The European Commission (EC) and the European Investment Bank (EIB) have agreed to provide €10 billion (US$10.1 billion) in support to regions most affected by the shift away from fossil fuels as the continent grapples with how to decarbonise without leaving communities behind amid a rampant energy crisis.
The two European organisations have signed the agreement on the Public Sector Loan Facility, the third pillar of the Just Transition Mechanism, which will finance public investments in the regions most affected by Europe’s transition to a climate-neutral economy. It will combine up to €10 billion in EIB loans with €1.5 billion in EU budget grants over the next five years.
“The Public Sector Loan Facility offers public sector entities planning investment projects in affected regions a combination of EIB loans and EU grants, effectively reducing the financial burden for public coffers,” the EIB said in a media release.
Eligible projects must be located in or benefit territories that EU Member States have identified in their Commission-approved territorial Just Transition plans as facing the biggest challenges related to the energy transition. You can view these territories via this link.
In less developed regions – defined as those with a GDP per capita of less than 75% of the EU average – the EU grant component can be up to 25% of the EIB loan amount for each project.
“Thanks to this agreement with the EIB, the Public Sector Loan Facility will offer public authorities in the regions and territories that most need support preferential lending conditions for projects that do not generate sufficient revenue to be financially viable,” said Elisa Ferreira, EIB commissioner for Cohesion and Reforms.
“The European Commission and the EIB will keep working together to support a fair transition that will leave no one behind.”
In May, the European Union (EU) significantly ramped up and brought forward its solar deployment targets as part of its updated REPowerEU strategy, redesigned to combat the bloc’s reliance on fossil fuels, and in particular Russian gas.
These accelerated plans, however, could be thwarted by higher material and module costs as a “perfect storm” looms over the sector, as well as repeated calls to ensure the most vulnerable communities are not left isolated and worse off as part of the transition to clean energy.