On 11th December 2019, the European Commission published a Communication on ‘The European Green Deal’, ‘[...] a new growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient 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). In so doing, one of the priorities should be to ensure a ‘just transition for all’ (ibid.: 6), with a view to cushioning 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, in a recent Working Paper published by the European Trade Union Institute (Sabato and Fronteddu, 2020) we have investigated if and to what extent the Commission’s European Green Deal (EGD) represents a suitable framework to implement a ‘just transition’ towards low-carbon economies and societies, focussing on two crucial tools for the implementation of the Commission’s Green Deal Strategy: i) EU socio-economic coordination (the European Semester); and ii) funding.
What is Just Transition?
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 and it was since then put forward by the trade union movement during several international negotiations and conventions on climate change. This notion is strictly related to the sustainable development approach as developed by the United Nations in the Sustainable Development Agenda and potentially complementary to a green growth approach. Indeed, differently than other approaches relying on the notion of degrowth, the proponents of just transition do not fundamentally challenge the feasibility of a sustained, ‘green’ growth pattern compatible with environmental protection.
However, the just transition perspective raises the attention on the fact that the changes required in order to build a more sustainable economic model will entail dramatic social and employment challenges. Consequently, in order to be just, policies for the transition should ensure that both the risks and the opportunities deriving from these changes are equally distributed. In 2015, the International Labour Organisation (ILO) tried to systematise the notion of just transition, identifying the constitutive elements of what was labelled a ‘just transition framework’ and publishing a set of ‘Guidelines for a just transition towards environmentally sustainable economies and societies for all’ (ILO, 2015). From an analysis of the ILO’s guidelines, six key elements that should characterise a ‘well-managed’ and ‘just’ transition emerge:
i) The elaboration of policies that are simultaneously context-sensitive and global, i.e. that, while recognising that risks and opportunities of the transition vary between territories, economic sectors and social groups, they also consider that decisions taken at one level of governance also have an impact at the global level;
ii) The need to develop coherent policy frameworks for the transition, creating synergies between a multiplicity of policy areas linked to economic, social and environmental sustainability and identifying and addressing possible trade-offs.
iii) Ensuring capacity building at all levels and developing solid and transparent indicators to elaborate and monitor the impact of policies.
iv) The set-up of governance arrangements allowing for policy integration and coordination between a variety of institutional and social actors operating at various levels of governance.
v) Social consensus to be achieved through the promotion of social and civic dialogue at all levels.
vi) Ensuring the availability of financial resources – especially through public investment – not only in order to ‘greening’ the economy but also to ensure that everybody can participate to the opportunities arising from the transition and is protected from the related risks.
The Just Transition framework in the European Green Deal
According to our analysis, the European Green Deal proposed by the von der Leyen Commission in December 2019 considers – at least at the discursive level – most of the elements characterising the notion of just transition as developed by the ILO, thus having the potential to represent a suitable policy framework to ensure such a kind of transition. At a general level, the EGD is a growth strategy compatible with the UN Social Developments Agenda and it includes most of the policy areas related to the Sustainable Development Goals. In this perspective, one of the ambition of the EGD is to create a coherent policy framework taking simultaneously into account economic, social and environmental objectives with a view to, on the one hand, create synergies between actions in these domains and, on the other hand, to identify and addressing possible trade-offs. In order to do so, a particular emphasis is put on the need of policy integration and on the coordination between institutional and societal actors at different levels of governance. As for the latter, the involvement of stakeholders is seen as a key feature in order to create the social consensus needed to ensure a successful transition. In addition to this general considerations, the notion of just transition is repeatedly mentioned into the EGD Communication, highlighting the fact that the risks and opportunities deriving from the transition will differ across countries, regions, economic sectors and social groups. Consequently, these differences should be taken into account when elaborating and implementing policies: a context-sensitive approach would be needed.
Our analysis, however, also reveals some possible tensions between the comprehensive understanding of just transition proposed by the ILO and the EGD. Besides more general statements, when it comes to specific policies and initiatives the latter indeed adopts a rather narrow approach to just transition, by focusing on specific territories and economic sectors and by limiting social policy areas specifically dealt with in the EGD Communication to education and training. These two elements – the marked territorial/sectoral focus of just transition in the EGD and the emphasis given to social investment-oriented policies – may be only partially consistent with the notion of just transition developed by the ILO, the latter highlighting the need to firmly place measures targeted at the most vulnerable territories and sectors and employability- enhancing measures 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. These potential contradictions and tensions may be reduced by the fact that, according to the Commission, the European Pillar of Social Rights – with its comprehensive list of rights and principles for social provisions addressed to all EU citizens – should be considered as the reference framework that should ensure that ‘[...] no one is left behind [in the transition]’ (European Commission, 2019a: 4).
All this said, since the EGD is a forward-looking, strategic document, the way in which it is concretely implemented will obviously be key to really understand if and how discourses will translate into reality, including the actual capacity to conjugate attention to specific territories and sectors with a full implementation of the rights and principles of the EPSR for all EU citizens. In this respect, we provide some considerations on two key implementation tools of the EGD: the European Semester and funding instruments.
The European Semester 2020
Launched in 2011, the European Semester has traditionally dealt with macro-economic, fiscal and social policy, while – until the 2019 cycle – environmental policies and policies against climate change have been rather peripheral in the process and mostly limited to issues related to energy policies. In order to facilitate the implementation of the EGD (and to integrate into the process the UN Sustainable Development Goals), an ‘environmental dimension’ was added in the 2020 cycle of the Semester, launched with the publication, in December 2019, of the Annual Sustainable Growth Strategy (ASGS) (European Commission, 2019b). The latter document builds on the notion of ‘competitive sustainability’, relying on four – supposedly complementary – dimensions to be taken into account in order to put the EU on a sustained and sustainable growth pattern: i) environmental sustainability; ii) productivity growth; iii) social fairness; and iv) (macroeconomic and fiscal) stability. In line with the EGD, ensuring a just transition so as to make sure that the costs and opportunities of the transition are fairly shared is presented as a priority in the ASGS 2020. The rationale of this document relies on the premise that the objectives of economic growth, fiscal responsibility, social fairness and environmental protection are compatible and potentially mutually reinforcing, even though it is admitted that trade-offs are possible and should be identified and addressed. This 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. Consistently, the Country Reports 2020, besides containing specific sections on environmental sustainability, also include new indicators concerning sustainable development and green growth and specific Annexes providing ‘Investment Guidance on the Just Transition Fund 2021-2027’ (Annex D).
A veritable reality check of the capacity of the Commission to ensure the consistency of growth, fairness, environmental sustainability and fiscal responsibility beyond the discursive level could have been the Semester’s CSRs, in which principles and ambitions should have been translated into concrete and coherent policy recommendations to the Member States. The latter were however published in a social, political and economic context dramatically conditioned by the COVID – 19 crisis. While the exceptionally loosening of fiscal discipline does not allow for a full reality check on the actual consistency of the four dimensions of the Semester and, more broadly, of the philosophy of the EDG, it is however highly relevant that the latter has nevertheless been confirmed as the reference framework for the recovery. Indeed, in line with the EGD, the Commission has recommended to the Member States to target their investments on the ecological and digital transformation. Such an approach was then confirmed in the Commission’s proposal for a Recovery Plan for Europe – the Next Generation EU plan (European Commission, 2020a).
Financing the European Green Deal: public and private investment for a just transition
The financial means to implement the EGD and ensure a just transition have been the last aspect analysed in this paper. As afore mentioned, the EGD includes a multitude of forward-looking objectives, the majority of which imply structural transformations of the whole European socio-economic structure. Achieving them implies vast financial, political and human investment. Moreover, the EGD aims at undertaking an ecological transition that is socially just. This implies investments to provide ‘affordable solutions to those affected by carbon pricing policies (…) as well as measures to address energy poverty and promote re-skilling’ (European Commission, 2019a: 16).
The European Commission published, on 14 January 2020, a Communication entitled ‘Sustainable Europe Investment Plan’ (European Commission, 2020b). This document lays the foundations for an investment plan whose objective is to mobilise one trillion euros in public and private investment over ten years. According to the Commission’s strategy, EUR 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 affected by the transition. At the same time the cross-cutting recovery plan entitled ‘Next Generation EU’ which is supposed to act as a catalyst for a dual ecological and digital transition should eventually mobilise EUR 1,850 billion by enabling the Commission to borrow EUR 750 billion on the financial markets. However, the European Council, in the conclusions of its special meeting held from 17 to 21 July 2020, considerably reduced the level of financial commitments proposed by the European Commission in both the Next Generation EU plan and the Multiannual Financial Framework for 2021-2027 (for example, the Just Transition Fund — a key component of the JTM — have been slashed from EUR 40 to 17.5 billions) (European Council, 2020).
In other words, 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 as the investments needed to achieve such a transition exceed by far the capacity and willingness of both European Union and the Member States. One of key instrument of the EU to channel private funds to the green transition is the establishment of an EU taxonomy (Fronteddu, 2020). This taxonomy aims to define, at the European level, what constitutes a ‘sustainable’ economic activity. In its ‘Next Generation EU’ action plan, the Commission notes that ‘the EU sustainable finance taxonomy will guide [private] investment in Europe’s recovery to ensure they are in line with our long-term ambitions’ (European Commission, 2020a: 6). However, as a consequence of tensions and conflicting interests between the various stakeholders, the interinstitutional agreement concerning the EU taxonomy reached between the Parliament and the Council, on 11 March 2019, appears to be rather vague. The agreement 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 qualified as ‘sustainable’.
The completion of a transition announced as ‘socially just’ will depend not only on the means allocated to it but also on the relevance of the instruments mobilised to allocate these funds. The funding structures of the transition will have a decisive impact on the implementation process of the objectives defined in the Green Deal. Hence, a brief analysis of the legislative process that led to the adoption of a European taxonomy highlighted how it revived deep divides between the various stakeholders. This can be analysed by understanding the structural limits of the funding instruments of the transition. 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 towards the just transition. This strategy itself is based on assumptions made by the European Commission which seem conform to neoclassical economic theories and that are far from reaching consensus among academics. In this sense, even though the Green Deal derives its legitimacy from the fact that it is 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 Green Deal funding strategy appear to be based on debatable ideological grounds. This is why, as the just transition funding structures are being implemented, stakeholders diverging interests will be likely to gradually rekindle, undermining the Commission's quest for broad consensuses amid the implementation of a long term cross-cutting strategy such as the Green Deal. In order to avoid that the Green Deal’s inner contradictions dramatically hinders its achievement, it is paramount that the Commission opens up substantive debates on the ‘transition imponderables’.
European Commission (2020a), Communication from the Commission - Europe’s moment: repair and prepare for the next generation, COM(2020) 456 final, 27 May 2020.
European Commission (2020b), Communication from the Commission - Sustainable Europe Investment Plan - European Green Deal Investment Plan, COM(2020) 21 final, 14 January 2020.
European Commission (2019a), Communication from the Commission - The European Green Deal, COM(2019) 640 final, 11 December 2019.
European Commission (2019b), Communication from the Commission - Annual Sustainable Growth Strategy 2020, COM(2019) 650 final, 17 December 2019.
European Council (2020), Special meeting of the European Council (17, 18, 19, 20 and 21 July 2020) – Conclusions, EUCO 10/20, 21 July 2020.
Fronteddu B. (2020), La finance contre le réchauffement climatique : un loup déguisé en agneau, Opinion Paper 21, brussels: European Social Observatory.
ILO (2015), Guidelines for a just transition towards environmentally sustainable economies and societies for all, Geneva, ILO.
Sabato S. and Fronteddu B. (2020), A socially just transition through the European Green Deal?, Working Paper, Brussels, European Trade Union Institute (ETUI).