The value of this fund will be of approx. €72.2 billion for a period of eight years from 2025 to 2032. The aim of the fund is to support European citizens should climate measures lead to higher bills or other unfair impacts. The Social Climate Fund includes both compensation – meaning direct payments to citizens – and financing investment in climate measures, such as insulating buildings.
The accomplishment of the European Green Deal, the new growth strategy for the European Union it will require significant financial resources and the involvement of many stakeholders. To reach the climate neutrality the reduction of direct consumption of fossil fuels is essential.
To reach this purpose, the EC drafted a proposal for a new regulation regarding the emissions trading for buildings and road transport. Through to this new normative act, the EC will provide the necessary incentive required to reduce the direct consumption of fossil fuels and thereby contribute to reducing greenhouse gas emissions.
On the long term, introducing a market price on carbon in these two sectors will definitely bring many opportunities, like new jobs and investment, besides the reduction of the emissions.
However, the immediate social impacts should not be neglected, because the increase in the price for fossil fuels, unfortunately will affect those categories of the population with low incomes, micro-enterprises and other vulnerable categories.
The severity of these impacts will be different from region to region, affecting more the Member States with a lower average income. Thus, having in view that the fuel price increased through carbon pricing will generate revenues, these could be used to support the vulnerable groups by the creation of the Social Climate Fund.
According with the draft proposal of the normative act “The Fund aims at mitigating the price impact of the new carbon pricing and should provide funding to Member States to support their policies to address the social impacts of such emissions trading on vulnerable households, vulnerable micro-enterprises and vulnerable transport users. This should be achieved notably through temporary income support and measures and investments intended to reduce in the medium to long term the reliance on fossil fuels through increased energy efficiency of buildings, decarbonisation of heating and cooling of buildings, including the integration of energy from renewable sources, and granting improved access to zero- and low-emission mobility and transport.”
According with the article 3 from the proposal, each Member State will prepare and submit a Social Climate Plan “containing measures and investments to address the impact of carbon pricing on vulnerable households, vulnerable micro-enterprises and vulnerable transport users in order to ensure affordable heating, cooling and mobility while accompanying and accelerating necessary measures to meet the climate targets of the Union”. The support will consist in:
- Reducing energy taxes or providing other forms of direct support to deal with rising road transport and heating fuel prices. This measure would be phased out by the end of 2032.
- Incentives for the renovation of buildings and for the transition to renewable energy sources in construction.
- Incentives for switching from private to public transport, car sharing or cycling.
- Support for the development of a second-hand market for electric vehicles.
The Fund shall provide financial support to Member States to fund the measures and investments set out in their Plans and the payments shall be conditional upon achieving the milestones and targets for measures and investments set out in the Plans.
From the total financial envelope for the period 2025 – 2032, Romania will have an allocation of 6 682 901 998 euro.
Before the preparation of this proposal which is a part of the ‘Fit for 55’ package, the Commission invited the Member States, industry representatives from the private sector, non-governmental organizations, research and academic institutions, trade unions and citizens to provide their feedback and opinion on the possible emissions trading for the sectors of buildings and road transport, including on its social consequences.
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