The impact of the EU Emissions Trading System on households: how can the Social Climate Fund support a just transition?

Emissions from road transport and buildings are being targeted in new policy proposals by the European Commission to reach net-zero greenhouse gas emissions by 2050 and to reduce emissions by 55% by 2030 compared to 1990 levels.

The Fit for 55 policy package aims to bring EU policy instruments into line with the 55% emissions reduction target. For the first time, these proposals include carbon pricing measures for the fuels used in the road transport and buildings, adding to existing carbon pricing already in place for electricity and district heating. With energy security, high fuel prices, and various supporting mechanisms at the forefront of discussions the stakes are high to design policies that ensure a transition away from fossil fuels that is inclusive and fair. This is important not only for moral reasons, but also political and practical ones, because perceived fairness is the most important factor determining public acceptance of climate policy.

To address the social implications of the new ETS for road transport and buildings (ETS2), the EU Commission has proposed a Social Climate Fund of EUR 72 billion over eight years (2025-2032). The fund offers EU Member States additional resources to provide income support to the most vulnerable households and implement measures to reduce emissions in road transport and buildings sectors. 

The authors set out how the EU is planning to reduce greenhouse gas emissions from road transport and buildings, and discuss which groups are likely to be affected most by the measures envisioned, building on the example of Sweden. They then ask whether price signals alone drive a reduction in greenhouse gas footprints and how the proposed Social Climate Fund can contribute to a just transition for households across the EU.

The paper concludes with policy considerations for the EU and national and regional governments.