Just Transition Planning Toolbox

To help implement the Just Transition Development Plan for Western Macedonia, a Special Transitional Fair Transition Program was set up by the Greek government. The program is financed by external funds from the European Union in addition to domestic revenue via the government’s ‘Green Fund’.

The Green Fund’s objective is to stimulate growth by providing administrative, economic, technical and financial support for programs, measures, interventions and initiatives to improve and restore the environment and combat climate change. It is capitalized by revenue from various sources, including energy distributors, excise duty on petrol, fines for the erection and maintenance of unauthorized buildings, and fines for environmental infringements.

Among the programs financed by the Green Fund in lignite areas are development of Action Plans for sustainable energy and climate, and for the circular economy, a pilot program for the circular management of urban waste, an energy communities program, support for small and medium-sized enterprises, and development of a Specialized Innovation Zone or business park.

The Equity Collaborative Learning Pilot Fund administered by the Climateworks Foundation is a community-centred program providing grants to target communities in the United States. The fund is designed to help the Foundation’s staff build capacity and connection with groups focused on power and movement building, while mobilizing communities to implement solutions to climate change.

A key feature of the funding model is to move resources closer to community and frontline groups. It does this through direct engagement with grantees, and by giving grantees the lead in deciding on the strategies that should be funded. Grants made through the pilot fund should align with some already defined strategic objectives of the Foundation, and then help to more deeply centre justice and equity issues in these programs. The Foundation cites various examples of funded activities, such as a campaign by a climate justice network to address under-resourced communities paying disproportionately for energy costs, legal action led by a coalition of grassroots organizations against polluting industries, or networks bringing together communities and labor unions to promote the interests of a just climate transition.

Another feature of the fund is its attempt to move towards a more “trust-based” approach for community-based funding. It does this by streamlining the application process and reporting requirements, so that transaction costs for applicants are lower. It also reduces the conditionality of funding, providing multi-year, unrestricted funding or general operating support. The Foundation also offers communities other technical support beyond the grant.

The EUR 75 million Converting to Sustainable Agriculture Programme was set up by the Ministry of Agriculture, Nature and Food Quality in the Netherlands to improve farmer’s access to finance to support the transition to sustainable practices. It arises from the recognition that accessing finance is often a problem for farmers and growers who want to convert to a form of agriculture that is more sustainable and extensive and uses fewer nitrogen inputs, in part because conventional financiers are generally hesitant and assign a higher risk profile to these activities.

By supporting farmers to get access to finance, the programme will encourage and support farmers and growers to accelerate the transition to more sustainable or extensive agriculture. At the same time, it enables farmers to participate in and benefit from the transition, reducing the risk they may be left behind as production norms change in the sector.

The programme comprises an Investment Fund, a grant scheme to support the drafting of a conversion plan, a grant scheme for starting a demonstration farm, and a loan guarantee scheme for working capital. The Investment Fund is designed so that banks also cover a share (60%) of the required investment. In other words, private parties also commit to the producer’s conversion plan. The Investment Fund is a revolving fund, providing producers with subordinated loans. As they are repaid over time, that money can be used in turn to help other businesses.

There are various examples of fiscal reform being used to both foster transition to more sustainable economies while proactively redirecting funding towards managing the impacts of transition and inequality.

Indonesia introduced significant transport fuel subsidy reforms in 2014. The changes liberated substantial government revenue, which had over the previous decade consumed around 10% of all government expenditure (and had benefited wealthier households most). Subsidy savings was used by the government to mobilize new investment (e.g. infrastructure including new roads, bridges, railway tracks, airports and seaports, as well as housing, plantations and finance for SMEs, agriculture and fisheries among other sectors), fund human and economic development programs, and increase transfers to regions and villages. These programs were not intended to specifically target workers, but rather to stimulate economic growth and rural development.

Ghana reformed its Fertiliser Subsidy Programme in 2017. Over 90% of producers in Ghana are small holder farmers, so to mitigate the impacts of transition the government redirected public expenditure towards a flagship Planting for Food and Jobs Initiative. The objective of this new programme was to improve targeting of support for smallholders, improving their access to improved inputs, markets, and extension services, with a focus of creating jobs along the value chain. This change in policy reflected a growing awareness that inadequate access to agricultural inputs by smallholder farmers was contributing towards deforestation. Support had reportedly benefited some 1.7 million farmers by 2020.

The Just Transition Fund is a philanthropic initiative focused on using grant funding to create economic opportunities for communities and workers who will be hardest hit by the transition away from coal. The Fund invests in organizations in its priority regions and states that are creating economic opportunity or pursuing policy changes aligned with the goals of just transition.

Grants support initiatives that build local capacity and promote low-carbon sectors that will create and retain wealth locally. Grant making aims to balance opportunities to achieve near-term impact with longer-term needs related to planning and capacity building, necessary to create and sustain inclusive economic opportunity.

Recognizing that communities may need technical assistance as well as finance to advance transition efforts, the Fund also provides direct transition planning and support, such as by convening learning events. The Fund supports collaboration among entrepreneurs, capital providers, and researchers, and also endorses initiatives that promote the development and expansion of innovative entrepreneurial training programs.

A feature of the Fund is that it prioritizes initiatives led by, or serving, historically marginalized groups and those most impacted by changes in the coal economy. This includes low-income people, women, and Black, Indigenous, and other communities of color.

The investments are intended to help communities create new jobs, and technical assistance should empower local leaders to act. The Fund leverages public and private resources. It creates an “on-ramp” for philanthropic foundations, enabling these funders to invest directly in local coal-affected communities.

The Mpumalanga Green Cluster Agency is a not-for-profit organization in South Africa, working at the micro and macro level, whose mission is to support green-tech SMEs build their businesses, enable bigger businesses to improve their environmental footprint, and assist the provincial government to create the right environment for a more resilient green economy. It seeks to facilitate more investment and stimulate job creation into the green economy of Mpumalanga, a province which is today heavily dependent on the coal industry.

The organization has published various “market opportunity briefs” that highlight investment opportunities in green economy sectors in Mpumalanga. These cover the water, renewable energy, and sustainable agriculture sectors. Each provides an overview of the market within the sector, including key developments and achievements, the key players, legislation and regulation, market opportunities and challenges, and funding opportunities.

These annually updated briefs are aimed at helping investors to understand the opportunities for investment and job creation in green economy sectors in the province, and thus to act as a mechanism for mobilizing finance in support of the green transition.

In 2016, China established a Special Fund for Excess Capacity Reduction to finance lay-offs and reemployment in the coal and steel industry. Funds are raised mainly from power grid enterprises and the amounts are based on the energy generation of these enterprises. The special fund will co-finance worker layoff and re-employment, alongside local funds.

The Ministry of Finance earmarked a special fund of 100 billion yuan ($15.33 billion) to subsidize local governments and state-owned enterprises (SOEs) in reducing steel and coal overcapacity. Funds were to be distributed to local governments and centrally administered SOEs based on their respective capacity reduction assignments, as well as the number of laid-off workers that must be resettled and the difficulty of doing so.

In additional support for the transition, the Ministry also flagged the introduction of other preferential taxation policies, including tax preferences for urban land use by coal miners.

The EU has various funding mechanisms supporting the objectives of just transition:

• The Just Transition Fund, as the primary component of the Just Transition Mechanism (JTM), provides grants to EU Member States which have identified their territories likely to most negatively impacted by the green transition. The fund aims to mitigate the socioeconomic costs of transition by supporting regional economic diversification and reconversion, through investments in small and medium-sized enterprises, the creation of new firms, research and innovation, environmental rehabilitation, clean energy, up- and reskilling of workers, job-search assistance and active inclusion of job-seeker programs, as well as the transformation of existing carbon-intensive facilities (where doing so will lead to substantial emission cuts and job protection).
• The InvestEU scheme supports investments in the framework of the Territorial Just Transition Plans (TJTP) prepared by EU Member States across a wide range of sectors, including energy and transport infrastructure, and district heating, as well as decarbonization projects, economic diversification programs and social infrastructure. The European Commission provides a budgetary guarantee to implementing partners to provide financing directly or indirectly to project promoters.
• The InvestEU Advisory Hub is set up to provide technical assistance and capacity-building support for the identification, preparation, development, structuring, procuring and implementation of projects, and for enhancing the capacity of project promoters to build a strong pipeline of projects in eligible territories.
• A public sector loan facility leveraged by the European Investment Bank is created to exclusively target public entities, providing support to projects that do not generate a sufficient stream of own resources to be financed commercially. This may include investments in all types of public infrastructures, as well as energy efficiency measures such as building renovation, and social infrastructure.