Eligibility of projects within the JTF framework (VKG)

REPUBLIc OF EsT0NIA MiNIsTRY OF FINANcE

Elisa Ferreira Commissioner for Cohesion and Reforms Our ref. 28.02.2024 No European Commission [email protected]

Request for clarification of eligibility of projects within the JTF framework

Your excellency, Commissioner E.Ferreira

1 am writing to you in order to ciarify an issue that has emerged during the impiementation of the EU’s just transition fund (JTF) in Ida-Virumaa, Estonia, and has to do with eligibility of projects that deal with chemical recyciing of mixed piastic waste.

Background of the issue

Last year, one of the iargest companies of the oil shale sector — Viru Keemia Grupp (VKG) —

submitted a project for funding via the JTF in Ida-Virumaa. The project aimed to enhance circular economy by deploying chemical recyciing technology (pyrolysis) to recycle p1astic waste, which was unsuitable for mechanicai recycling.

The output of the project was supposed to be pyrolysis oil, which wouid be then used to produce new plastics. The by-products of the production process inciuded pyrolysis gas, which was produced as an unavoidabie and unintentional by-product of the production process and was intended to be used as an energy source for the pyrolysis process, and soiid coke. The project wouid have resuited in over 50 new circularjobs in Ida-Virumaa.

Having carried out muitipie consultations and done due diligence on the project (inciuding the analysis ofits environmental impacts), we found that, in principle, the project was in line with the phiiosophy of the JTF. Ali in ali, ca 75% of the input material (by mass) was to be converted into circular economy products. The process aiso reduced GHG emissions by ca 60% compared to the conventionai piastic production process. However, given the project’s technicai compiexity, in October 2023 we submitted an officiai QA query to the Commission (DG REGIO) in order to ciarify the status of pyrolysis gas used within the production cycie and check project’s eiigibility.

Despite the project’s merits, in November 2023 the Commission replied that the project is ineiigible for support via the JTF. The Commission’s repiy was official and is publicly available on the Regio Wiki page (QA00263).

Suur-Ameerika 1 / 10122 Tallinn / Estonia! +372 611 3558 / [email protected] www.rahandusministeerium.ee / Reg. code: 70000272

We informed VKG of the Commission’s reply and work on the project was paused. Unfortunately, the Commission’s reply also made a dent in the reputation of the JTF in Estonia, as a clearly circular project was deemed ineligible for support via the fund.

Recent developments

In the end of December 2023 we learned about a similar project (https://biobtx.com) receiving JTF support in another EU member state. In order to clarify, why the type of project that was deemed ineligible for JTF support in case of Estonia was deemed eligible elsewhere, we sent a letter to the Commission (DG REGIO). So far, we have not received a definitive reply.

Recently, we became aware of yet another similar project receiving support via the JTF: https://packagingeurope.com/news/eu-invests-5-million-into-iteros-mixed-plastic-waste- chemical-recycling-plant/1 1016.article

In this context, we have no choice, but to ask for fair treatment between member states and clarity, as far as eligibility ofmixed plastic waste pyrolysis projects within the JTF framework.

Our request

We kindly ask you to please c1ari1’ the eligibility of mixed plastic waste pyrolysis projects within the JTF framework and let us know, whether we can continue processing VKG’s project proposal. The project is a great example of one of the largest companies of the oil shale sector making genuine efforts to reform its business model and we see it as a potential success story for the JTF. Ifsuch projects are indeed eligible for JTF support, we would like to know it as soon as possible, so that it can stili be sufficiently developed and realized within the JTF’s tight deadiines.

Yours sincerely,

Mart Vörklaev Minister of Finance of Estonia

Ivan Sergejev +372 56952026 Ivan. Sergejevfin.ee

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