Public sector loan facility under the just transition mechanism

SUMMARY OF:

Regulation (EU) 2021/1229 on the public sector loan facility under the just transition mechanism

WHAT IS THE AIM OF THE REGULATION?

It sets up the public sector loan facility (PSLF), which aims to support European Union (EU) regions that face serious social, economic and environmental challenges stemming from the shift towards a climate-neutral EU.

KEY POINTS

Through public sector investments, the PSLF aims to address the social, employment, economic and environmental impacts of the EU’s transition towards its 2030 climate and energy targets, and the objective of climate neutrality in the EU by 2050 at the latest, based on the Paris Agreement (see summary).
It is the third pillar of the just transition mechanism, along with the Just Transition Fund and the InvestEU scheme.
It is a key element of the European Green Deal (see summary).

Objective

The specific objective of the PSLF is to increase public sector investments in sustainable investment projects that address the development needs of the territories concerned, but which may not create sufficient revenue streams to cover their investment costs.

Budget and financing

The PSLF will provide projects a combination of grants awarded by the European Commission and loans generated on preferential terms by the European Investment Bank (EIB).
The PSLF is expected to open up €18.5 billion of investment.
EU grants will provide around €1.5 billion, with €250 million of that coming from the EU budget – at current prices from the 2021–2027 multiannual financial framework.
Loans from the EIB can provide up to €10 billion.
- The facility may also be extended to finance partners* other than the EIB under certain conditions.

Eligibility

Projects must fulfil certain criteria:

they must have a measurable impact and include, where appropriate, output indicators that address the social, economic and environmental challenges arising from the EU’s climate transition targets;
they must benefit territories identified in a territorial just transition plan, even if the projects are not located in those territories;
they must support sustainable investments meeting the development needs of the territories concerned in:
- renewable energy and green and sustainable mobility, including the promotion of green hydrogen and efficient district heating networks,
- public research,
- digitalisation,
- environmental infrastructure for smart waste and water management,
- sustainable energy, energy efficiency and integration measures, including renovation and conversion of buildings,
- urban renewal and regeneration,
- the transition to a circular economy,
- land and ecosystem restoration and decontamination, taking into account the ‘polluter pays’ principle,
- biodiversity,
- up-skilling and re-skilling, training and social infrastructure, including care facilities and social housing, and
- investments in other sectors that could also be supported if they are consistent with the approved territorial just transition plans;
they must not support activities excluded under Article 9 of Regulation (EU) 2021/1056 establishing the Just Transition Fund.

Oversight

The regulation sets out rules for the programming, monitoring, evaluation and control of the facility.
The facility is implemented through work programmes, which include award criteria assessing the relevance, impact and quality of the projects. For situations where the requested funding exceeds the financing available, priority is given to:
- projects promoted by beneficiaries located in less developed regions;
- projects that contribute directly to the achievement of the EU’s 2030 climate and energy targets and the objective of climate neutrality in the EU by 2050 at the latest;
- projects promoted by beneficiaries that have adopted decarbonisation plans.
The management of the public sector loan facility has been delegated to the European Climate Infrastructure and Environment Executive Agency.
Territorial just transition plans will describe the sectors and areas that could be supported by the public sector loan facility.
The European Parliament and the Council of the European Union will perform an interim evaluation of the facility before 30 June 2025.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 19 August 2021.

BACKGROUND

For further information see:

Just transition mechanism (European Commission).

KEY TERMS

Finance partners. The EIB, other international financial institutions, national promotional banks and financial institutions, including private financial institutions, with which the Commission signs an administrative agreement to cooperate within the facility.

MAIN DOCUMENT

Regulation (EU) 2021/1229 of the European Parliament and of the Council of 14 July 2021 on the public sector loan facility under the Just Transition Mechanism (OJ L 274, 30.7.2021, pp. 1–19).