On Wednesday 14 July, the European Commission proposed a Social Climate Fund that could potentially raise €72.2 billion at current prices (or €144.4 billion with national co-financing) to smooth out the social impact of the measures announced as part of its package to target a 55% reduction in emissions by 2030 (the ‘Fit for 55’ package).
“Our package aims to combine emission reductions with nature conservation measures and to put jobs and social balance at the heart of this transformation”, said European Commission President Ursula von der Leyen at a press briefing. For the President, economic and societal transformations can only be successful if they are “combined with market-oriented measures with a good social balance”.
As reported (see EUROPE 12760/3), the Fund will aim to make funding available to Member States to provide temporary support for investments to reduce their dependence on fossil fuels in buildings and road transport, and to tackle energy poverty for the most vulnerable households, but also for the most vulnerable SMEs and micro-enterprises.
The Fund will be financed from the revenues generated by the future ETS for the building and road transport sectors (see other news), which will enter into force at the same time as the Fund. However, while the provisional version of the regulation that we had obtained provided for a levy of 20% of expected revenue, the Commission’s proposal revised this rate to 25% of expected revenue.
50% national co-financing
The Fund will therefore generate a contribution of €72.2 billion in current prices, according to the European Commission’s calculations. The life cycle of the Fund remains the same as in the draft version and will run from 2025 to 2032 based on the 2021-2027 Multiannual Financial Framework and own resources. More specifically, the financial envelope of the Fund is €23.7 billion for the years 2025-2027 and €48.5 billion for the years 2028-2032. In this context, the Commission intends to present amendments to the MFF and the Own Resources Decision as early as next week.
An important point is that Member States will be asked - if the proposal remains unchanged - to contribute at least 50% of the total estimated cost of the plan. Each Member State will have to draw up a social climate plan by the end of 2024, similar to what has been done in the framework of Next Generation EU. These plans will then be analysed by the European Commission. If the opinion is positive, the institution will then adopt an implementing decision. Otherwise, the social climate plan will be rejected, in which case the Member State concerned will have to submit a new version of its national plan.
It should be noted that each Member State will have to appoint a “coordinator” who will be responsible for monitoring the implementation of the plans.
Poland, first beneficiary
The calculation method for allocating funds between Member States is based on a series of criteria, including: - the share of the population at risk of poverty living in rural areas (based on 2019 figures); - carbon dioxide emissions from fuel combustion by households (averaged over the years 2016-2018); - the percentage of households at risk of poverty with bill arrears (2019 figures); - total population; - the Member State’s GNI per capita (2019 figures).
According to this distribution key, Poland should receive €12.7 billion, followed by France (€8 billion), Spain (€7.6 billion) and Germany (€5.9 billion). On the contrary, Malta should receive only €5.1 million.
The shadow of the ‘yellow vests’
The European Trade Union Confederation (ETUC) has expressed its doubts about the creation of carbon markets in buildings and road transport, which it says can only fuel “a social reaction of the type seen in the ‘Yellow Vests’ across Europe”. And to add: “all this without any environmental efficiency”.
According to some studies, the unions say, a carbon price of €170/t CO2 would result in an average annual carbon cost of €373 per household for transport and €429 per household for residential buildings. However, for the trade unions, the size of the Social Climate Fund is “insufficient” to offset the impact of the two new ETS systems. A view also shared by SMEunited.
The same goes for the European Parliament. Pascal Canfin (Renew Europe, France), Chair of the Parliament’s Committee on Environment, expressed his reservations about the creation of the two new secondary markets. The cost-benefit ratio seems unfavourable to him, as these new markets open up new fronts “that have little to do with the climate”, fearing political manipulation.
In the Parliament, The Left, the Greens/EFA, a majority of Renew Europe and a large part of the Socialist delegations, but also the ECR and ID groups are said to be against the creation of these two secondary ETS markets, which risks calling into question the source for financing the Fund.
To consult the rules: https://bit.ly/3ejWbmb (Original version in French by Pascal Hansens with Damien Genicot)