Delivering climate targets: how can EU policy support a just transition?

To reach its climate target of reducing net greenhouse gas emissions by at least 55% by 2030, the EU is currently discussing an ambitious revamp of its climate and energy legislation: the Fit for 55 Package (FF55). The overall benefit for EU societies of tackling climate change is clear. Mitigation policies do however have distributive consequences and they risk, if ill conceived, to disproportionately weigh on vulnerable citizens or leave workers in carbon intensive industries behind. This risk should not prevent policymakers from taking ambitious actions to fight climate change. Phasing out fossil fuels strongly favours the well-being of all in the long run due to the positive impact on health from improved air quality. At the same time, fighting climate change aims to preserve the well-being of future generations.

In this context, public authorities have a crucial role to play in shaping public policies and redefining the boundaries of the welfare state. These policies should prioritise the protection of vulnerable citizens against living standards reduction and the promotion of climate transition policies that improve their well-being. This is important both as a goal in its own, and in terms of preserving broad political support for climate action, which is crucial for achieving long term climate goals. There are many opportunities to do so. Revamping the fiscal system towards a stronger application of the polluter pays principle by ending fossil fuel subsidies, and the introduction, or increase, of a carbon price can be implemented in a progressive manner, if revenues are redistributed to the benefit of households. Energy prices in Europe are today at unprecedented levels in decades because of the war in Ukraine. Responding to this means that energy policies targeted at improving the livelihood of vulnerable households both in the short term (by compensating the impact of energy price increases on household’s budget) and in the long term (by making energy renovation and clean mobility accessible to everyone) are more important than ever. At the same time, an active reconversion policy in regions dependant on carbon intensive industries today is needed to prepare a future without fossil fuels and focused on new activities compatibles with a net-zero economy. A first step was taken in this direction in 2020 with the creation of the Just Transition Fund on the recognition of social challenges of the energy transition in Europe and the need to support the transformation of coal dependant regions.

In this context, the Fit for 55 Package presented in July 2021 by the European Commission should be the occasion to deepen policy actions integrating climate and social objectives. While the REPowerEU plan aims to further accelerate the European energy transition as a response to the Russian security challenge, finding the right balance between regulation changes, pricing instruments and other support policies encouraging changes in households and industry energy use. The FF55 includes many important levers to do so with important regulatory changes to accelerate the transition, but also new financial resources with the mobilisation of additional carbon revenues and the creation of a new dedicated Social Climate Fund. The proposed reforms will affect the final energy price paid by European citizens with the extension of carbon pricing to the building and transport from 2026 and a reform of the energy taxation that also aims to eliminate energy taxation loopholes. With all these measures open for decision, the EU has an unprecedented opportunity to show it can implement the energy transition at home in a just manner.