Do the Portuguese Territorial Just Transition Plans comply with the Just Transition Regulation?

Authors
  • Sara Belo de Oliveira

INTRODUCTION

In December 2022, all twelve of the Portuguese 2030 Programmes were approved by the Commission. This included a total of 224 million euros from the Just Transition Fund (JTF)[1] divided amongst three Territorial Just Transition Plans (TJTPs), for Matosinhos, Médio Tejo and Alentejo Litoral, included in the Programmes for the North, Center and Alentejo areas respectively. The complete Programmes include plans and objectives for a number of different European initiatives and funding options, but we are looking exclusively at the TJTPs, and how well they comply with the Just Transition Regulation[2] and its overall objectives.

The term ‘just transition’ has increasingly evolved since the 1970s, when it first became relevant, from a call for funding to provide financial aid to workers who were left unemployed by environmental protection policies in the US, to an increasingly broad term that depicts so much more than that, tackling social injustices, environmental policy, climate justice, and a change in paradigm for how to deal with the evolution of our energy system. A just transition now goes beyond the mere idea of compensation, to a way to look at society as a whole and understand how to best accomplish the changes necessary without leaving anyone behind.

So, what exactly are we discussing? Why is a just transition necessary? We will here be looking exclusively at the European Union and its path towards a just transition, to do that we will first have to go back and contextualize the European Green Deal[3] (EGD).

1. EU REGULATORY CONTEXT AND THE JUST TRANSITION FUND REGULATION

The EGD aims to make Europe the first greenhouse gas-neutral continent by 2050, to achieve this goal a multitude of changes have and will be implemented on the road to climate neutrality. Aware that this will cause significant disruptions to several parts of EU Member States’ territories, the EGD is fully based on a just transition, where “no one is left behind” (point 2.1 of the EGD Communication). To ensure this just transition, the Commission presented a Sustainable Europe Investment Plan (SEIP)[4], the investment pillar of the EGD, where the Just Transition Mechanism (JTM) is included. The fund we are looking at, the Just Transition Fund, is pillar one of three in the JTM and is based on a territorial approach because the main issue when looking at a just transition is that every region will be impacted differently, every part of the territory will have different needs and challenges, and they will each have to be tackled in different ways depending on the resources available, while also keeping in mind that that communities are facing a difficult challenge in rethinking their whole way of living. All EU countries are eligible for funding from the JTF, but allocations are determined through a negotiation process with the Commission, on the basis of Territorial Just Transition Plans.

The JTF’s single specific objective is to support the regions and communities in Europe that are most negatively affected by the transition to climate neutrality, ensuring that the ‘no one is left behind’ ideal is sustained. It is to be noted that access to these resources is conditional, as per Article 7 of the Just Transition Fund Regulation[5], Member States who have not committed to the objective of a climate-neutral Union by 2050, are only allowed access to 50% of the annual allocations made available. Portugal makes it very clear in its TJTPs that they have committed to ensuring their own climate neutrality by 2050, in accordance with their RNC 2050[6] plan, as well as the overall Union objective. The Portuguese National Energy and Climate Plan (NECP) for 2030 is also aligned with EU objectives on the road to climate neutrality by 2050, and the reduction of 55% of GHG emissions by 2030, in line with what is defined in the European Climate Law[7], the legal manifestation of the EGD objectives, in fact, one of their 8 national objectives is precisely guaranteeing a just transition. So, Portugal begins their TJTPs with a strong stance, clearly declaring that they are aligned with the EU and its goals in this just transition. These opening statements are repeated in all three plans, in accordance with what is asked for in Article 11(2), paragraphs (a) and (b) of the JTF Regulation. Paragraph (c) is where all three plans start to differ, each tackling a different territory and mapping out different challenges, objectives, operations, etc.

2. THE PORTUGUESE TERRITORIAL JUST TRANSITION PLANS

A full territorial analysis was conducted in Portugal on GHG emissions associated with the industry and energy sector, leading to the identification of the regions that most contributed to these emissions. A study developed by E&Y[8] in the creation of these plans identified that the Alentejo Litoral and Médio Tejo regions were both the most exposed to the challenges raised by decarbonization, and the biggest emitting regions. The regions face an added challenge due to their ageing population and diminished sectorial diversification, as well as the closing of the natural gas thermoelectric power plants of Pego (Médio Tejo) and Sines (Alentejo Litoral). In addition to both these regions, the Porto Metropolitan Area also presented some issues in this transition, with a decrease in resident population, and an above-average unemployment rate combined with the recent closure of the Matosinhos refinery. Having identified these three territories where the transition would be the hardest to accomplish in a just way, Portugal then sets out specific plans for each of them.  

  • Matosinhos

Let us now briefly look at each plan, starting with Matosinhos, where the closure of the Petrogal refinery will lead to an estimated yearly reduction of 900kton in CO2 emissions, with positive effects in the reduction of water and energy consumption. Despite these positive impacts, the refinery closing has also brought some negative ones, namely the loss of jobs, the economic loss in GVA, and a loss of investment in innovation, to name the most relevant. With this in mind, Portugal lists several needs and objectives to be fulfilled with the JTF allocation, like worker qualification based on new industry needs, incentives for SMEs to help diversify, modernise and lead the way into a climate and energy transition in the area, there is also the provision of the implementation of a centre for innovation, investigation and incubation on just transition. They even note that they do not foresee funding investment projects by big companies with JTF allocations. The ‘polluter pays principle’[9] can also be identified within the specifications of this plan, for example, it is clear that Petrogal is the company most referred to in the plan, and that it intends to cede land to public entities for the dismantling and reconversion of industrial units for the establishment of the Matosinhos Innovation Hub, which it will help create. Despite this, the polluter pays principle isn’t mentioned directly, to the best of my knowledge, in any of the three plans we are looking at.

  • Médio Tejo

When it comes to the Médio Tejo TJTP, the main element cause of concern was the closing of the Pego power station in November 2021, and its production of electricity through coal. This region of Portugal faces significant challenges with population demographic and economic growth, especially now that the station has closed. The biggest negative impacts are the loss of jobs and the loss of GVA, with significant impacts on the local economy, especially the engineering and maintenance sectors that worked closely with the station. The fact that this territory is already connected to the national energy grid is a strong positive in being able to reformulate the region and prioritize the production of energy from renewable sources. In this regard, the Plan foresees investments into new infrastructures and technology, as well as requalifying the impacted workers for jobs in these new technology sectors, energy efficiency, digital competencies and circular economy. For this specific region, 13 projects have already been submitted for funding, if implemented these will not only cover the loss of jobs but create new positions. It is noted that 8 of these are from SMEs and 5 from non-SMEs, with a detailed explanation as to why the results needed can’t be accomplished without the latter, and that all the projects will help contribute to reaching national objectives established in the Portuguese NECP and in the production of green energy – this justification is imposed by Article 11(2) paragraph (h), seeing as enterprises other than SMEs are predicted to be supported.

  • Alentejo Litoral

Finally, when it comes to the Alentejo Litoral region, this is considered the sub-region that is most exposed to the impacts of the just transition process in Portugal, so its plan was extremely detailed in how it should be accomplished. The main element cause for concern in this region was the closing of the Sines thermoelectric plant in January of 2021, because this is a region that strongly relies on industrial activity, as well as tourism, and while most of the directly affected workers were transferred to other facilities, there are an estimated 220 service providers that worked directly with the plant in the area weren’t, and are therefore one of the main targets of this plan. In this case, 14 projects have also already been submitted by SMEs, with an estimated 117 job positions created, but the submitted projects don’t cover all of the jobs lost, so new submissions will also be discussed. These encompass projects on I&D to help the transition process, as well as upskilling and reskilling initiatives for affected workers, and investments in sustainable mobility in the area, that would help decarbonise the local transport sector and work towards the Portuguese NEPC objectives for 2030 in reduction of GHG emissions. All investments from non-SMEs will be included in a list subject to the Commission’s approval, but no investments outside of the objectives pursued by the JTF will be selected.

3. ANALYSIS OF THE TJTPs

Having now looked at all three plans, we can appreciate how all the activities listed comply with the scope of support in Article 8 of the JTF Regulation, seeing as the JFT is only allowed to support a restricted list of activities that directly relate to its singular objective. The support of investments in enterprises other than SMEs is also mentioned in this article, as an additional conditional measure, support for SMEs is the priority, with investment in other enterprises being eligible only when they meet all the criteria set out after Article 8(2), as per Article 11(2) paragraph (h), which we already mentioned, and with which the Portuguese Plans comply with. These plans are made based on the template provided for in Annex II of the JTF Regulation, so they are very standardised and easy to follow, allowing for a comparison between plans. The use of the template is imposed by Article 11(1) of the JTF Regulation and makes it so that member states inevitably all include the necessary information in each part of the plan, while also limiting the text field. In this regard, we can note that all three plans seem to comply with the template and the necessary data to be provided within, following an almost repetitive but necessary discourse. Therefore, the elements listed in Article 11(2) seem to all be clearly set out and identified.

It is also important to note that despite referring specifically to the JFT, the plans should always identify the synergies and complementarities with other relevant national programmes, EU programmes, and the other two pillars of the JTM. All three plans here make it very clear that they are fully aligned with all other national plans and strategies for the same time period such as the RNC 2050, the NEPC, the EN-H2[10], etc. but also that there are existing complementarities with the other two pillars of the JTM and other funding programmes in the EU to which they have applied. 

In addition to all of the Articles of the JFT Regulation, it is also important to look at the Common Provisions set out for several different funds in Regulation (EU) 2021/1060 of the European Parliament and the Council. In this regard, attention should be mostly given to Article 8, as it deals with partnerships and governance. There are a number of standards that investors use to screen potential investment opportunities, the most relevant ones nowadays are the ESG, Environmental, Social and Governance criteria, so this analysis should also focus on how investors will consider these plans, and how they will choose to support these projects.

Let’s start with the governance problems that might arise. One of the biggest concerns when it comes to the JFT is that social partners are not adequately reflected in these plans, and that all of the relevant stakeholders, especially the workers and trade unions, aren’t being adequately involved. This is also reflected in the template for the TJTPs provided for by the EU, while it does say that a “description of the governance mechanisms consisting of partnership arrangements, the monitoring and evaluation measures planned and the responsible bodies” should be included, it does not directly make it mandatory that those mechanisms and measures include these stakeholders, it merely states that they should exist. This is an important measure when it comes to the overall governance of the Fund and all of the TJTPs in all Member States, and should be something that States should include even if not mandatory. And while Article 8 of the Common Provisions states some of the partners that should be included, this part of the programmes should be better established, to ensure that the people who were actually affected by this just transition can be heard.

Beyond governance, there are also issues in the social variable. Something that the JFT mentions that I didn’t identify in the Portuguese TJTPs is the promotion of gender equality or any measures of special attention to vulnerable groups, such as workers with disabilities, workers as a term is used loosely to refer to all workers, and the total of jobs lost, with no distinction between workers beyond the ones directly or indirectly affected. This is something that should be taken into account seeing as Portugal has an identified issue[11] with gender equality and with a lower digital literacy average, identifying these issues, and what measures will be taken to try and mitigate them, is a positive step in the right direction, and it should have been taken into account in the development of these plans. In 2021, 67% of the resident illiterate population in Portugal were women[12], with Alentejo being the region with the highest percentage. A note has also been made on this theme by the European Commission, stating that 40% of the Portuguese population hasn’t completed more than a high school education[13] and that specialized workers in the technology and innovation field are therefore limited. This labour shortage specifically in the sectors needed for a just transition should be reason enough to not only invest in the education of the affected workers but also in the education of as many people in these affected regions as possible, including the women, in order to combat this reality.

When it comes to the environmental criterion, when comparing the Portuguese plans to some of the other final TJTPs it must be noted that an effort to have an overall very consistent approach to the just transition, with a strong definition of long-term goals that are aligned with EU commitments and climate objectives exists. There is an identifiable underlying thread guiding these plans when it comes to complying with the NECP, with a strong focus on renewable energy creation and reducing carbon emissions. The critique is maintained when it comes to the governance mechanisms and stakeholder involvement, there weren’t enough details given on stakeholder views and their input into the creation of the programme, it was mostly governmental agencies mentioned or vague mentions of “focus groups” and “workshops”. All three plans mention that a national forum will be created to keep track of the challenges faced and identified in the TJTPs and to serve as a place for constant dialogue between all involved entities. From what I have researched, this forum isn’t operational yet, and if it is, it is extremely hard to find. The Portugal 2030 website is very useful in keeping up to date with the plans and everything happening with the different funds, seeing as the 224 million euro TJF allocation represents only 1% of the funding, but a specific national forum would be very much appreciated so that everyone interested can keep up to date with all the information, and participate in these discussions.

CONCLUSION

Overall, when comparing the Portuguese plans to others that have already been finalized, it seems Portugal has complied with the JTF Regulation. Keeping in mind some of the more minor details mentioned here that would benefit from improvement, or future application and consideration, like addressing the specifics of gender equality and vulnerable groups, as well as involving all relevant stakeholders, these three TJTPs are ambitious plans with long-term objectives to help the overall transformation of the EU and the ultimate goal of climate neutrality by 2050. The plans refer to NUTS level 3 regions, as is established, they set out very clearly what challenges each territory is and will face, and the types of operations that will be necessary to help in the transition, keeping in mind the two guiding pillars of the fund: the social and economic impact of the transition. It is noted that none of the “excluded investments” are part of the Portuguese plans, no activities or investments related to the production, processing, transport, distribution, storage or combustion of fossil fuels, for example, as excluded by Article 9 of the JTF Regulation. The polluter pays principle should be better established within the TJTPs, and we will see if when implementing the plans, help is given in that regard to identifying what entities should be liable for helping to remediate the damages they have caused in these territories, especially seeing as it is specifically mentioned in Article 8(2) paragraph (i) of the JTF Regulation, as activities that should be supported by the JTF.

Structural changes of this kind, that impact communities as a whole, are complicated. Uncertainty will always lead to resistance from the involved parties, it is important to keep communication open and, above all, clear. Do take advantage of all of the technology made available to us nowadays to create a strong national forum where this is possible, and strive to divulge it where necessary, because most of the time these bureaucracies get lost, and people don’t know where they can and should find information, whom to contact, etc. The transition will be much smoother if everyone is included, and ‘no one is left behind’, a bottoms-up approach is most definitely the correct one, as identified by the EU and the JTF Regulation. Although not everyone is content with the budget given to the JTF, it should be kept in mind that other funds can be accessed and used complementarily with the JTF and its objectives, but different funds also have different targets, so each sector should aim to use different funds, that is why the TJTPs are included in larger regional and national plans, and why they were approved as a whole. While we will have to wait and see how all of this develops, let us always keep in mind that ‘no one is left behind’.

Bibliography 

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[1] Acordo de Parceria – República portuguesa

[2] Regulation (EU) 2021/1056 of the European Parliament and of the Council

[3] COM(2019) 640 final

[4] COM(2020) 21 final

[5] Regulation (EU) 2021/1056 of the European Parliament and of the Council

[6] Roteiro para a Neutralidade Carbónica 2050

[7] Regulation (EU) 2021/1119 of the European Parliament and of the Council

[8] Complete study was not found, only the findings available in the TJTPs

[9] Says that polluters should bear the costs of their pollution, including the cost of measures taken to prevent, control and remedy pollution.

[10] Estratégia Nacional do Hidrogénio

[11] Addressed while the Committee on Economic, Social and Cultural Rights concluded their review of the fifth periodic report of Portugal in February 2023

[12] PORDATA, available: https://www.pordata.pt/db/portugal/ambiente+de+consulta/tabela

[13] European Commission, COM(2023) 622 final

Authors
  • Sara Belo de Oliveira