulation’) and determine in particular the procedure for establishing and implementing the budget through grants, prizes, indirect management, financial instruments, budgetary guarantees, financial assistance and the reimbursement of external experts, and provide for checks on the responsibility of financial actors. Rules adopted pursuant to Article 322 TFEU also include a general regime of conditionality for the protection of the Union budget.

(10)

In order to ensure the effective use of the JTF resources, access to the JTF should be limited to 50 % of the national allocation for those Member States that have not yet committed to implement the objective, in line with the objectives of the Paris Agreement, of achieving a climate-neutral Union by 2050, with the other 50 % being made available for programming upon acceptance of such a commitment. In order to ensure fairness and equal treatment of Member States, where a Member State has not committed to implement the objective of achieving a climate-neutral Union by 2050, by 31 December in any year starting from 2022, the budgetary commitment for the preceding year should be decommitted in its entirety the following year.

(11)

In accordance with Council Regulation (EU) 2020/2094 (11) and within the limits of resources allocated therein, recovery and resilience measures under the JTF should be carried out to address the unprecedented impact of the COVID-19 crisis. Such additional resources should be used in such a way as to ensure compliance with the time limits provided for in that Regulation.

(12)

This Regulation should identify types of investments for which support of expenditure by the JTF would be permitted. All supported activities should be pursued in full respect of the climate, environmental and social commitments and priorities of the Union. The list of investments should include those that support local economies through stimulating their endogenous growth potential in accordance with the respective smart specialisation strategies, including sustainable tourism where appropriate. Investments need to be sustainable in the long-term, taking into account all the objectives of the European Green Deal. The projects financed should contribute to a transition to a sustainable, climate-neutral and circular economy, including measures that aim to increase resource efficiency. Waste incineration should not receive support given that this activity belongs to the lower part of the waste hierarchy in the circular economy. Consultancy services that contribute to the implementation of measures supported by the JTF should be eligible. Renaturation of sites, development of green infrastructure and water management should be able to be supported as part of a land restoration project. When supporting energy efficiency measures, the JTF should be able to support investments such as those which contribute to reducing energy poverty, principally through energy efficiency improvements of housing stock. The JTF should also be able to support the development of innovative storage technologies.

(13)

To protect citizens who are most vulnerable to the climate transition, the JTF should also cover the upskilling and reskilling, including training, of the affected workers, irrespective of whether they are still employed or have lost their job due to the transition. The JTF should aim to help them adapt to new employment opportunities. The JTF should also provide any appropriate form of support to jobseekers, including job search assistance and their active inclusion into the labour market. All jobseekers who have lost their job in sectors affected by the transition in a region covered by the territorial just transition plan should be eligible to be supported by the JTF even if the workers who were dismissed do not reside in that region. Due regard should be paid to citizens at risk of energy poverty, in particular when implementing energy efficiency measures for improved social housing conditions.

(14)

Support for activities in the areas of education and social inclusion should be allowed, as well as support for social infrastructure for the purposes of child- and elderly-care facilities and in training centres, provided that these activities are appropriately justified in the territorial just transition plans. For elderly care, the principle of promoting community-based care should be preserved. Social and public services in those areas could complete the investment mix. All support in those areas should require appropriate justification in the territorial just transition plans and should follow the objectives of the European Pillar of Social Rights.

(15)

To address the specific situation and role of women in the transition to the climate-neutral economy, gender equality should be promoted. Women’s labour market participation and entrepreneurship, as well as equal pay, play an important role in ensuring equal opportunities. The JTF should also pay special attention to vulnerable groups that suffer disproportionately from the adverse effects of the transition, such as workers with disabilities. The identity of mining communities needs to be preserved and the continuity of past and future communities needs to be safeguarded. This involves paying special attention to their tangible and non-tangible mining heritage, including their culture.

(16)

In order to enhance the economic diversification of territories impacted by the transition, the JTF should provide support to enterprises and economic stakeholders, including through support to productive investments in micro, small and medium-sized enterprises (12) (SMEs). Productive investments should be understood as investment in fixed capital or immaterial assets of enterprises with a view to producing goods and services, thereby contributing to gross-capital formation and employment. For enterprises other than SMEs, productive investments should only be supported if they are necessary for mitigating job losses resulting from the transition, by creating or protecting a significant number of jobs, and do not lead to or result from relocation. Investments in existing industrial facilities, including those covered by the Union Emissions Trading System, should be allowed if they contribute to the transition to a climate-neutral economy of the Union by 2050 and go substantially below the relevant benchmarks established for free allocation under Directive 2003/87/EC of the European Parliament and of the Council (13) and if they result in the protection of a significant number of jobs. Any such investment should be justified accordingly in the relevant territorial just transition plan. In order to protect the integrity of the internal market and cohesion policy, support to undertakings should comply with Union State aid rules as set out in Articles 107 and 108 TFEU and, in particular, support to productive investments in enterprises other than SMEs should be limited to enterprises located in areas designated as assisted areas for the purposes of points (a) and (c) of Article 107(3) TFEU.

(17)

In order to provide flexibility for the programming of the JTF resources under the Investment for jobs and growth goal, it should be possible to prepare a self-standing JTF programme or to programme JTF resources in one or more dedicated priorities within programmes supported by the ERDF, the ESF+ or the Cohesion Fund. In accordance with Regulation (EU) 2021/1060, JTF resources could be reinforced on a voluntary basis with complementary funding from the ERDF and the ESF+. In such a case, the respective amounts transferred from the ERDF and the ESF+ should be consistent with the type of operations set out in the territorial just transition plans.

(18)

The JTF support should be conditional on the effective implementation of a transition process in a specific territory in order to achieve a climate-neutral economy. In that regard, Member States should prepare, in social dialogue and cooperation with the relevant stakeholders, in accordance with the relevant provision of Regulation (EU) 2021/1060 on partnership, and supported by the Commission, territorial just transition plans, setting out the transition process, consistent with their integrated national energy and climate plans. To that end, the Commission should set up a Just Transition Platform, which would build on the existing platform for coal regions in transition, to enable bilateral and multilateral exchanges of experience on lessons learnt and best practices across all affected sectors. Member States should ensure that municipalities and cities are involved in the implementation of the JTF resources and that their needs in that context are taken into account.

(19)

The territorial just transition plans should identify the territories most negatively affected, where JTF support should be concentrated, and describe specific actions to be undertaken to reach the Union’s 2030 targets for energy and climate and a climate-neutral economy of the Union by 2050, in particular as regards the conversion or closure of facilities involving fossil fuel production or other greenhouse gas intensive activities. Those territories should be precisely defined and correspond to level 3 of the common classification of territorial units for statistics (‘NUTS level 3 regions’), as established by Regulation (EC) No 1059/2003 of the European Parliament and of the Council (14), or be parts thereof. The plans should set out the challenges and needs of those territories, taking into account depopulation risks, and identify the type of operations needed to contribute to job creation at the level of the beneficiaries of the plan and in a manner that ensures the coherent development of climate-resilient economic activities that are also consistent with the transition to a climate-neutral economy and the objectives of the European Green Deal. Where such territories are identified, additional attention should be given to the specificities of islands, insular areas as well as the outermost regions, where the geographical and socio-economic characteristics may require a different approach to support the transition process towards a climate-neutral economy. Only investments in accordance with the territorial just transition plans should receive financial support from the JTF. The territorial just transition plans should be part of the programmes, supported, as the case may be, by the ERDF, the ESF+, the Cohesion Fund or the JTF, which are approved by the Commission.

(20)

In order to enhance the result orientation of the use of JTF resources, the Commission, in line with the principle of proportionality, should be able to apply financial corrections in the case of serious underachievement of targets established for the specific objective of the JTF.

(21)

In order to set out an appropriate financial framework for the JTF, implementing powers should be conferred on the Commission to set out the annual breakdown of available resources by Member State.

(22)

Since the objective of this Regulation, namely to support the people, economy and environment of territories facing economic and social transformation in their transition to a climate-neutral economy, cannot be sufficiently achieved by the Member States owing to the disparities in the levels of development of the various territories and to the backwardness of the least favoured territories, as well as to the limit on the financial resources of Member States and territories, but can rather, by reason of the need for a coherent implementation framework covering several Union funds under shared management, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(23)

In view of the adoption of this Regulation after the start of the programming period, and taking into account the need to implement the JTF in a coordinated and harmonised manner, and in order to allow for its prompt implementation, it should enter into force on the day following that of its publication in the Official Journal of the European Union,

(a)

the decommissioning or the construction of nuclear power stations;

(b)

the manufacturing, processing and marketing of tobacco and tobacco products;

(c)

an undertaking in difficulty, as defined in point (18) of Article 2 of Commission Regulation (EU) No 651/2014 (18), unless authorised under temporary State aid rules established to address exceptional circumstances or under de minimis aid to support investments reducing energy costs in the context of the energy transition process;

(d)

investment related to the production, processing, transport, distribution, storage or combustion of fossil fuels.