The Environment Ministers of the EU Member States agreed on a General approach to the creation of a Social Climate Fund (SCF) on the night of Tuesday 28 to Wednesday 29 June, which will help Member States to take measures to mitigate the social effects of the energy transition.
The allocation was set at €59 billion in current prices over the period 2027-2032, as proposed by the French Presidency of the EU Council, compared to the €72.2 billion initially proposed by the Commission. A “good balance”, was the defence of the French minister Agnès Pannier-Runacher.
However, several countries that are hostile to the SCF have again expressed their dissatisfaction in a specific statement.
This is the case for Denmark, Sweden and Finland, which continued to complain about the SCF being too large, and comprising too much direct aid, as well as an ‘unconventional’ method of negotiating budgetary issues in the European Parliament’s Environment Committee (ENVI).
Malta also expressed its dissatisfaction in a statement, saying that the share it will receive from the SCF (€4.8 billion) will not even cover the administrative costs of implementing the Fund. Maltese citizens will be penalised by the allocation method, the country insisted.
For the French Presidency, the result is still the best possible and the last compromise accepted demonstrates a “general effort” to support the social effects of the transition to low-carbon societies.
The text agreed stipulates that the €59 billion fund will be fed by a redirection of 150 million allowances from ETS 2 (extended to road transport and buildings) previously destined for the Innovation Fund, amounting to €7.5 billion. Another part of the funding will come from a redirection of the 50 million ETS 1 allowances that were also earmarked for the Innovation Fund, amounting to €4 billion. The rest - €47.5 billion - will be financed through the traditional ETS 2 emissions trading system, with the Commission - not the Member States - now in charge of auctioning.
The French minister disputed any reduction in ambition at the expense of the Innovation Fund, arguing that the latter tool will mainly benefit the “richer” countries.
The latter have therefore made an effort to support the SCF, she said, while being able to keep more revenue from quota sales for non-SCF uses.
The compromise approved provides for the retroactive eligibility of expenditure from 1 January 2026.
A ceiling of 35% of the total estimated costs of the national plans under the SCF will be allowed to go to temporary direct income support (e.g. through tax exemptions).
The Council of the EU also deleted the 50% national contribution (co-financing) provided for in the Commission’s proposal, which would have further increased the volume of the Fund. As for the management of the Fund, part of the resources could go to shared management elements (via the cohesion funds).
The allocation method remains unchanged and is based on several criteria such as the share of population at risk of poverty living in rural areas, carbon dioxide emissions from fuel combustion by households and the percentage of households at risk of poverty with bill arrears.
Disappointment
Belgian Greens/EFA MEP Sara Matthieu said she was disappointed that the fund had been cut back and might support measures (direct aid) that do not help the climate. She also criticised the abolition of co-financing.
The NGO WWF, for its part, called it a “black day” with the “smaller and weaker” SCF in danger of becoming an empty shell, “because it does not oblige member states that want to access it to adopt net zero emission targets”.
By allowing “existing national measures to be financed by the Fund” this will also leave “less money for new initiatives”.
Dutch MEP Esther de Lange (EPP) welcomed the 35% share of direct aid, which will leave more money for structural investments, but criticised the end of co-financing. She also considered that the fact that these revenues from the Fund are externally earmarked may seem pragmatic, but “contradicts the European Parliament’s desire to create new own resources”.
A good topic for discussion in the upcoming trilogues, she commented. (Original version in French by Solenn Paulic)