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EU Just Transition Fund to help industry in ETS cut CO2 costs: EC

Highlights

Could mobilize up to Eur50 billion of public support

Could help refineries, steel works cut their emissions

Focused on all CO2-intensive regions, not just coal

An EU Just Transition Fund could mobilize up to Eur50 billion ($55 billion) of public money to help heavy industry like refineries and steel works cut their emissions, the European Commission said in a formal proposal on Tuesday.

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Only plants covered by the EU's Emissions Trading Scheme and located in EU regions with a carbon emission intensity at least twice the EU average would have a chance of receiving such support.

The proposed fund is part of a wider plan for a Eur100 billion Just Transition Mechanism intended to help targeted carbon-intensive regions keep up with the rest of the EU becoming carbon-neutral by 2050, in line with the EC's European Green Deal strategy.

National governments would have to set out how they want to use their share of the proposed fund in a "territorial just transition plan" for each region they want to support.

The EC would have to approve these plans, and intends to be "very selective" on the regions chosen, according to an EC source.

It would focus on regions where many people work in coal, lignite, oil shale and peat production, or to regions dependent on carbon-intensive industries.

Any planned support for ETS-covered installations to help clean up their industrial processes would have to be justified by showing that the support would preserve jobs in the region.

The EC wants to earmark Eur7.5 billion for the fund from the proposed 2021-27 EU budget, which national governments are still discussing.

The EC would then combine this with money from the EU's cohesion fund and national government co-financing to mobilize Eur30-50 billion in total over seven years.

Steel support

The proposed fund could help EU steel mills that are struggling to stay competitive globally, such as ArcelorMittal Italia, the former Ilva, according to an EC source.

"We are talking about the biggest steel mill in Europe which has a serious competitiveness challenge that will grow only bigger as EU carbon prices increase," the source said.

Ilva is in Italy's Taranto region, which is eligible for cohesion funding and so in principle eligible for support from the proposed Just Transition Fund.

"It depends on what Italy might propose as measures," the source said. "The Taranto region might also benefit from diversifying its economy."

Using the fund -- or indeed any public money -- to revamp an industrial plant to cut its emissions, for example by converting it to run on hydrogen, would be subject to EU state rules, the source said.

"In principle this is a very good illustration of a region that is not a coal extraction region and has a big industrial problem. The Just Transition Mechanism was designed specifically for regions like this," the source said.

Italy's Prime Minister Giuseppe Conte was reported by local media Monday saying that he wanted Ilva to have a "central place" in the European Green Deal strategy.

Decarbonizing industry is a key tenet of the strategy.

Next steps

The EC's formal proposal for the Just Transition Fund has to be approved by the European Parliament and EU Council, representing national governments.

The wider Just Transition Mechanism's focus is on preserving or replacing jobs to ensure social acceptance of the EU's 2050 climate-neutrality goal.

The EC plans to propose an EU climate law to make the 2050 goal binding on February 26.