Europe's Green Transition: A Fund Under Pressure
By Valeria Cirillo, Marialuisa Divella, Lidia Greco, Eustachio Ferrulli
The EU's flagship Just Transition Fund, designed to mitigate social inequalities, faces significant challenges in achieving its ambitious goals.
In line with the Paris Agreement, the European Union (EU) aims to achieve climate neutrality by 2050. This objective necessitates profound shifts in energy production, technological development, and national economic structures, inevitably leading to significant social consequences, including job displacement. To ensure a fair and inclusive transition, the European Commission has introduced measures to support potentially affected regions, industries, and workers. The Just Transition Fund (JTF) stands as a pivotal initiative for this purpose.
Approved in 2021, the JTF targets regions whose economies are reliant on coal extraction and highly polluting industries. Its remit includes diversifying these economies, fostering clean energy activities, promoting environmental remediation, and ensuring that workers receive appropriate training to adapt to new economic conditions, while also creating new employment opportunities.
Conceived as a cornerstone of the EU’s climate strategy, the JTF is a policy instrument designed to ensure that the transition to climate neutrality does not exacerbate existing social and territorial inequalities. It forms part of the broader European Green Deal and is a pillar of the Just Transition Mechanism. The JTF initially received a budget allocation of €17.5 billion, which was later increased to €19.3 billion. Today, it represents one of the main efforts to reconcile climate ambition with social justice – at least in theory. Indeed, this twofold objective, supporting decarbonisation while ensuring fairness, demands more than mere financial transfers. It requires a fundamental rethinking of economic development itself, particularly in territories historically dependent on fossil fuel industries. The JTF aims not merely to cushion the blow of transition but to create the conditions for long-term structural change. Yet, as implementation proceeds, a growing body of evidence points to a significant gap between the fund’s ambitious rhetoric and its practical application.
A New Generation of Industrial Policy?
The JTF marks a departure from traditional forms of industrial and cohesion policy in Europe. It can be understood as a “third generation” industrial policy: one that is explicitly socially inclusive, territorially embedded, and transformative. Earlier waves of industrial policy often focused narrowly on enhancing competitiveness, technological upgrading, or correcting market failures. By contrast, the JTF’s underlying logic is profoundly political – it acknowledges that the green transition will produce "losers" and that addressing their needs is essential to preserving social cohesion and democratic legitimacy.
What makes the JTF unique is its territorial dimension, which often refers to a sub-regional unit. Funding is distributed based on Territorial Just Transition Plans (TJTPs), developed by national and regional authorities in consultation with local stakeholders. These plans are intended to map the economic, social, and environmental profile of each region, identify at-risk sectors, and articulate a strategy for creating new opportunities. The JTF embodies a place-based approach that promotes development, participatory governance, and coordination across institutions.
At its best, the JTF provides a template for how the EU can pursue a green transition that is not only efficient but equitable. At its worst, it risks becoming a fragmented and technocratic instrument, disconnected from the real needs and aspirations of local communities. As discussions on the future of the JTF unfold, it is worth analysing some preliminary evidence.
Italy, Germany, and Spain: Towards a Just Transition
To assess the fund’s effectiveness, we examined its implementation in a recent paper through semi-structured interviews with key stakeholders, including the Just Transition Platform (JTP) Coordinator at the European Commission’s Directorate-General for Regional and Urban Policy, officers from the Managing Authorities of the JTF in selected regions, and representatives of the German Trade Union Federation, an umbrella organisation of eight trade unions in Germany. This qualitative research was complemented by a desk analysis of official documents, focusing on three countries: Italy, Germany, and Spain. Each case highlights the complex interplay between the existing economic and social fabric, local institutional capacity, and national political priorities.
The analysis revealed a highly heterogeneous implementation of JTF actions, although progress has been slow across all territories. At the EU level, as of March 2024, only a small portion of the total JTF allocation had been spent, approximately six percent, with upskilling and reskilling initiatives appearing even more delayed.
In Italy, the city of Taranto (Apulia) hosts the former Ilva integrated steel plant, one of the largest and most polluting in Europe. Despite its massive environmental impact and the health risks posed to the local population, the former Ilva – since 2021, the legal name of the company has been Acciaierie d’Italia S.p.A., though it is still commonly referred to as ‘Ilva’ or ‘ex-Ilva’ – remains central to the region’s economy.
JTF resources cannot be allocated to large, polluting companies investing in the modernisation of steel plants, nor can they be used to support the closure of major polluting firms. As a result, the fund risks failing to bring about a significant transformation of the existing industrial structure – particularly in single-industry areas like Taranto – and may hinder efforts to diversify the local economy. In Taranto, the JTF’s vision of a 'just transition' appears limited. While it provides resources for environmental remediation and workforce reskilling, it falls short of supporting a comprehensive alternative economic model. The local development strategy remains fragmented, and public institutions continue to struggle with chronic capacity shortages. As a result, the fund’s transformative potential is weakened. Implementation in the area has been delayed by the late approval of both the territorial plan and the corresponding executive plan, only finalised in early 2025, highlighting the difficulties faced by local institutional and economic actors in formulating concrete projects and articulating a long-term development vision.
A second Italian territory addressed by the JTF is the Sulcis-Iglesiente region (Sardinia). In recent years, this region has seen a reduction in pollution emissions, including a 4.6 percent decrease in CO₂ from local ETS facilities, alongside the emergence of sustainable tourism – especially slow tourism and archaeological heritage – as a promising growth sector. Nevertheless, a successful reconversion plan remains critical, particularly one that addresses workforce requalification. The JTP for Sulcis identifies three strategic priorities: expanding renewable energy, promoting economic diversification, and managing the social impacts of decarbonisation. Active labour market policies receive significant support, including funds for upskilling unemployed individuals, at-risk workers, and aspiring entrepreneurs. For example, Action 1.7 of Sulcis’ territorial plan specifically earmarks training and retraining measures, offering a two-month programme with attendance allowances, targeting especially women and youth. However, the Sulcis experience underscores a broader JTF challenge: while funding allocations are ambitious (for example, €30 million for Action 1.7.1), procedural bottlenecks – such as prolonged approval phases for calls like Action 1.7.2 (soon to be published as of June 2025) – risk undermining timely impact. Moreover, further funds addressed to the same beneficiaries of the area also weaken the effectiveness of the intervention.
Germany’s JTF-relevant regions are undergoing a carefully orchestrated transition away from lignite mining and a petrol-based economy. Thanks to decades of industrial experience and strong federal support, local institutions seem well equipped to manage change. The German government complements the JTF with national funds and facilitates dialogue between trade unions, employers, and civil society through long-standing stakeholder platforms. However, several interrelated challenges remain. First, the process is criticised as top-down, with federal actors dominating decision-making and marginalising regional and local stakeholders. Second, the JTF is perceived as merely financing pre-existing measures rather than providing additional support, frustrating regional governments. Due to the tight deadlines of the JTF, requiring 70 percent of funds to be allocated by 2026, local actors have limited space for effective long-term planning. Moreover, territorial inequalities arise as the JTF focuses on lignite-dependent regions, excluding other industrial areas (for example, automotive sectors) facing similar transition pressures. Small and medium-sized enterprises (SMEs), a key target, struggle with limited capacity to identify skill needs, plan training, and shift to green technologies. These hurdles underscore the need for more holistic, regionally tailored strategies – a challenge where Spain has emerged as a leading European example.
By implementing a comprehensive Just Transition Strategy, Spain has addressed similar obstacles in regions heavily impacted by decarbonisation, such as Asturias, Galicia, and Andalusia. These areas are experiencing the socio-economic consequences of closing coal mines and phasing out coal-fired power plants, a shift that has heightened Spain’s temporary energy dependency and exacerbated existing issues like depopulation and economic fragility. In response, Spain established the Institute for Just Transition (ITJ) in 2020, under its Strategic Framework for Energy and Climate, to coordinate support through European and national funding mechanisms, including the JTF and the Next Generation EU recovery plan. The Spanish TJTP (2021–2027) and Just Transition Programme, approved by the European Commission in December 2022, build on prior national efforts.
A cornerstone of the Spanish approach is the development of 15 regional Just Transition Agreements (Convenios de Transición Justa), which outline concrete, locally tailored actions to sustain economic activity, foster diversification, and retain employment in vulnerable regions. These agreements rely on inclusive stakeholder participation, with commitments to support local development through SME investments, industrial redevelopment, environmental restoration, and workforce retraining. Institutional backing is reinforced by both the ITJ and the Institute for the Diversification and Saving of Energy (IDAE), which have coordinated efforts such as early retirement schemes for coal workers and over €338 million in funding for 400 territorial projects. The Territorial Plan also promotes renewable energy, sustainable mobility, circular economy, and the rehabilitation of historical and environmental assets. It emphasises vocational training and labour integration for displaced workers, especially women, older workers, and people with disabilities, ensuring their inclusion in the transition to a green economy.
Critical Implementation Challenges
Despite its progressive ambition, the JTF encounters several implementation challenges that risk undermining its overall effectiveness. A primary concern lies in gaps in institutional capacity across many target regions. Successful transition planning demands interdisciplinary expertise spanning from industrial strategy to territorial planning, environmental remediation, workforce development, and financial oversight. Yet, local authorities often lack the necessary staff, resources, and technical know-how to meet these complex demands. As a result, both the design and implementation of TJTPs are frequently undermined. Compounding this issue is the absence of a coherent strategic vision for the post-carbon economy. What will these regions produce in the future? At this stage, no clear answers have emerged.
While the JTF assumes that localities will identify viable sectors for development, many plans fall back on generic objectives – such as green jobs or digital transformation – without articulating concrete pathways to realise them. This lack of specificity dilutes the transformative potential of the fund and leads to fragmented, uncoordinated investments.
Additionally, the social measures embedded in the JTF are often poorly integrated into broader development strategies. Training initiatives tend to be generic and misaligned with the actual skills required in emerging industries, while income support schemes offer temporary relief without facilitating durable reintegration into the labour market.
Beyond such specific aspects, the broader geopolitical context is also reshaping the landscape in which the JTF operates. In the wake of Russia’s invasion of Ukraine, the EU has launched new initiatives like ReArm Europe, now Readiness 2030, to bolster its defence capabilities and energy independence. These programmes are expected to command significant financial and political attention in the coming years. There is growing concern that such priorities will divert resources away from green transition efforts. Moreover, the securitisation of EU policy could marginalise social and environmental objectives, reducing the ambitious goals of the JTF. Already, debates around budget allocations for the next Multiannual Financial Framework (2028–2035) suggest a pivot towards defence and security, with climate policies facing renewed scrutiny. At the same time, the economic context has changed. Rising inflation, supply chain disruptions, and monetary tightening have increased the cost of transition projects. What seemed financially viable in 2020 may no longer be realistic. Without an expansion in funding or a recalibration of goals, the JTF may struggle to achieve its mission.
Conclusions and Policy Recommendations
While the JTF offers a groundbreaking framework for a more equitable climate transition, bridging the gap between its ambitious vision and concrete implementation requires greater attention, particularly in light of a future revision of the fund. Some targeted policy interventions might be useful for this scope.
First, it is essential to strengthen local institutions by providing targeted technical assistance, adequate staffing, and comprehensive training to enhance their administrative and strategic capacity. Without capable local authorities, even the best-designed plans risk faltering in implementation.
Second, territories must be encouraged and supported in developing clear and realistic strategic objectives that are rooted in local assets and aligned with future economic demands. Vague aspirations are insufficient for driving systemic change.
Third, there is a pressing need to better integrate social and economic policies – specifically, reskilling programmes, labour market interventions, and industrial strategies must be closely coordinated to ensure that displaced workers are not merely compensated but meaningfully reintegrated into evolving and growing sectors. To this aim, the active involvement of trade unions and workers would be essential. Indeed, a more effective participation of social partners in the design of Territorial Just Transition Plans would help to better tailor development strategies to concrete local workforce needs.
Fourth, the environmental legacies of polluting industries must be addressed directly within the TJTPs through comprehensive remediation efforts and restructuring of harmful infrastructures.
Lastly, the integrity of climate funding must be protected: resources allocated for the green transition should not be diverted to meet new geopolitical priorities, which would undermine the transformative capacity of the JTF.
Ultimately, the fund is more than a financial tool; it is a litmus test of the EU’s commitment to a fairer, greener, and more resilient future. As climate pressures and global instability intensify, the urgency for decisive and inclusive action has never been greater.