Ease the Pain, but Where? Adjustment Costs and the Targeting of the EU Just Transition Fund

Zouhair Ait Benhamou ()
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Zouhair Ait Benhamou: EDEHN - Equipe d'Economie Le Havre Normandie - ULH - Université Le Havre Normandie - NU - Normandie Université, NU - Normandie Université, FAI - Université Le Havre Normandie - Faculté des Affaires Internationales - ULH - Université Le Havre Normandie - NU - Normandie Université

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Abstract: Meeting the European Union's Fit-for-55 target requires cutting CO₂ emissions by roughly a third relative to 2022, but the employment cost of those cuts falls unevenly across regions that differ in industrial structure and energy dependence. The EU's Just Transition Fund (JTF) which allocates 7.5 billion € under the multiannual financial framework, is meant to ease this pain, whether its support reaches the regions where the employment cost is highest has not been tested. Using a panel spatial Durbin model across 1,151 mainland EU-27 NUTS-3 regions, we estimate region-specific, spillover-inclusive elasticities of employment with respect to emission cuts, derive the cost-effective allocation of the aggregate target, and confront this benchmark with the observed geography of JTF receipts. Spatial dependence is strong (ρ = 0.685): the employment cost of decarbonization is overwhelm ingly a network phenomenon, with the total elasticity well in excess of the direct one, so that pricing spillovers raises the modelled employment exposur e of the target by an order of magnitude and reorders which regions a cost-effective planner would ask to cut. JTF support is highly concentrated (Gini ≈ 0.95) and strongly aligned with carbon exposure. Such regions are 8 to 12 percentage points more likely to be funded and receive about 2.3 times as much when funded. Conditional o n exposure, however, the Fund does not track the estimated employment cost: per job at risk, carbon -intensive regions receive only about a third as much as other funded regions. We read this gap not as waste but as the price of a NUTS-2, carbon-exposure-based design, and show that it can be narrowed by retargeting on an estimated, spillover-inclusive adjustment-cost benchmark at the NUTS-3 scale at which transition pain is actually felt.

Keywords: Just Transition Fund; decarbonization; regional employment costs; spatial econometrics; place-based policy targeting (search for similar items in EconPapers)
Date: 2026-07-14
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