EXPLAINER-Can Europe’s new Social Climate Fund protect the poor from rising carbon costs? | Popgen Tech

* New carbon levy on heating, hitting households from 2027

* Social Climate Fund of 87 billion euros aims to soften the blow

* Experts fear EU climate measures could worsen social inequalities

By Joanna Gill BRUSSELS, Dec 22 (Thomson Reuters Foundation) – As the European Union prepares to extend controls on planet-warming carbon emissions to heating and transport, politicians are wary of the social unrest sparked in France in 2018 when the government increased taxes on diesel, which hits consumers hard.

The “yellow jacket” protests over the rising cost of living and perceived unfairness of making ordinary people pay for climate measures forced a U-turn on policy – and was widely seen as a lesson in the need to justify the green transition make. A new deal to overhaul the EU’s carbon market from 2027 by cutting emissions faster and imposing new CO2 costs on building and road transport fuels also includes a fund to cushion the blow of higher prices for households and small businesses dampen, and to help them invest in renovations. and electric vehicles.

Here’s what you need to know about the Social Climate Fund: Why is the EU setting up a Social Climate Fund?

The fund, which was only announced in July 2021, was developed amid negotiations to reform the EU’s emissions trading scheme (ETS), which limits carbon pollution from thousands of factories and power plants. The ETS works on the ‘polluter pays principle’, to force companies to reduce carbon dioxide emissions and invest in greener energy and energy efficiency by placing a price on carbon.

The scheme is now being extended to cover other sectors, to enable the EU to meet its target of reducing greenhouse gas emissions to at least 55% below 1990 levels by 2030. Under the updated ETS II scheme, which will extend to buildings and road transport fuels, there are concerns that the reforms could push up energy and fuel prices for those who can least afford them, as the higher cost of carbon is factored in.

“Not everyone will be able to afford to quickly renovate their home and/or replace their petrol car with an electric vehicle,” said Dimitri Vergne, sustainability team leader for BEUC, a Brussels-based European consumer protection organisation. “It is crucial to provide the most vulnerable consumers with financial support so that they can switch to cleaner alternatives.”

To compensate for the extra costs, the EU’s 86.7 billion euro ($92 billion) Social Climate Fund will provide direct payments to citizens and small businesses, on a temporary basis. It will be up to national governments to disburse the funding in a way that supports investment in energy efficiency in buildings and improves access to low-emission transport.

Vergne welcomed the EU’s efforts to provide more financial aid to help consumers make a green transition, but said the new fund would only represent “a fraction of the support needed”. When will it start and where will the money come from?

EU leaders and parliamentarians still need to rubber-stamp the ETS II deal, which could happen as early as 2023. The new rules will come into effect four years later. But if fuel and energy prices remain as high as they are today, the reforms could be delayed until 2028.

The Social Climate Fund will run from 2027-2032, but it may start a year early to help consumers prepare for price rises, using the proceeds from the auction of 50 million carbon allowances in 2026. After that it will be funded by up to 65. billion euros in revenue generated from the expanded carbon market and an additional 25% from national governments.

If carbon prices reach 45 euros per ton, extra emission permits will be released into the market to moderate prices. “The 45-euro ceiling to the price of ETS II allowances until 2030 will guarantee that consumers will not suffer from sudden price increases due to the market fluctuations,” Verge said.

Who will win and lose from the new climate measures? While most experts and politicians agree that the Social Climate Fund will help share the financial burden of climate action more fairly, some believe that it will not fully offset the hit to the lowest income households.

Clotilde Clark-Foulquier, a project manager at FEANTSA, a European federation of national organizations working with the homeless, said the ETS II plan “is biased from the start”. “It takes with one hand, partially redistributes with the other,” she said.

Michael Bloss, a German Green Member of the European Parliament (LEP), said that since everyone would pay the same price for emitting carbon on a daily basis, heating and driving would take a larger share of disposable income for lower earners. eat up “The impact on everyday life for poor people is therefore greater than for the rich,” he explained.

Figures from the EU’s statistical office, Eurostat, show that around 35 million people lived in energy poverty in 2020, but today’s energy crisis is expected to have pushed this higher, the European Commission says on its website. “Energy poverty is most acute in Central and Eastern Europe, as well as in Southern Europe, where the building stock is generally less energy efficient,” said Clark-Foulquier.

“So it’s very likely that a further rise in energy prices will have a grimmer impact there.” This risks a geographic divide, with richer nations such as France able to give consumers more support for the green transition, said Sanna Markkanen, a senior analyst at the Cambridge Institute for Sustainability Leadership (CISL) in the UK.

It could also create a mobility gap, leaving those without reliable access to public transport facing a fuel penalty for using their cars, she explained. The Social Climate Fund will not be enough to compensate for the increased costs of heating and transport for the most vulnerable households, she added.

“One of the biggest risks of ETS II is losing public support for high-level climate ambition in Europe. This could happen if the policy hits the lowest income households the hardest and pushes more people into energy poverty,” she said . How can the burden be shared more evenly?

Romanian parliament member Dragoș Pîslaru told journalists that other funding is available, such as the EU’s Just Transition Fund, which countries can use to protect the public at higher prices. But drawing from it will shrink investments in other areas, such as infrastructure or education.

“You can only spend a euro once,” said German MEP Bloss. Renovating green buildings must go hand-in-hand with social safeguards such as rent caps or boosting social housing stock, to keep it affordable, Clark-Foulquier said.

She urged the EU to raise more funding for lower-income groups using its next budget and the bloc’s windfall tax on energy company profits. CISL’s Markkanen said a fairer system would be to apply carbon prices more selectively – for example, only to the top half of households in terms of income, using means-testing to prevent the poorest from paying more for their energy.

This could be combined with a zip code mechanism to ensure petrol prices remain affordable for those with limited access to public transport, she said. “Climate policy must be socially just,” she added. “At the same time, without climate justice, there can be no social justice, because the impact of climate change is going to affect the most vulnerable.” ($1 = 0.9416 euros)

Originally published at: https://www.context.news/just-transition/can-eus-new-social-climate-fund-protect-poor-from-carbon-cost

(This story has not been edited by Devdiscourse staff and is automatically generated from a syndicated feed.)