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(1) On 11 December 2019, the Commission adopted a communication entitled ‘The European Green Deal’, drawing a roadmap which sets out a new growth strategy for Europe and ambitious objectives for countering climate change and for environmental protection. In line with the objective of achieving the Union’s 2030 climate target as established in Regulation (EU) 2021/1119 of the European Parliament and the Council and achieving climate neutrality in the Union by 2050 at the latest in an effective and socially fair manner, the European Green Deal announced a Just Transition Mechanism to provide resources for facing the challenge of the transition process towards the Union’s 2030 climate target and the objective of climate neutrality in the Union by 2050 while leaving no one behind. The most vulnerable regions and people are the most exposed to the harmful effects of climate change and environmental degradation. The transition towards a climate-neutral economy is a source of new economic opportunities, with significant potential for job creation, in particular in territories that currently depend on fossil fuels. It can also contribute to enhanced energy security and resilience. However, the transition may also trigger short term social and economic costs in territories undergoing heavy decarbonisation process, and already weakened by the disruptive economic and social effects of the COVID-19 crisis.

(2) Managing the transition will require significant structural changes at both national and regional level. To be successful, the transition needs to reduce inequalities, create a net employment effect with new high quality jobs, and be fair and socially acceptable for all, while strengthening competitiveness. In that regard, it is critical that the territories most negatively impacted by the transition, in particular coal-mining regions, can be supported in diversifying and revitalising their local economies and in creating sustainable employment opportunities for the impacted workers.

(3) On 14 January 2020, the Commission adopted a communication entitled ‘Sustainable Europe Investment Plan – European Green Deal Investment Plan’, in which it proposed a Just Transition Mechanism which focuses on the regions and sectors that are most affected by the transition because of their dependence on fossil fuels, such as coal, peat and oil shale, or their dependence on greenhouse gas-intensive industrial processes, but have less capacity to finance the necessary investments. The creation of a Just Transition Mechanism has also been affirmed by the conclusions of the European Council of 21 July 2020. The Just Transition Mechanism consists of three pillars: a Just Transition Fund (JTF) implemented under shared management, a dedicated Just Transition Scheme under InvestEU, and a public sector loan facility to mobilise additional investments to the regions concerned. Those three pillars provide complementary support to those regions, with a view to fostering the transition to a climate-neutral economy by 2050.

(4) For the better programming and implementation of the JTF, territorial just transition plans are to be established, setting out the key steps and timeline of the transition process and identifying the territories that are most negatively affected by the transition towards a climate-neutral economy and that have less capacity to deal with the transition challenges. Territorial just transition plans are to be prepared together with the relevant local and regional authorities and involve all relevant partners in accordance with Article 8 of Regulation (EU) 2021/1060 of the European Parliament and of the Council . They may be amended, together with the corresponding programmes supported by the JTF, in accordance with Article 24 of that Regulation, to include new territories which would be severely impacted by the transition in a way that was not anticipated at the time of their initial adoption.

(5) A public sector loan facility (the ‘Facility’) should be established. It constitutes the third pillar of the Just Transition Mechanism, which aims to support investments by public sector entities, given the key role of the public sector in addressing market failures. Such investments should meet the development needs resulting from the transition challenges described in the territorial just transition plans that have been approved by the Commission. The activities envisaged for support under the Facility should be consistent with, and should complement, activities supported under the other two pillars of the Just Transition Mechanism. In order to align its duration with the period of the multiannual financial framework from 1 January 2021 to 31 December 2027 (the ‘2021-2027 MFF’) laid down in Council Regulation (EU, Euratom) 2020/2093 , the Facility should be established for a period of seven years.

(8) Respect for fundamental rights and compliance with the Charter of Fundamental Rights of the European Union, and in particular gender equality, should be ensured, as appropriate, throughout the preparation, evaluation, implementation and monitoring of eligible projects under the Facility. Similarly, beneficiaries and the Commission should also avoid any discrimination based on gender, racial or ethnic origin, religion or belief, disability, age or sexual orientation, throughout the implementation of the Facility. The objectives of the Facility should be pursued in line with the United Nations Sustainable Development Goals, the European Pillar of Social Rights, the polluter pays principle, the Paris Agreement adopted under the United Nations Framework Convention on Climate Change (the ‘Paris Agreement’) and the ‘do no significant harm’ principle.

(17) Resources for advisory support should also be provided for in order to promote the preparation, development and implementation of eligible projects and the early preparation of projects prior to the submission of the application by the beneficiary to the Facility. A share of those resources should be dedicated to supporting the endogenous capacity of beneficiaries to ensure the sustainability of eligible projects.

(18) In order to ensure that all Member States are able to benefit from the grant component, a mechanism should be set up to pre-allocate national shares during a first stage, as set out in Annex I to Regulation (EU) 2021/1056. However, in order to reconcile that objective with the need to optimise the economic impact of the Facility and its implementation, such national shares should not be pre-allocated for the period after 31 December 2025. Thereafter, the remaining resources available for the grant component should be provided without any pre-allocated national share and on a competitive basis at Union level, while ensuring predictability for investment and following a needs-based and regional convergence approach.

(20) In order to optimise the effectiveness of Union assistance and to prevent the replacement of potential support and investment from alternative resources, support under the Facility should only be provided to projects that do not generate sufficient streams of revenues to cover their investment costs. Those revenues should correspond to revenues other than budgetary transfers that are generated directly by the activities carried out by the project, such as sales, fees or tolls and incremental savings generated by the upgrade of existing assets.

(21) Since the grant component should take into account the divergent development needs of regions across Member States, such support should be adjusted in favour of less developed regions. Taking into account the fact that public sector entities in less developed regions generally experience lower public investment capacity, the grant rates applied to loans provided to such entities should be comparatively higher.

(22) In order to ensure the effective implementation of the Facility, it may be necessary to provide advisory support for the preparation, development and implementation of projects. Such support should be provided through the InvestEU Advisory Hub for eligible projects and for the preparation of projects prior to the submission of applications, paying particular attention to beneficiaries that have lower administrative capacity or that are located in less developed regions. It should also be possible for such support to be granted under other Union programmes.

(23) In order to measure the effectiveness of the Facility, its capacity to meet its objectives and support the preparation of its possible prolongation beyond 2027, the Commission should carry out an interim and a final evaluation, including an assessment of the possibility of adopting provisions on a gender impact assessment, if appropriate, and should submit the evaluation reports to the European Parliament and to the Council. Pursuant to paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016 on Better Law-Making , the Facility should be evaluated on the basis of information collected in accordance with specific monitoring requirements, while avoiding an administrative burden, in particular on Member States, and overregulation.