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A socially just transition
through the European
Green Deal?
—
Sebastiano Sabato and Boris Fronteddu
Working Paper 2020.08
A socially just transition
through the European
Green Deal?
—
Sebastiano Sabato and Boris Fronteddu
Working Paper 2020.08
european trade union institute
Sebastiano Sabato is a senior researcher at the European Social Observatory
(OSE asbl). Contact: sabato@ose.be
Boris Fronteddu is a researcher at the European Social Observatory (OSE asbl).
Contact: fronteddu@ose.be
ETUI publications are published to elicit comment and to encourage debate. The views
expressed are those of the author(s) alone and do not necessarily represent the views of
the ETUI nor those of the members of its general assembly.
Brussels, 2020
©Publisher: ETUI aisbl, Brussels
All rights reserved
Print: ETUI Printshop, Brussels
D/2020/10.574/27
ISSN: 1994-4446 (print version)
ISSN: 1994-4454 (electronic version)
The ETUI is financially supported by the European Union. The European Union is not responsible
for any use made of the information contained in this publication.
3WP 2020.08
Contents
Introduction ............................................................................................................................................... 5
1. The just transition framework ............................................................................................... 7
1.1 Preliminary remarks on the notion of just transition ...................................................... 7
1.2 The ILO’s Guidelines on Just Transition ................................................................................ 9
2. The European Green Deal ............................................................................................ 12
2.1 The European Green Deal: main features ......................................................................... 12
2.1.1 Objectives, approach and policy domains ......................................................................... 12
2.1.2 Governance and funding ......................................................................................................... 13
3. The European Green Deal and the ILO Just Transition framework:
fits and misfits ................................................................................................................ 15
3.1 Comparing the two policy frameworks: a significative overlap ................................. 15
3.2 The social dimension of the European Green Deal ....................................................... 16
4. Implementing the European Green Deal through The European
Semester ......................................................................................................................... 19
4.1 The starting point: the European Semester before the European
Green Deal ................................................................................................................................... 19
4.2 The Annual Sustainable Growth Strategy and the Country reports 2020 .......... 20
4.3 The European Semester and the COVID-19 pandemic: towards a
Recovery Plan for Europe ....................................................................................................... 22
5. Financing the European Green Deal: public and private investment
for a just transition ...................................................................................................... 25
5.1 The complexity of estimating the costs for achieving a green and just
transition ...................................................................................................................................... 25
5.2 The EU instruments to finance the just transition: an overview .............................. 26
5.3 Towards a European taxonomy of sustainable activities: the key elements
of a thorny debate .................................................................................................................... 29
Conclusions ................................................................................................................................ 33
References .................................................................................................................................. 36
Annex: list of acronyms ........................................................................................................... 40
A socially just transition through the European Green Deal?
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Introduction1
In a context characterised by increased public concern regarding the issues
of global warming and environmental protection (think, for instance, of the
Fridays for Climate movement), climate change played a signicant role in the
2019 European Parliament electoral campaign. It is thus no coincidence that
one of the rst, highly symbolic initiatives of the newly elected Parliament was
to declare a climate and environment emergency, calling on the Commission,
the Member States and all global actors to take urgent and concrete action
(European Parliament 2019a). The ght against climate change indeed features
strongly in the political programme of the new Commission President Ursula
von der Leyen. In her Political Guidelines for the Next Commission, she stated
that the key priority of her Commission would be to transform Europe into
‘[...] the rst climate-neutral continent’ (von der Leyen 2019: 5), by developing
a European Green Deal (EGD). In so doing, one of the priorities should be to
en sur e a ‘j ust transit ion for all’ (ibid.: 6), to cushion the social and employment
consequences of the transition towards a climate-neutral development model
– which will be particularly severe for some regions and economic sectors –
thus also gaining more social acceptance for the transformations needed.
Against this background, the aim of this Working Paper is to provide a
preliminary assessment of whether the European Green Deal constitutes
a suitable policy framework to combine environmental and economic
objectives with the pursuit of social fairness, thus ensuring a just transition
towards more sustainable economies and societies. Such an assessment
appears particularly relevant in a period in which the EU and its Member
States are guring out how to redesign their economies and societies in order
to cope with the unprecedented social and economic crisis triggered by the
COVID–19 pandemic. To perform this assessment, in Section 1 we identify
the key elements of the just transition approach, as proposed by the trade
union movement and codied by the International Labour Organisation
(ILO), which – in 2015 – drew up a set of guidelines on which a comprehensive
‘just transition framework’ should be based (ILO 2015). Then, in Section 2 we
discuss the main elements of the European Commission’s Communication on
1. The empirical research for the preparation of this Working Paper was nalised on 30 June
2020. Consequently, the decisions on the Recovery Fund and on the EU budget taken
during the 17-21 July 2020 European Council (2020) have not been systematically included
in this analysis. The authors would like to thank Bela Galgóczi (ETUI) and Bart Vanhercke
(OSE) for their valuable comments on a previous draft of this Working Paper. The usual
disclaimer applies.
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the European Green Deal. In Section 3, we compare the EGD with the ILO
guidelines for just transition, in order to understand to what extent the two
initiatives are compatible (ts and mists) and, consequently, to what extent
the EGD could act as a suitable EU overarching policy framework to ensure
that the transition towards a more environmentally sustainable economic
model is also socially fair. In this respect, the results of our analysis show
a certain degree of compatibility, at least at the discursive level. This said,
since the EGD is a forward-looking, strategic document, the way in which
it is nally implemented will obviously be key. Consequently, in the rest of
the paper we consider two important implementation tools of the EGD: the
European Semester and funding. In Section 4, we analyse the 2020 cycle
of the European Semester and, in Section 5, we look at the overall nancial
aspects of implementation of the EGD and then focus on one of the core pillars
of the transition funding, i.e. the EU taxonomy for sustainable economic
activities. This said, the COVID-19 pandemic has dramatically changed the
social, economic and political context in which the EGD was designed. We will
thus provide – in both Sections 4 and 5 - some preliminary considerations on
recent initiatives taken by the EU in relation to the topic of this paper, in order
to address the situation. The nal section summarises and concludes.
From a methodological point of view, this paper uses qualitative research
methods, notably an analysis of key policy documents and of the relevant
scientic literature.
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1. The just transition framework
1.1 Preliminary remarks on the notion of just
transition
The notion of just transition is closely linked to the notion of sustainable
development. The latter, promoted by international organisations such as
the United Nations (UN), implies the convergence of three – interrelated
and mutually reinforcing – goals (which constitute the three pillars of
sustainability): economic development, social equity and environmental
protection (UN 2015a). While sustainable development is a broadly shared
goal, on which there is a certain degree of consensus among states and
stakeholders at the global level, the question of how to achieve such an ambition
in practice, balancing the three pillars of sustainability and making these
compatible, is much more controversial. With this goal in mind, the notion of
‘green growth’ gained increasing support in policy-making circles in the 2000s
and was promoted, among others, by international organisations such as the
World Bank, the Organisation for Economic Co-operation and Development
(OECD), and the United Nations Environment Programme (UNEP). While the
notion of green growth itself may be interpreted in dierent ways (cf. Jacobs
2013), its core meaning is relatively straightforward, i.e. ‘economic growth
(growth of gross domestic product or GDP) which also achieves signicant
environmental protection’ (ibid.: 197).2 From this perspective, the growth of
green sectors in the economy, besides bringing environmental benets, could
also create employment opportunities (e.g. creating new, ‘green’ jobs) and an
overall increase of citizens’ welfare.
Such potentialities of green growth have also been highlighted by the
International Labour Organisation, which considers the green economy
as an opportunity for social progress, including for its potential to create
green jobs (ILO 2015: 4). This said, however, in the view of the ILO (as well
as of the trade union movement), the greening of the economy also brings
important challenges related, for instance, to the economic and social costs
of restructuring (e.g. job losses) at both the individual and community level,
or to the quality of the new jobs possibly created (ibid.: 5). Thus, besides
being simply green, the transition towards a more sustainable development
model should also be socially just. The just transition approach therefore
2. In particular, in the context of climate policies, green growth is primarily related to a
development pattern able to decouple greenhouse gases (GHG) emissions from the growth
in Gross domestic product.
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focuses, more than green growth, on the need to consider employment
and social concerns in the transition towards a more sustainable economic
model.3 In other words, green growth and just transition approaches can be
seen as potentially compatible and, even, complementary for the practical
implementation of sustainable development (Sabato and Mandelli 2018).4
As mentioned above, the ILO has be en one of the major proponents of the notion
of just transition, so much so that, in 2015, this international organisation
drew up guidelines for its implementation (see Section 1.2). However, the idea
of a just transition is relatively old, since it originally appeared among the
demands of some national trade union movements as early as in the 1980s (cf.
Newell and Mulvaney 2013); it was then put forward by the international trade
union movement during several international negotiations and conventions
on climate change. Eventually, a reference to this notion was included in the
nal agreement of the Conference of the Parties in Cancun in 2010 (UNFCC
2010),5 stressing that the shift towards a low-carbon society should ensure
‘[...] a just transition of the workforce that creates decent work and quality
jobs’ (UNFCCC, 2010: I.10). The call for a just transition was then repeated
by the International Trade Union Confederation (ITUC) during the rst ITUC
Climate Change Workshop with South African Trade Unions in July 2011,
then becoming a key revindication of the ITUC campaign ‘Unions4Climate
Action’ in 2011 (ITUC 2011).
Later on, the ILO rened and created a more systematic notion of just
transition, identifying the constitutive elements of what was labelled as a
‘just transition framework’. This work eventually resulted in the publication
of a specic set of ‘Guidelines for a just transition towards environmentally
sustainable economies and societies for all’ (ILO 2015). In December 2015,
the Paris climate conference (COP21) took place, resulting in the commitment
to limit global warming to well below 2°C and to pursue eorts to limit it to
1.5°C. In the Preamble of the Paris Agreement, ‘[the] just transition of the
workforce and the creation of decent work and quality jobs [...]’ (UN 2015b)
3. The ILO (2015) refers to a just transition towards environmentally sustainable economies
and societies. The notion has however been used especially in relation to the challenges
posed by climate change, with particular reference to the transformations needed in order
to reduce greenhouse gas emissions (for instance, the transition towards a zero – carbon
economy).
4. In line with the sustainable development approach proposed by the UN, proponents of both
green growth and just transition do not question fundamentally the possibility of pursuing
long-term economic growth. Thus, these notions dier from other, more radical approaches
postulating that, in a planet with limited resources, high levels of environmental protection
are incompatible with a sustained growth of GDP or, even, with high levels of social
protection (such as, for instance, the notion of sustainable welfare -cf. Koch 2018). In this
sense, while green growth could be seen as a strategy to ‘green’ capitalism without changing
fundamentally the principles on which it is based, just transition – at least as it has been
proposed by the European trade union movement – could be interpreted as a greening of
the trade unions’ traditional agenda (Pochet 2019: 321).
5. The Conference of the Parties (COP) is the main decision-making body of the United
Nations Framework Convention on Climate Change (UNFCCC). Made up of the states and
the international organisations (including the EU) that adopted the Convention, it has met
every year since 1995.
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were identied as an ‘imperative’ to be taken into account. More recently,
a specic Declaration on ‘Solidarity and Just Transition’ (the so-called
‘Silesia Declaration’) was adopted by the Heads of State and Government
at the 24th Conference of the Parties (COP24) of the UNFCCC in Katowice
(December 2018). The Declaration (COP24 2018) – that explicitly refers to
the 2015 ILO Guidelines – rearms the political commitment towards just
transition already taken in Paris and highlights the need to work further in
that direction.6
1.2 The ILO’s Guidelines on Just Transition
As shown in the previous Section, the notion of just transition has been used
over time by a number of societal actors and international organisations,
often in the context of political documents and initiatives, a circumstance
that inevitably implies a certain degree of vagueness at the conceptual
level. Indeed, besides the basic reference to the need to pay attention to and
address the possible social consequences of the transition towards a more
environmentally sustainable economy, the exact conceptual boundaries of the
notion are rather blurred and various interpretations and usages are possible.
In 2015, the ILO tried to clarify this notion by elaborating a more
comprehensive policy framework and publishing a set of concrete guidelines
for its implementation. In the rest of this Section, we will identify and discuss
the key elements of the notion of just transition as developed by the ILO, with
a view to using it as a benchmark for the analysis in the following Sections.
In the ILO’s view, the just transition framework is strongly linked to the
sustainable development approach and could help to achieve some of
the Sustainable Development Goals (SDGs) such as those relating to the
eradication of poverty, social protection and social inclusion, and the creation
of decent jobs for all (ILO 2015: 4). In order to achieve such an outcome, the
transition should be guided by the principles of distributional and procedural
justice (cf. McCauley and Heron 2018; Newell and Mulvaney 2013).7 From a
distributional point of view, both the opportunities the transition will create
and the costs it will entail should be shared in a fair way, taking into account
and addressing current and potential inequalities at dierent levels: between
individuals, social groups, sectors of the economy, communities, regions and
countries. From a procedural point of view, the participation of citizens and of
6. Importantly, the signatory parties ‘Note the importance of a participatory and
representative process of social dialogue involving all social partners to promote high
employment rates, adequate social protection, labour standards and wellbeing of workers
and their communities, when developing nationally determined contributions, long-term
low greenhouse gas emission development strategies and adaptation planning processes’
(COP24 2018: point 10, italics in the original).
7. McCauley and Heron (2018: 4-5) also identify ‘restorative justice’ – i.e. the restoration to
the previous level of the jobs lost as a consequence of the transition – as a dening principle
of just transition since the rst usages of this notion by the trade union movement in the
1980s.
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10 WP 2020.08
all stakeholders in the decision-making process and in policy implementation
should be ensured.
In order to fully exploit the opportunities arising from it and address the
related risks and challenges, the transition towards a more sustainable
economy should be ‘managed well’ (ILO 2015: 4) and should be based on a
series of principles and requirements for eective implementation.
First, since the situation in the various countries and sectors of the economy
is extremely diverse (e.g. in terms of stage of development, exposure to
climate-related risks, dening features of national economies), strategies
and policies for a just transition should be context-sensitive. A country-
specic approach fully recognising the peculiar conditions in each country
would be needed, while one size ts all initiatives would be counterproductive
(ILO 2015: 6). A further element of complexity to be considered is that, while
the challenges of the transition have territorial specicities, decisions taken
at one geographical level may have repercussions at other geographical
levels. In other words, while addressing specic territorial or sector-related
challenges, to be ‘just’ the transition towards a low-carbon society should
also take into account the broader global framework and the connections
between ‘multi-scalar realities’ (McCauley and Heron 2018: 2). As we will
see below, governance arrangements for vertical coordination between
dierent levels of governance would be needed and, in the view of the ILO
(2015: 6), cooperation between countries should be seen as one of the guiding
principles for the transition to environmentally sustainable economies and
societies. While contextual dierences are particularly evident in relation to
the big divide between the global North and South, there are also dierences
within geographical macro-areas such as the EU. Indeed, risks, costs and
opportunities of the transition vary signicantly among EU countries,
regions, local communities. Furthermore, the eects of the transition will
vary both among and within economic sectors (cf. Galgóczi 2018, 2019a;
2019b) and between social groups, which makes the adoption of ‘targeted yet
holistic policy approaches’ (Galgóczi 2018: 4) essential.
Second, a just transition would require the elaboration of coherent policy
frameworks, taking into account and creating synergies between a
multiplicity of policy areas linked to the economic, environmental, and social
dimensions of sustainability.8 In particular, the ILO (2015) stresses the need
to pay particular attention to nine policy areas:9 i) macro-economic and
growth policies; ii) industrial and sectoral policies; iii) enterprise policies; iv)
skills development; v) occupational safety and health; vi) social protection
policies; vii) active labour market policies; viii) rights; ix) social dialogue and
tripartism. In the context of the transition, social policies may serve a double
8. As noted by Galgóczi (2018: 4) ‘[just transition] should not be an ‘add-on’ to climate policy,
it needs to be an integral part of the sustainable development policy framework’.
9. In this context, recognising and addressing the gender dimension of many environmental
challenges and opportunities should be considered as a guiding principle of just transition
to be mainstreamed in the policies formulated.
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function. On the one hand, following a social investment perspective, it will
be necessary to provide workers with the skills and competences necessary to
participate in a greener economy. In this respect, education, life-long learning,
and active labour market policies would be fundamental. On the other hand,
social interventions should protect individuals and communities during
the transition, with particular attention to those more negatively aected
by changes. Strong (and where necessary ‘innovative’) social protection
systems to ensure healthcare, income security and social services should be
available (ILO 2015). In addition, social legislation should ensure the respect
of fundamental principles and rights at work (ibid: 6).
Obviously, assessing the combined eects that initiatives taken in such an
array of policy domains may have on environmental, economic and social
sustainability is an incredibly demanding task. Thus, third, capacity
building should be ensured at all levels and for all the actors concerned (ILO
2015). In particular, decision–makers and stakeholders should be provided
with robust indicators and data allowing for ex-ante impact assessment and
ex-post evaluations of the (environmental, economic and social) implications
of the measures envisaged or implemented.
Fourth, the elaboration of coherent just transition policy frameworks – also
taking into account the varied territorial implications of decisions taken –
would require a signicative degree of policy integration. This could be
achieved through the setting-up of institutional arrangements allowing for
coordination within and between institutions at dierent levels of governance
and between public and private and social actors (ILO 2015: 6).
Impor t ant ly, fth, to be just, the transition cannot be a top-down process
but, rather, it should be based on social consensus. Relevant stakeholders
should be consulted in meaningful ways and, in particular, social dialogue
should be ensured at all levels in t he formulation, decision and implementation
of strategies and policies (ILO 2015).
Sixth, promoting a (just) transition towards a more sustainable, low-
carbon economy would require a huge amount of nancial resources.
In this respect, while calling for the mobilization of both public and private
investments towards environmentally sustainable activities (ILO 2015: 6), the
ILO particularly stresses the key role that governments and public authorities
should have – through public investments – in the greening of the economy
and in ensuring that everybody can participate in the opportunities arising
from the transition and be protected from the related risks10 (ibid.: 11).
10. As Galgóczi (2018: 4) puts it, ‘[s]ince decarbonisation is a commonly shared objective in
the interest of all of humanity, the role and responsibility of the state is indispensable in
managing it in a just and balanced way’.
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2. The European Green Deal
2.1 The European Green Deal: main features
2.1.1 Objectives, approach and policy domains
On 11th December 2019, the European C ommission published a Communication
on ‘The European Green Deal’ (European Commission 2019a), accompanied
by a roadmap for its implementation (European Commission 2019b). The
European Green Deal should serve as ‘[...] a new growth strategy that aims
to transform the EU into a fair and prosperous society, with a
modern, resource-ecient and competitive economy where there
are no net emissions of greenhouse gases (GHG) in 2050 and
where economic growth is decoupled from resource use’ (European
Commission 2019a: 2, bold in the original). Simultaneously, the Commission
stresses the importance of achieving a ‘socially just’ ecological transition – i.e.
of ensuring that the cost of the transition is not borne by the most vulnerable
populations (ibid.: 16) – as a precondition for a successful transition towards
a zero-emission economy. In this context, the European Pillar of Social Rights
(EPSR) is presented as the reference framework to ensure that ‘[...] no one is
left behind’ (European Commission 2019a: 4).11
In terms of structure, the Commission Communication on the EGD is
organised around eight macro-areas for action, considered as interlinked and
mutually reinforcing (European Commission 2019a: 4):
1. Increasing the EU’s climate ambition for 2030 and 2050;
2. Supplying clean, aordable and secure energy;
3. Mobilising industry for a clean and circular economy;
4. Building and renovating in an energy and resource ecient way;
5. Accelerating the shift to sustainable and smart mobility;
6. From ‘Farm to Fork’: designing a fair, healthy and environmentally-
friendly food system;
7. Preserving and restoring ecosystems and biodiversity;
8. A zero pollution ambition for a toxic-free environment.
11. The EPSR includes 20 principles and rights organised around three chapters (European
Commission 2017): (a) equal opportunities and access to the labour market; (b) fair
working conditions; and (c) social protection and inclusion. The Pillar was proposed in a
Commission Recommendation published in April 2017 and was then jointly proclaimed by
the Commission, the European Parliament and the Council in November 2017.
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In addition to the areas mentioned above, the stated intention is to main stream
sustainability into all EU policies, with explicit references to the EU budget,
macro-economic and scal policies, taxation, research and innovation,
education and training, trade policies and EU external policies.
Importantly, the EGD is meant to be a growth strategy: the objective of
promoting a sustained growth pattern remains of paramount importance,
and economic growth is not considered incompatible with the achievement of
high levels of environmental protection and social progress. In this respect,
at a rst glance the EGD continues on the path of the previous EU ‘grand
strategy’ – the Europe 2020 strategy for smart, sustainable and inclusive
growth (European Commission 2010). However, other than in Europe
2020, tackling climate and environmental-related challenges – depicted as
‘[...] this generation’s dening task’ (European Commission 2019a: 2) – is
explicitly presented as the top priority of the EGD from the very beginning
of the Commission Communication. The objective of the EGD is indeed
twofold. Firstly, it is to guide the transition towards an economy (and a
society) characterised by ‘zero net emissions’ of greenhouse gases and by
the decoupling of economic growth from resource use. Secondly, it is ‘[...]
to protect, conserve and enhance the EU’s natural capital, and protect the
health and well-being of citizens from environment-related risks and impacts’
(European Commission 2019a: 2). These strategic objectives are a sort of l
rouge linking the various parts of the Communication and the policy areas/
actions illustrated therein.
2.1.2 Governance and funding
According to the Commission, the EGD should be considered as an integral
part of the EU strategy to implement the United Nations’ 2030 Agenda for
Sustainable Development and the Sustainable Development Goals (SDGs)
(European Commission 2019a: 3). In terms of policy areas dealt with, when
considering the EPSR as a constitutive element of the strategy, the EGD covers
all the 17 SDGs. Furthermore, in line with the UN Sustainable Development
approach, the objectives of economic growth, social fairness and environmental
progress are deemed to be compatible and mutually reinforcing. To this end,
EU action in the various policy domains should be consistent; this requires a
high degree of integration and coordination at dierent levels of governance.
However, as is the case for the UN Sustainable Development Agenda, the EGD
sets no clear priorities between environmental, economic and social objectives,
should trade-os arise. This said, the potential diculty of combining
economic growth, environment protection and social fairness is made more
explicit than in the past, and the need to pay attention to the possible trade-
os that could arise is mentioned (European Commission 2019a: 4). To
address this issue, the Commission has undertaken to strengthen its ’Better
Regulation’ guidelines and impact evaluation procedures (ibid.: 19), while the
European Semester is expected to have a key role in ensuring that macro-
economic, scal and social policies are in line with environmental priorities,
and in identifying possible inconsistences and trade-os (see Section 4).
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In a multi-level governance setting such as the EU, policy integration and
coordination between institutional and societal actors operating at dierent
levels of governance is vital for the elaboration of coherent strategies and
policies. While the features of interaction and coordination between actors
vary according to specic policy areas and initiatives, the European Semester
should be the governance arrangement best placed to coordinate EU and
national policies linked to the EGD, possibly combining EU priorities with
a country-specic approach. As for interaction with societal actors, the
involvement of the public and of a broad array of stakeholders is considered as
an important element in the success of the EGD; the transition can be successful
only if policies are designed with the involvement of citizens and accepted by
them (European Commission 2019a: 22). In this perspective, the Commission
has stated its intention to launch a European Climate Pact, activating existing
structures for citizens’ dialogue and social dialogue committees (ibid.: 23).
More specically, an ‘active social dialogue’ is recognised as an essential
element to ensure that the transition is successful and accepted by workers
and companies (European Commission 2019a: 16).
Finally, the issue of funding for the transition features prominently in the
Commission’s Communication on the EGD (see Section 5). In this respect,
a number of EU nancial initiatives are listed, including: i) the setting-up of
a Sustainable Europe Investment Fund; ii) the EU budget; iii) the InvestEU
Fund; and iv) the Just Transition Fund. It is however clear that the bulk of
the nancial resources needed would have to come from national public
investment and private capital. National budgets should be ‘greened’, so as
to redirect public investment, consumption and taxation towards ‘green
priorities’ (European Commission 2019a: 17). In this respect, guidance on
how to combine green public investment with scal sustainability should be
provided in the context of the European economic governance framework
(ibid.).
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3. The European Green Deal and the ILO
Just Transition framework: fits and
misfits
3.1 Comparing the two policy frameworks: a
significative overlap
The main features of the EGD show a certain degree of correspondence with
the main elements of the just transition framework proposed by the ILO in
their 2015 Guidelines (see Section 1.2). First of all, in terms of policy approach
the Commission’s European Green Deal is closer to a Sustainable Development
Agenda. It is a broad framework including the notions of green growth and
just transition: the two approaches are deemed as compatible with each other
and with the pursuit of environmental objectives. As for the latter, the ght
against climate change and the reduction of greenhouse-gas emissions are the
common threads linking the various components of the EGD strategy. The
EGD includes a broad array of policy areas, with the ambition of developing
a coherent policy framework guiding the transition, including all the
policy areas constituting the ILO just transition framework. These policy
areas cover macroeconomic, scal, social and environmental objectives and,
coherently with the just transition framework, the EGD aims at both creating
synergies between these objectives and the related policies and identifying
and addressing possible trade-os. One of the main governance arrangements
that should serve as a feedback mechanism to verify to what extent economic,
social and environmental actions are consistent, and to identify and address
possible trade-os, is the European Semester. Besides the Semester, policy
consistency should also be ensured through the further development of the
Commission’s Better Regulation guidelines as well as through strengthened
and more participatory impact assessment procedures, which require robust
and comprehensive indicators and data as well as work on capacity
building at all levels, as repeatedly underlined in the ILO’s just transition
framework. The elaboration of consistent strategies and policies would also
require a high degree of policy integration and coordination between
institutional and societal actors operating at dierent levels of governance, a
concern that emerges from the EGD Communication.
As for vertical coordination, the European Semester could serve as a
governance tool to coordinate actions at the EU level with initiatives at the
national, regional, and local level, possibly helping to develop the context-
sensitive approach that would be needed in a just transition perspective
(cf. Section 1.2). In this respect, the tool specically geared to ensuring a just
transition in the framework of the EGD – the Just Transition Mechanism –
will be strongly territorially-focused and sectorial in nature. As explained
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16 WP 2020.08
in Section 1, just transition should be understood as a multi-scalar process,
considering the relationship between regional, national and local initiatives
and the global context. As for the latter aspect, the European Commission
has committed itself to continue to play a key role in elaborating a global
response to climate change and environmental degradation (in particular
under the Paris Climate Agreement), strengthening international partnership
and through trade policies (European Commission 2019a: 20-22; see
also European Commission 2020a: 12). While a full analysis of the global
implications of EU actions foreseen in the EGD goes well beyond the scope of
this paper, some observers have pointed out possible inconsistencies, notably
concerning the fair distribution of mitigation eorts towards emission
reduction and usage of natural resources (Laurent 2020).
When it comes to coordination and interaction with social actors, the wish to
ensure adequate involvement of relevant stakeholders in order to build social
consensus around the transition – a key element of the ILO just transition
framework – is mentioned in the Communication on the EGD, which also
mentions the importance of ensuring an ‘active’ social dialogue (European
Commission 2019a: 16). The promotion of social dialogue at all levels and
the involvement of workers is one of the principles of the EPSR (Principle 8).
Finally, the issue of nancing the transition is a key element of both the Just
Transition framework developed by the ILO and of the EGD. This said, the
EGD emphasises more strongly than the ILO approach the need to mobilize
private capital – in addition to substantial public investment.
3.2 The social dimension of the European Green Deal
With regard to the social dimension of the EGD, we have already mentioned
that promoting a ‘just and inclusive’ transition is among the stated objectives
of the Commission’s strategy (European Commission 2019a: 2), and a number
of considerations about the possible social implications of action in the eight
macro-areas of the EGD can be found in the Commission Communication.12
Two aspects appear particularly relevant for this analysis, since they could
be a mist between the EU strategy and the ILO just transition framework,
potentially leading to certain tensions around the social dimension of the
EGD: the scope and the orientations of social policies in the EGD.
With regard to the scope, in the EGD the Commission adopts a rather ‘targeted’
approach to just transition, by focusing on the possible negative implications
that the transition could have on specic territories and economic sectors.
Indeed, the main measure proposed by the Commission in order to cushion
12. For instance, energy transition initiatives should consider and address the risk of energy
poverty; the shift to sustainable and smart mobility should ensure the aordability and
accessibility of the alternatives to current mobility habits; the ‘From Farm to Fork’ strategy
should also ensure a decent living for farmers, shermen and their families.
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the social consequences of the transition is the creation of a ‘Just Transition
Mechanism’, including a ‘Just Transition Fund’, to support the regions and
sectors that – given their reliance on fossil fuels or carbon intense processes
– will be hardest hit by the transition (European Commission 2019a: 16; see
Section 5). Such an instrument would thus have a marked geographical and
sector-specic character. As for the nature of social policies, only ‘education
and training’ policies are addressed in an autonomous, specic section of the
EGD Communication (cf. European Commission 2019a: 19). These policies are
considered as particularly important to allow citizens and workers to adapt to
the new, more sustainable economic model envisaged. Quite surprisingly, as
noted by Laurent (2020), there are no references to inequalit y in the document,
and few references to the notion of social rights. In other words, at a rst
glance, the Commission seems to predominantly rely on a social investment-
oriented understanding of social policies, focusing on the policy areas with the
highest potential to provide workers with the skills needed for a new, greener
economic model, while apparently neglecting broader distributional eects of
climate policy and more general social protection and social inclusion issues.
There is a risk that these two elements – the marked territorial/sectoral focus
of just transition in the EGD and the emphasis given to social investment-
oriented policies – are only partially consistent with the notion of just
transition developed by the ILO. Indeed, while the latter highlights the need
for me asur es tar get ed at the mo st v ulnerable territor ies and sect ors (a context-
sensitive approach) and the importance of policies facilitating employability
in the new economic context, it also makes clear that both elements should
be rmly placed within strong social protection systems guaranteeing social
rights to all citizens. In this sense, territorially and sectorally targeted social
provisions should not be an alternative to universal social rights, and social-
investment policies should be in addition to basic social protection and social
inclusion policies.
This said, these potential contradictions and tensions may be reduced since,
as mentioned, the European Commission in its Communication on the EGD
(European Commission 2019a: 4) also mentions the European Pillar of
Social Rights as the reference framework that should ensure that ‘[...] no one
is left behind’. On the one hand, the Pillar contains a rather comprehensive
list of social rights and principles for social provisions addressed to all
European citizens, and, on the other hand, the inclusion of the Pillar in
the EGD should ensure a better balance between more social-investment
oriented policies and more traditional social protection and social inclusion-
oriented policies. According to some observers, the EPSR indeed takes a
‘rights-based social investment approach’: while the primary objective of
the Pillar is the promotion of social rights, the actual measures and policy
orientations through which these rights are to be implemented are consistent
with the social investment approach (Sabato and Corti 2018: 61). While, at
the time of its elaboration, the link between the EPSR and the promotion of
environmental sustainability was largely neglected (Sabato and Vanhercke
2017: 82), in the context of the EGD the stated objective is to put the Pillar at
the centre of the transition towards climate neutrality – as well as the digital
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and demographic transitions13 – so as to ‘[...] upgrade Europe’s social market
economy to t the opportunities and challenges of today and tomorrow and
ensure just transitions for all’ (European Commission 2020a: 3). Of course,
if the EPSR is to perform this function, the full realisation of all its principles
and rights should remain a central preoccupation in all the policy processes
and tools linked to the implementation of the EGD, including – importantly –
EU socio-economic governance and nancial provisions.
All in all, the comparison between the main elements of the EGD and the ILO
just transition framework allows us to conclude that, at least on a discursive
level, the EGD is potentially a suitable policy framework to ensure that the
transition towards a more environmentally sustainable economic model
is also socially just. Obviously, since the EGD is a programmatic, strategic
document, a closer look at its actual implementation is needed in order to
understand whether and to what extent the promise of a green and just
transition will be pursued and achieved. In the next two Sections we will focus
on two key tools for the implementation of the EGD, seeking to identify their
potential and limitations: the European Semester and nancial instruments.
In so doing, we will also suggest some preliminary considerations on recent
initiatives taken by the EU to address the COVID-19 crisis.
13. ‘The European Pillar of Social Rights is the European answer to these fundamental
ambitions. It is our social strategy to make sure that the transitions of climate neutrality,
digitalisation and demographic change are socially fair and just’ (European Commission
2020a: 2).
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4. Implementing the European Green
Deal through the European Semester
4.1 The starting point: the European Semester before
the European Green Deal
Launched in 2011, the ‘European Semester for economic policy coordination’ is
an annual policy coordination cycle aimed at synchronizing and coordinating
the diverse instruments and procedures linked to the reformed Stability and
Growth Pact (SGP) and activities associated with the Europe 2020 Strategy.
In a nutshell, the Semester is based on three pillars: i) the reformed SGP (scal
policy), ii) the Macroeconomic Imbalances Procedure (MIP) (macroeconomic
policy), and iii) the Europe 2020 Strategy, supported by the Integrated
Guidelines for growth and jobs. The Semester is an iterative process: every year,
the European Commission publishes its ‘Annual Growth Survey’, identifying
key policy challenges and setting out EU priorities. The Member States then
submit ‘National Reform Programmes’ (NRPs), detailing structural reforms
implemented or foreseen in the domains covered by Europe 2020. These are
subs equently used by the Com mis sion and the Cou nci l of the EU to issue (non-
binding) Country-specic Recommendations (CSRs), providing Member
States with policy advice. Since 2015, the Commission also publishes Country
Reports analysing the situations in the Member States in the areas covered
by the Semester. These form the analytical basis for the CSRs. Over time,
the Semester has undergone several changes, from both a substantive and a
procedural point of view. While in the rst years of implementation the main
focus was on macroeconomic and scal policies, attention to social policies
in the Semester has increased over the years, to the extent that Zeitlin and
Vanhercke (2018) have identied a progressive ‘socialisation’ of the process,
in terms of both the substantive outcomes (e.g., the CSRs) and procedural
aspect (i.e. the increasingly central role gained by institutional ‘social actors’).
Thus, although opinions on its eectiveness and implications dier,14 it is
safe to conclude that the European Semester has gradually developed a more
social dimension, complementing its well-established macro-economic and
scal dimensions. However, the same cannot be said for the environmental
dimension of the Semester which, according to some observers, appears
rather underdeveloped and mostly focused on issues related to energy policies
(Charveriat and Bodin 2020; Sabato and Mandelli 2018).
14. For a more critical view on the social dimension of the European Semester, see, among
others, Copeland and Daly (2018), Hacker (2019).
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4.2 The Annual Sustainable Growth Strategy and the
Country reports 2020
Against this backdrop, in the Commission’s view the European Semester
should be one of the implementation tools of the European Green Deal and,
in particular, of the UN SDGs. Consequently, in the 2020 cycle of the process,
the Commission has restated its intention to ‘refocus’ the Semester on the
priorities of the SDGs, with a stated goal ‘[...] to put sustainability and the
well-being of citizens at the centre of economic policy, and the sustainable
development goals at the heart of the EU’s policymaking and action’ (European
Commission 2019a:3).
The European Semester 2020 was launched on 17 December 2019 with the
publication of what used to be the Semester’s Annual Growth Survey, now
renamed ‘Annual Sustainable Grow th Strategy’ (Europea n Commission
2019c). In order to promote the sustainable growth model envisaged in the
EGD and the Union’s climate objectives, the Annual Sustainable Growth
Strategy refers to the notion of ‘competitive sustainability’ (ibid.: 3), based on
four, complementary dimensions to be taken into account:
1. Environmental sustainability, with a focus on nancial resources
to achieve the objectives of the EGD and on private and public ‘green
investments’;
2. Productivity growth, to be ensured – among others – through research
and innovation, the digital transition, the single market, investment in
education and skills development;
3. Fairness, to be achieved through the implementation of the principles
and rights of the EPSR, through the promotion of cohesion between
and within the Member States, and the setting-up of a European
Unemployment Benet Reinsurance Scheme;
4. Stability, highlighting the need for ‘responsible’ economic, scal and
nancial policies so as to ensure ‘[...] well-targeted investments
to support the move to a climate-neutral and fully digital
economy [...]’ (European Commission 2019c: 12, bold in the original),
while safeguarding scal sustainability.
In line with the Communication on the EGD, and somehow lling a gap in
the Europe 2020 Strategy, the environmental dimension has been included
in the Semester, thus potentially paving the way for the elaboration of a more
comprehensive and coherent policy approach making it possible to better
grasp the relationship between environmental, macro-economic, scal and
social objectives and policies.
The notion of just transition as a general principle is explicitly mentioned
several times in the Annual Sustainable Growth Strategy. In particular,
besides highlighting the potential opportunities arising from the transition
(new jobs and greater well-being), the Commission also explicitly refers to
the need to take into account and balance the distributional consequences
of the transition, maintaining that ‘[b]enets should be shared and costs
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must not be borne by the most vulnerable’ (European Commission 2019c:
4). These distributional implications of climate change and of the policies
to ght the phenomenon should be taken into account when formulating
recommendations for structural reforms (ibid.). Particular attention is paid
to the context-sensitivity of the transition, i.e. to the fact that some regions,
sectors and workers will pay higher costs than others. The awareness of the
need for context-specic approaches is indeed cross-cutting in the Annual
Sustainable Growth Strategy, since references to this aspect can be found
in all the four dimensions of sustainability considered in the document. The
main instruments to address this situation should be cohesion policy and the
envisaged Just Transition Mechanism.
From a governance perspective, in order to put the EU on the right track to
achieve a sustainable growth model, the European Commission (2019c: 2)
highlights the need to adopt a ‘systemic’, ‘whole of government’ approach,
ensuring the participation of all relevant institutional actors and stakeholders.
In the Commission’s view, such an approach should help to develop more
coherent policies, helping to create synergies between the four key dimensions
and to identify and address possible trade-os (ibid.). In this respect, two
issues arise. The rst one concerns the governance and leadership of the
process. In particular, for the European Commission, the Directorate General
for Employment, Social Aairs and Inclusion (DG EMPL) is among the ‘core
DGs’ of the Semester, together with the Directorate General for Economic
and Financial Aairs (DG ECFIN) and the Secretariat-General (SECGEN),
while the Directorate-General for the Environment (DG ENV) and the
Directorate-General for Climate Action (DG CLIMA) play a more peripheral
role in the decision-making. However, at a higher hierarchical level, neither
DG ECFIN nor DG EMPL are part of the Commission’s Group on ‘A European
Green Deal’. Coordinated by the Commission Executive Vice-President
France Timmermans, this latter group is made up of the Commissioners for
Agriculture, for Health and Food Safety, for the Environment, Oceans and
Fisheries, for Energy, for Transport and for Cohesion and Reforms. Strikingly,
neither the Commissioner responsible for the economy nor the Commissioner
for Jobs and Social Rights are part of this Group. The latter are however
involved – together with the Commissioner for Cohesion and Reforms and
the Commissioner for Trade – in the Group on ‘An Economy that Works for
People’, under the responsibility of the Commission Executive Vice-President
Valdis Dombrovskis.
A second issue is that ensuring policy coherence and identifying synergies
and trade-os between economic, social and environmental policies would
require account to be taken of the various policy-specic strategies already
implemented in the EU, their procedures, targets and indicators. With
regard to climate and environmental policies, a number of strategies with
specic timelines, targets, indicators and reporting procedures already exist
(Charveriat and Bodin 2020: 22) and it is not clear how key decision-makers
in the Semester will take into account those initiatives in their analyses and
recommendations. As for policy targets, Charveriat and Bodin (2020: 21)
note that the EU currently has about 64 quantitative policy targets which
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are relevant to climate and the environment, and 12 quantitative policy
targets related to other dimensions of sustainability; all these targets are
measured by specic indicators. While, quite obviously, not all the objectives
of environmental strategies and targets can be integrated into the Semester
– which could potentially focus on the contribution that macroeconomic,
scal and social policies can make to the achievement of these objectives
and targets – eective governance arrangements should be developed for
coordination between the Commission DGs responsible for economic, social
and environmental strategies.
In line with the overall orientations of the Annual Sustainable Growth
Strategy, some changes have been made to the contents and structures of
the Semester’s Country reports 2020. Published at the end of February
2020, these documents now include: i) a specic Section on environmental
sustainability;15 ii) a paragraph on the countries’ performances vis-à-vis the
UN SDGs in the Section on ‘Economic situation and outlook’; iii) a table on
green growth indicators, in Annex C;16 iv) an Annex on ‘Investment guidance
on the just transition fund 2021-202 (Annex D)’; and v) an Annex on ‘Progress
towards the Sustainable Development Goals’, based on the indicators included
in the EU SDG indicator set used by Eurostat for monitoring progress towards
the SDGs in an EU context (Annex E).
4.3 The European Semester and the COVID-19
pandemic: towards a Recovery Plan for Europe
Soon after the publication of the 2020 Country Reports, EU countries
were hit hard by the COVID-19 pandemic, putting national healthcare
systems under huge strain and pushing most national governments to enact
unprecedented initiatives limiting social contacts and economic activities,
with enormous social and economic consequences. Against this background,
many Member States have called for an EU response to the crisis, based on
the principle of solidarity. A rst EU reaction took the form of a massive
intervention of the European Central Bank on the nancial markets and
of a number of initiatives by the European Commission, including the
activation of the Stability and Growth Pact’s ‘general escape clause’17 and the
15. The Section on ‘Environmental Sustainability’ is included among the reform priorities,
together with ‘Public Finance and Taxation’, ‘Financial Sector’, Labour Market, education
and social policies’, ‘Competitiveness, Reforms, and Investments’. The Country Reports
also provide short references to Member States’ National Energy and Climate Change Plans
(NECPs), usually in the Section on Competitiveness, Reforms, and Investments or in the
Section on Environmental Sustainability.
16. In addition to tables on ‘Financial market indicators’, ‘Headline Social Scoreboard
indicators’, ‘Labour market and education indicators’, ‘Social inclusion and health
indicators’, and ‘Product market performance and policy indicators’.
17. As explained by the Commission (2020b: 4), the general escape clause does not suspend
the SGP but it ‘[...] allows Member States to depart from the budgetary requirements that
would normally apply while enabling the Commission and the Council to undertake the
necessary policy coordination measures within the framework of the Pact’.
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setting up of a loan-based European instrument for temporary Support to
mitigate Unemployment Risks in an Emergency (SURE). However, a more
comprehensive response, in the form of a EU Recovery Plan, has been delayed
by harsh divergences among Member States concerning the desired scale,
scope and form of a potential EU response to the crisis, especially in terms
of nancial aid. After a series of rather dramatic meetings of the Eurogroup
and of the European Council, the task of working on such a Recovery Plan was
given to the Commission, with a view to drafting a proposal to be submitted
to the European Council.
In this context, and with the prospect of a severe economic recession and
a dramatic increase in the unemployment rate, many doubts were raised as
to the fate of the European Green Deal, notably if the priority of resuming
growth as soon as possible were to aim to take account of environmental
and social considerations. These discussions obviously inuenced the
European Semester and, in particular, the elaboration of the Commission’s
proposals for the 2020 Country-specic Recommendations. The latter
were published on 20 May 2020, one week before the presentation of the
Commission’s proposal for the Recovery Plan. A number of key, common
messages emerge from a preliminary analysis of the 2020 CSRs (see also
European Commission 2020b). First, the European Commission has restated
its willingness to maintain the approach taken in the Annual Sustainable
Growth Strategy – i.e. the simultaneous focus on the four dimensions of
competitive sustainability – and to implement the EGD. Second, there is
a general recommendation to take all necessary measures to eectively
address the pandemic, temporarily disregarding scal constraints deriving
from the SGP, with a view to resuming more prudent scal policies only when
the overall conditions will allow this. Third, there is a clear message that
countries should take the necessary initiatives to cope with the short-term
socio–economic impacts of the crisis, including prioritisation of investment
in health-related issues and income support to aected workers. The fourth
general recommendation is to focus eorts for the recovery on the green and
digital transition, by prioritising sustainable and green investments18 in line
with the EGD.
The focus on the EGD and green investment was conrmed in the
Commission’s proposal for the Recovery Plan (27 May 2020), the stated
objective of which is to ensure that ‘[...] solidarity, cohesion and convergence
[...] drive Europe’s recovery’ (European Commission 2020c: 1). In a nutshell,
the proposal consists of the creation of a new recovery instrument – the Next
Generation EU – nanced through the EU budget and an increase of own
18. This can be considered as an important change compared to the CSRs of the previous
Semester cycle. In fact, referring to the 2019 CSRs, Charveriat and Bodin (2020: 9)
note that ‘Recommendations for structural reforms to Member States largely fail to
take into account environmental risks and opportunities. References to the climate and
energy package are few and unspecic. In fact, a word cloud analysis of the 2019 country
recommendations [...] demonstrated that there is still little coverage of environmental
issues in the CSRs. The vocabulary remains focused on macroeconomic concepts and, to
some extent, social aspects’.
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24 WP 2020.08
resources, so as to provide extra funding to the Member States in the form
of both grants and loans. Without entering into the details of the plan (some
considerations on the nancial aspects will be provided in Section 5), two
elements appear particularly relevant. First, various ‘policy fundamentals’
are identied which – in the view of the Commission – should lead the
recovery, notably: i) the reiteration that the EGD should be considered as
the EU growth strategy and that investments should be targeted at its policy
priorities; ii) the need to strengthen the Single Market and to adapt it to the
digital transformation; and iii) the aim to ensure that the recovery is fair
and inclusive (European Commission 2020c). Second, from a governance
perspective, public and private ‘green’ investment should, according to the
plan, be in line with the EU sustainable nance taxonomy (ibid: 6), and public
investments funded through the plan should be in line with the priorities
identied in the European Semester, in the National Energy and Climate
Change Plans and in the Just Transition Mechanism (ibid.).
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5. Financing the European Green Deal:
public and private investment for a
just transition
5.1 The complexity of estimating the costs for
achieving a green and just transition
As mentioned in Section 2, the European Green Deal includes a multitude of
objectives, the vast majority of which imply structural transformations of the
whole European socio-economic structure. For example, the Green Deal calls
for a 90% reduction in GHG emissions from the transport sector by 2050 and
estimates that 1 million charging points will be needed to power low-emission
vehicles in the EU by 2025 (European Commission 2019a). Achieving this
implies vast nancial, political and human investment.
In general, the European Commission estimates that achieving the energy
and climate objectives by 2030 would require around €260 billion of
additional annual investments (European Commission 2019a: 18). For its
part, the European Court of Auditors estimates that between 2021 and 2030,
€1,115 billion in annual investment would be needed (of which €736 billion in
the transport sector and €282 billion in the residential and services sector)
to achieve the EU’s climate objectives by 2030 (European Court of Auditors
2017).
In any event, it is extremely dicult to estimate precisely what it would cost
to achieve all the objectives set out in the EGD, particularly as these take a
long-term perspective. It should also be noted that the EGD is partly based
on the electrication and digitalisation of the European economy, and the
costs of these aspects of the transition can vary considerably depending on
trends in the prices of raw materials. These in turn are highly dependent on a
multiplicity of factors, including the trade policies of producing and exporting
countries. For example, half of the world’s cobalt consumption is used in the
production of electric vehicles. Hence, the growing demand for this metal will
most likely generate strong tensions on the market in the short term (Lepesant
2018).This underlines the centrality of the EU’s relations with third countries
(especially with those of the global South) since the achievement of the EU’s
environmental and climate objectives will depend, in part, on its ability to
secure supplies of critical raw materials produced outside its borders.19
19. To understand the social consequences of the supply and production chains for this type of
raw material in the producing countries, see, for example, Amnesty International (2015).
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Moreover, in addition to the costs of the ecological transition itself, one of the
pillars on which the EGD is based is the intention to undertake an ecological
transition that is socially just. This implies ‘investments to provide ‘aordable
solutions to those aected by carbon pricing policies (…) as well as measures
to address energy poverty and promote re-skilling’ (European Commission
2019a: 16).
However, this central element of the EGD also requires massive investment.
In order for the transition to receive broad support within the Member
States, it will be necessary to ensure that the Member States whose socio-
economic fabric is largely based on sectors with a key role in the EU’s global
environmental footprint are not left behind by the transition, as this could
have dramatic social repercussions for the workers involved. The Commission
states in its proposal for a Regulation establishing a Just Transition Fund
that while some economic sectors will be in decline, with an ‘irreversible’
decrease in economic production and employment, others will have to
go through dramatic restructuring (European Commission 2020d). For
example, electrication of the automotive industry is likely to modify the
sector’s very structure. This will require a comprehensive political approach
and massive investment, both public and private, as many workers from the
industry will have to be radically retrained. The transformation of one of the
most signicant economic sectors in the EU will involve ‘[...] shifts to entirely
dierent elds both within and outside enterprises, as well as within and
outside the automotive sector’ (Lefeuvre and Guga 2019: 188; Galgóczi 2019b).
In addition, in order to prevent workers from the most polluting economic
sectors from opposing the ecological transition, they must be guaranteed
conditions at the very least similar to those provided by their current jobs in
terms of wages and social benets. These may be considerably higher than in
other, less polluting, sectors, for workers with similar qualications.20
5.2 The EU instruments to finance the just transition:
an overview
In order to assess whether the European Commission’s funding proposals
respond to the magnitude of the cha llenges posed by the EGD, we must analyse
the instruments available or envisaged in order for massive channelling of
funding towards the transition. In its proposal for a regulation published on
May 1st 2018 and concerning the Multiannual Financial Framework (MFF)
2021-2027, the Commission set out its ambition to allocate one quarter of the
nancial framework to the transition (European Commission 2018a).
20. See for example the case of the Polish coal sector (Szpor 2019).
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Financial breakdown of the Sustainable Europe Investment Plan
On 14 January 2020, the European Commission published a Communication
entitled ‘Sustainable Europe Investment Plan’ (European Commission 2020d). The
Communication lays the foundations for an investment plan whose objective is to
mobilise one trillion euros in public and private investment over ten years, between
2021 and 2030, to achieve a ‘socially just transition’.
The plan’s financial breakdown has been proposed by the Commission as follows:
– €503 billion between 2021 and 2030 would be provided from the EU budget;
– €114 billion would come from national co-financing. In addition, the plan provides
greater budgetary flexibility for the Member States in meeting the costs of the
transition;
– At least €25 billion would come from the Innovation and Modernisation Funds
(financed by revenues from the EU Emissions Trading Scheme);
– InvestEU is expected to attract €279 billion of private investment. This fund should
be used to finance energy and transport infrastructure projects, in particular gas
infrastructure, district heating and projects to reduce CO2 emissions;
– €100 billion would be allocated to a Just Transition Mechanism (JTM) whose
objective is to accompany and support the ecological transition of those regions
whose socio-economic fabric will be most aected by the transition. The projects
eligible for funding through the JTM would be defined on the basis of territorial
transition plans submitted by the Member States to the Commission.
The JTM itself would consist of three pillars:
1. A specific facility within InvestEU which is expected to attract €45 billion of
private investment (including €1.8 billion of public guarantees);
2. A public loans facility channelling funds from the European Investment Bank (EIB);
3. A Just Transition Fund (JTF) that will serve as an instrument providing subsidies to
support the transformation and reconversion of those regions most dependent on
sectors of economic activity with a high carbon footprint. Initially, the Commission’s
proposal envisaged that the JTF would have €7.5 billion in budgetary reserves,
which should eventually generate investments of up to €50 billion (European
Commission 2020d). However, the Commission, on 27 May 2020, as part of the
recovery plan in response to the COVID-19 pandemic, decided to substantially
increase this amount, proposing a €40 billion budget for the JTF.
Source: authors’ own elaboration, based on European Commission 2020d
Implementation of the JTF had already been the subject of a Commission
proposal for a regulation in January 2020 (European Commission 2020e).
The scope of the fund includes the retraining of workers, assistance,
reconversion and active inclusion of workers aected by the transition
(European Commission 2020d). More specically, the proposal states that
for every euro invested from the EU budget, the beneciary Member States
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should contribute between 1.5 and three euros (depending on the level of
socio-economic development of the region and the related investment capacity
of the Member State) through the European Regional Development Fund
(ERDF), the European Social Fund Plus and/or as national co-nancing. The
cornerstone of the JTF is thus close cooperation between the Commission, the
national and local authorities. The governance scheme for this collaboration
will be part of the wider framework of the European Semester and will be based
on the territorial transition plans provided to the Commission by the Member
States. These will have to dene the environmental, social and economic
challenges faced by the regions applying for funding. In this respect, on 26
February 2020, the Country Reports published as part of the 2020 cycle of the
European Semester provided, in annex, a list of regions eligible for funding
under the Just Transition Fund.
As stated in Section 4.3, the COVID-19 pandemic and its socio-economic
consequences led the Commission to propose, on 27 May 2020, a cross-
cutting recovery plan entitled ‘Next Generation EU’ to act as a catalyst for a
dual ecological and digital transition (European Commission 2020c).21 The
Commission intends to involve a wide range of actors in this recovery plan,
including the social partners, industry, regions and the Member States: this
plan should eventually mobilise EUR 1,850 billion. In order to generate this
amount, the Commission proposes an increase in the EU budget to 2% of gross
national income.
This increase should enable the Commission to borrow €750 billion on the
nancial markets. The ‘Next Generation EU’ plan is based on three pillars. The
rst pillar is a funding instrument with a budget of €560 billion euros intended
to provide subsidies and loans to the Member States. These will be granted on
the basis of their investment and reform priorities dened in the context of the
European Semester, and will thus be linked to their territorial transition plans.
Then, an instrument entitled ‘React-EU’ will top up the cohesion funds and will
in particular support ‘ecological and digital transitions’. Finally, as mentioned
above, the Commission intends to upgrade its proposal for a Just Transition
Fund, to provide this instrument with a total budget of EUR 40 billion. The
second pillar will aim to stimulate private investment, in particular through an
instrument to support business solvency and an increase in the capacity of the
InvestEU mechanism. The last pillar will aim to increase Europe’s resilience
amid future crises, notably through the launch of a new programme entitled
‘The EU for Health’. In addition, public investment made under the post-
COVID-19 recovery plan is expected to comply with the ‘do-no-harm’ criterion,
which aims to ensure that the investments made do not undermine European
climate and environmental objectives (European Commission 2020c).22
21. The European Commission estimates that Europe’s GDP will fall by 7% in the year 2020 - or
even by 16% if Europe has to cope with a second wave. Unemployment in the EU is expected
to reach 9% in the same year. (European Commission 2020c).
22. The European Council of July 2020 eventually agreed on an amount of € 750 billion EUR
for the Next Generation EU programme (made up of €360 billion in loans and €390 billion
in grants) and an overall budget for the MFF of €1.074 trillion. For a summary and analysis
of the European Council’s outcomes, see Drachenberg (2020).
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However, while the recovery plan proposed by the Commission appears to
be particularly ambitious, the negotiations on the Multiannual Financial
Framework 2021-2027 are continuously bogged down. In order to overcome
the deadlocks in the negotiations, and in parallel with the ‘Next Generation
EU’ plan, the Commission proposed a new MFF amounting to €1,100 billion
(European Commission 2020c). The European Council, in the conclusions
of its special meeting held from 17 to 21 July 2020, considerably reduced
the level of nancial commitments proposed by the European Commission
in both the Next Generation EU plan and the MFF (the JTF budget, for
example, has been slashed from EUR 40 to 17.5 billions). However, in the
same document, the European Council highlighted the need to implement
the EPSR while mainstreaming climate actions through the Next Generation
EU plan and the MFF, in order to contribute to the EU’s commitments to
the Paris Agreement and the SDGs (European Council 2020). In any case,
both the European Green Deal Investment Plan and the European Recovery
Plan would rely heavily on the hope that private investors will collectively
and voluntarily support the public authorities’ political priorities. In other
words – even disregarding the mainly exogenous variables mentioned above,
such as the volatility of commodity prices – the legislative proposals analysed
in this Working Paper make a clear statement: the environmental transition
proposed by the Commission, especially if it aspires to be socially just, would
require a massive injection of private capital. In this sense, the investments
needed to achieve such a transition exceed by far the capacity and willingness
of both European Union and the Member States.
In this regard, on 8 March 2018 the Commission published an action plan
entitled ‘Financing Sustainable Growth’ (European Commission 2018b). The
document encompasses ten elds of action. These are mostly outlined in
three proposals for regulations of the European Parliament and the Council,
all three brought together in a legislative package on sustainable nance
(European Commission 2018c). The EGD communication announces an
upcoming ‘renewed sustainable nance strategy’ to foster and accelerate the
implementation of the 10 priorities dened in the initial 2018 action plan
(Fronteddu 2020).
5.3 Towards a European taxonomy of sustainable
activities: the key elements of a thorny debate
One of the priorities of the European sustainable nance strategy is the
establishment of a framework to facilitate sustainable investment (European
Commission 2018d). This proposal aims to dene, at the European level, what
constitutes a ‘sustainable’ economic activity. Its implementation would require
all nancial and non-nancial companies to oer ‘sustainable’ nancial
securities to demonstrate that they comply with harmonised European
standards. The nal objective of this regulation would be to inform and guide
private investors who would like or need to take into account environmental,
social or governance (ESG) criteria in their investment policies. In this way,
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30 WP 2020.08
the Commission wishes, rstly, to increase the visibility of ‘sustainable’
investment and, secondly, to limit the opportunities for greenwashing.23 The
regulation should enter fully into force between 2020 and 2022, depending on
the publication of the related delegated acts. This regulation and its delegated
acts would thus constitute a community classication of sustainable activities
i.e. a ‘European taxonomy’ (Vander Stichele 2018) and they will probably play
a key role in the just transition. Indeed, a harmonized classication of ‘green
activities’ could provide a clear regulated basis for dening which sectors are
eligible for subsidies and funding allocated under the EGD and the recovery
plan. At the same time, it should help to ensure that the private investment
on which much of the Commission’s strategy is based is actually involved in
the transition. In its ‘Next Generation EU’ action plan, the Commission notes
that ‘the EU sustainable nance taxonomy will guide [private] investment in
Europe’s recovery to ensure they are in line with our long-term ambitions’
(European Commission 2020c: 6). However, a brief review of the legislative
process that led to the adoption of the taxonomy regulation by the Council
and the Parliament on 18 June 2020 and of relevant scientic literature
illustrates both the limits of the taxonomy per se and how dicult it is to
get all the stakeholders to agree on an ambitious socio-environmental cross-
cutting strategy.
First, and in particular, as a consequence of these tensions and conicting
interests, the agreement between the Parliament and the Council, reached on
11 March 2019, appears to be rather vague. Apart from solid fossil fuels, the
taxonomy does not, at this stage, exclude any particular sector of activity or
technology (Hache 2020). The agre ement leaves a lot of room for interpretation
and a large share of responsibility to delegated acts, which will have to specify,
in detail, the criteria to be met for an economic activity to be qualied as
‘sustainable’ (European Commission 2019d).24 On the latter aspect, a lively
debate developed with some organisations such as the World Wildlife
Fund (WWF) and Finance Watch calling for the establishment of a ‘brown’
taxonomy, i.e. a classication of the activities considered as the most harmful
to the environment and climate (Finance Watch 2019; WWF 2018). This idea
led to a struggle with the industry25 and an amendment introducing a ‘brown’
23. ‘Greenwashing’ refers to behavior or activities that make people believe that a company
is doing more to protect the environment than it really is (Cambridge dictionary online,
consulted on 4 June 2020).
24. In detail, the development of a framework for classifying sustainable economic activities
was largely guided by a technical expert group (TEG) (European Commission 2019d). The
group was made up of representatives of the nance industry, multilateral institutions,
and civil society representatives (TEG 2020). While the expert group delivered a nal
report to the Commission on 9 March 2020, the more political aspects of taxonomy, such
as the outright exclusion of some of the most environmentally damaging sectors, were the
subject of much negotiation between political parties in the European Parliament, NGOs
advocating environmental and nancial regulation and business representatives.
25. For example, European Issuers, an umbrella organisation which represents the interests
of listed companies in Europe, sent an appeal as early as 15 March 2019 to the MEPs
in the Committee on Economic and Monetary Aairs (ECON) and the Committee on
the Environment, Public Health and Food Safety (ENVI), calling on them to reject the
amendments referring to the ‘brown taxonomy’ (European Issuers 2019).
A socially just transition through the European Green Deal?
31WP 2020.08
taxonomy was ultimately rejected by the European Parliament. However,
another amendment, which was adopted by the European Parliament, calls
on the European Commission to carry out an impact assessment by 31
December 2021 on the consequences of revising the Regulation to extend the
taxonomy to a framework setting out the criteria for determining when and
how an economic activity has a signicant negative impact on sustainability
(amendment 38). A similar debate developed in the Council, revealing deep
divisions among the Member States, reluctant to endorse the exclusion of
one of their key sectors from potential future funding in the context of the
upcoming transition.26 This situation eventually led to a compromise solution
envisaging a gradual approach to the classication of economic activities that,
apart from solid fossil fuels, does not exclude any particular sector of activity
or technology.
Second, besides environmental criteria, the European Trade Union
Confederation (ETUC) and several NGOs called for the inclusion of social
criteria in the evaluation of projects to be labelled ‘sustainable’, while, in
July 2018, several national and international organisations called on the
Commission to include the respect of human rights and sector-specic
social criteria in the assessment of whether an economic activity is eligible
under the taxonomy (Germanwatch 2018). In this respect, the text that was
ultimately adopted on 28 March 2019 by the European Parliament states
that the minimum social guarantees should not be limited to the eight
fundamental ILO conventions (as initially proposed by the Commission). The
Parliament agreed to add references to the OECD Guidelines for Multinational
Enterprises, the UN Guidelines on Business and Human Rights and the
International Bill of Human Rights. At the same time, MEPs have called
on the European Commission to assess whether further social ‘minimum
guarantees’ need to be added for an economic activity to qualify as complying
with the EU denition of ‘environmentally sustainable economic activity’
(European Parliament 2019b).
Third, while conicts among the various stakeholders have mainly concerned
the contents and criteria for the taxonomy, some more fundamental criticisms
have been put forward by the scientic community in relation to the political
and ideological underpinnings of the ‘Financing Sustainable Growth’ action
plan. The latter is indeed based on the arguments that ‘nance supports the
economy by providing funding for economic activities and ultimately jobs and
growth’ (European Commission 2018b: 2). However, this correlation between
nance, growth and employment is far from being a matter of consensus (see,
for example, Favereau 2016; Husson 2008; Lebeau 2009).
26. For example, a document from the General Secretariat of the Council dated 24 September
2019 includes a joint declaration by Germany, Luxembourg and Austria stating their
opposition to a ‘green’ label for investments linked to nuclear energy, revealing pressure
from some Member States, including France, to backtrack on the Parliament’s proposal,
which proposed to exclude nuclear-related activities from the taxonomy (Council of the
European Union 2019).
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Fourth, more in general, the entire European strategy for developing
sustainable nance is based on the assumption that market players will,
of their own accord and in a rational manner, collectively change their
behaviour. However, the ‘natural’ rationality of nancial investors is one
of the cornerstones of neoclassical economic theories and is also far from
being a given (see, for example, Amin 2009; Plihon 2008; Lordon 1994). The
Commission seems to accept that in order to encourage private investors to
nance low-carbon projects, sustainable investments must be made attractive.
Encouraging actors to set up and nance ‘green’ projects involves translating
environmental benets into nancial terms (Dupont et al. 2015).
Fifth, the need to ‘price’ environmental benets can create tension between
the pressure to increase production in order to raise income and the
achievement of project sustainability goals (Dupont et al. 2015). Tordjman
and Boisvert (2012) stress that calculation systems whose purpose is to
assign a market value to biodiversity require ‘codication’ and distortion
of reality. This is done so that biodiversity can be broken down into assets
that conform to market logic. However, by classifying and coding economic
activities according to their supposedly positive impact, it is up to the market,
i.e. institutional investors, to determine the market value of safeguarding the
environment and, in the end, humanity.
In the same vein, sixth, the recovery plan relies on a double transition:
ecological and digital (see Section 5.2). This is also one of the cross-cutting
objectives of the Green Deal, through, for example, electrication of the
automotive industry, the development of digital identity cards for consumer
products and the use of digitalisation to maximise the use of resources
(European Commission 2019a). And yet academic and scientic questions
about the counter-cyclical eects of digitalisation on the environment have
not provoked strong and concerted reactions from NGOs and trade unions.
However, many studies have demonstrated the environmental and social
impacts of the extraction of the raw materials needed for both digitalisation
and the energy transition (see for example: The Shift Project 2018; Vidal 2018;
Gelin 2019; Pitron 2018; OECD 2019).
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Conclusions
Our analysis shows that the European Green Deal takes into account – at least
at the discursive level – most of the elements characterising the notion of ‘just
transition’, as described in the ILO 2015 Guidelines, and is thus potentially a
suitable policy framework to ensure such a transition. In particular, one of the
aims of the EGD is to create a coherent policy f ramework, taking simulta neously
into account economic, social and environmental objectives with a view to, on
the one hand, creating synergies between actions in these domains and, on
the other hand, identifying and addressing possible trade-os. The notion of
just transition is repeatedly mentioned in the EGD Communication, which
emphasises that the risks and opportunities deriving from the transition
will dier across countries, regions, economic sectors and social groups.
Conseq uently, thes e die rences shou ld be taken int o acc ount when de veloping
and implementing policies. Furthermore, particular attention should be paid
to policies facilitating workers’ employability in a ‘greener’ economy, notably
education and training. In theory, such an approach may be only partially
consistent with the ILO Just Transition Framework, since the latter postulates
that context-sensitive initiatives and employability-related policies should not
be an alternative to universal social rights, and that social-investment policies
should be in addition to strong social protection and social inclusion systems.
This risk may be reduced by the reference in the EGD Communication to
the need to fully implement the European Pillar of Social Rights, which lists
a comprehensive number of social rights to be guaranteed to all European
citizens (not only those potentially hit harder by the transition). Moreover,
this ‘mist’ could gradually be oset by implementing broader, transition-
related social policies with distributional eects, such as the ght against
energy poverty, the strengthening of the European social dialogue and the
publication of Country-specic Recommendations regarding environmental
scal policies.
One of the key governance arrangements to implement the EGD (as well
as the EPSR), thus possibly applying the principles of a just transition,
is the European Semester. According to our analysis, the introduction of
an environmental dimension and the attention paid to the United Nations
Sustainable Development Goals are among the main new features of the
2020 Semester. In line with the general orientations of the EGD, one stated
priority of the 2020 Annual Sustainable Growth Strategy is to ensure a just
transition, to make sure that the costs and opportunities of the transition
are fairly shared. The Annual Sustainable Growth Strategy is based on the
notion of ‘competitive sustainability’, postulating that the objectives of GDP
Sebastiano Sabato and Boris Fronteddu
34 WP 2020.08
growth, scal responsibility, social fairness and environmental protection are
compatible and potentially mutually reinforcing, although it recognises that
trade-os are possible and should be identied and addressed. It is important
to note that, in both the Communication on the EGD and the Annual
Sustainable Growth Strategy, the need to identify and address potential
trade-os between simultaneous eorts to achieve these various objectives is
emphasised much more strongly than in prev ious EU initiatives and strategies,
such as Europe 2020. A comprehensive analysis of synergies and trade-os
between the objectives, initiatives and recommendations proposed by the
EU in the various policy areas of the Semester would require a high degree
of policy integration and coordination between the various institutional
actors responsible for economic, social and environmental policies, and an
improvement of their analytical capacities. An important role in this latter
aspect is to be played by the Semester’s 2020 Country Reports. Our analysis
shows that - although some limitations do emerge - these documents now
have the potential to provide a more comprehensive analysis of the situation
in the Member States, and of possible (positive or negative) interactions
between initiatives in dierent policy domains. This is mainly because the
scope of the CRs has been broadened to include environment and sustainable
development-related issues and indicators. This said, the 2020 Semester
Country-specic Recommendations could have acted as a reality check of
the Commission’s ability to ensure in practice the consistency of growth,
fairness, environmental sustainability and scal responsibility, beyond the
discursive level. These CSRs were however published in a social, political and
economic context dramatically impacted by the COVID–19 crisis. Against this
background, the main message of the CSRs has been to ask countries to take
all necessary measures to address the pandemic eectively (from both a social
and an economic point of view), temporarily disregarding scal constraints
deriving from the SGP. Importantly, in the CSRs the Commission has restated
its willingness to implement the EGD, by recommending that Member States
target their investments at the ecological and digital transformations. This
approach seems consistent with the promise to promote a just transition.
However, the loosening of the requirements of the SGP, due to the exceptional
circumstances, means that we cannot assess the extent to which the priority of
investing in greening economic growth while simultaneously preserving high
social standards for all European citizens can actually be compatible with
the traditional EU priority of the objective of ‘scal responsibility’, especially
for countries with high levels of public debt. Indeed, while activation of the
SGP’s general escape clause currently allows the Member States a large
degree of budget exibility in the short term, this should not ‘[...] endanger
scal sustainability in the medium term’ (European Commission 2020b: 8)
and ‘[w]hen economic conditions allow, scal policies should aim at achieving
prudent medium term scal positions and ensuring debt sustainability, while
enhancing investment’ (ibid.: 7).
All this said, targeting investment on the ecological (and digital) transition
while ensuring that this process is also socially just is an approach seemingly
conrmed in the Commission’s proposal for a Recovery Plan for Europe
(the Next Generation EU plan). In particular, in this plan, the Commission
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35WP 2020.08
emphasizes the need to attract and focus public and private capital on
sustainable investment in both the digital and ecological transition. A central
role in the green transition is to be played by the taxonomy of sustainable
economic activities, enabling identication of the key investment areas.
Furthermore, the objective of achieving a just transition was also restated in
the recovery plan, which foresees an increase of the nancial resources of the
Stability Mechanism. The nancial means to implement the EGD and ensure a
just transition have been the last aspect analysed in this paper. As repeatedly
stated, the EGD has been presented by the Commission as a holistic and long-
term strategy, which is intended to act as the driver of European economic
growth. However, the completion of a transition announced as ‘socially just’
will depend not only on the means allocated to it, but also on the instruments
activated to allocate these funds. The structures funding the transition will
have a decisive impact on the process implementing the objectives dened
in the Green Deal. As the negotiations concerning the next MFF and the
EU recovery plan are still ongoing, it is too early to assess the adequacy of
the nancial resources allocated to meeting the EGD’s political objectives.
Moreover, it is very dicult, if not impossible, to make a precise estimation
of the cost of the transition, since exogenous factors will play a decisive role
(e.g. the price volatility of raw materials critical to the transition, as well as the
social, economic and political impact of the COVID-19 pandemic).
However, a brief analysis of the legislative process that led to the adoption
of the interinstitutional agreement on the establishment of a European
taxonomy of sustainable economic activities has highlighted how it revived
deep divides between the various stakeholders. Such an analysis is helped
by an understanding of the structural limitations of the instruments funding
the transition. These limitations are linked to the Commission’s assumptions,
which underlie and structure the very concept of these transition funding
instruments. Thus, the entire funding strategy for the EGD is based, inter
alia, on the hope that private investors will collectively and voluntarily
provide massive private capital to fund the just transition. This strategy
itself is based on assumptions made by the European Commission, which
seem to conform to neoclassical economic theories and which are far from
a matter of consensus among academics. Although, then, the EGD derives
its legitimacy from being presented as a ‘science-based policy’ (i.e. based on
the fact that human activities are largely responsible for long-term climate
crises), numerous assumptions underlying the EGD funding strategy appear
to have a debatable ideological foundation. For this reason, implementation of
the just transition funding structures is likely to gradually rekindle diverging
interests among stakeholders, undermining the Commission’s quest for broad
consensuses on the implementation of a long-term cross-cutting strategy such
as the EGD.
Sebastiano Sabato and Boris Fronteddu
36 WP 2020.08
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Sebastiano Sabato and Boris Fronteddu
40 WP 2020.08
Annex: list of acronyms
COP Conference of the Parties
COVID COronaVIrus Disease
CSRs Country-specific Recommendations
DG Directorate General (European Commission)
DG CLIMA DG for Climate Action (European Commission)
DG ECFIN DG for Economic and Financial Aairs (European Commission)
DG EMPL DG for Employment, Social Aairs and Inclusion (European Commission)
DG ENV DG for the Environment (European Commission)
ECON Committee on Economic and Monetary Aairs (European Parliament)
EIB European Investment Bank
EGD European Green Deal
ENVI Committee on the Environment, Public Health and Food Safety
(European Parliament)
ERDF European Regional Development Fund
ETUI European Trade Union Institute
ETUC European Trade Union Confederation
EPSR European Pillar of Social Rights
ESG Environmental, Social, and Governance
EU European Union
GDP Gross Domestic Product
GHG Greenhouse gases
ILO International Labour Organisation
ITUC International Trade Union Confederation
JTF Just Transition Fund
JTM Just Transition Mechanism
MIP Macroeconomic Imbalances Procedure
MFF Multiannual Financial Framework
NECP National Energy and Climate Change Plan
NRP National Reform Programme
OECD Organisation for Economic Co-operation and Development
SDGs Sustainable Development Goals
SECGEN Secretariat-General (European Commission)
SGP Stability and Growth Pact
SURE Support to mitigate Unemployment Risks in an Emergency
TEG Technical Experts Group (on sustainable finance)
UN United Nations
UNFCCC United Nations Framework Convention on Climate Change
UNEP United Nations Environment Programme
WWF World Wildlife Fund
