Negotiators from the European Parliament and the EU Council Presidency agreed on the final shape of the Social Climate Fund (SCF) on the night of 17-18 December, which will finally reach a total of €86 billion thanks to a 25% co-financing by the European Parliament.
In 2021 the Commission had proposed a €72 billion fund with a 50% national co-financing rule, which would have doubled the capacity of the fund.
The amount of this fund, intended to cushion the shock of the energy transition for the most vulnerable households, transport users and micro-enterprises, has been increased to €65 billion (not including co-financing), whereas the EU Council had agreed on €59 billion last June.
The SCF, which will be financed from 2027 onwards by the new Emissions Trading System extended to buildings and road transport (ETS2) (see related article), will also start in 2026, a year ahead of the date set by the EU Council.
During this transitional year, the SCF will be financed by revenues from the auctioning of 50 million EU ETS allowances, estimated at around €4 billion. It will then be financed by the auctioning of ETS2 allowances, up to an amount of €65 billion (with an additional 25% covered by domestic resources).
In concrete terms, Member States will have to submit ‘social climate plans’, after consulting local and regional authorities, economic and social partners and civil society.
They will cover two types of initiatives: - temporary direct income support measures to cope with rising road transport and heating fuel prices, meaning that support can still be given to fossil fuels; - long-term structural investments such as building renovation, decarbonisation solutions and the integration of renewable energy, procurement and infrastructure for zero- and low-emission vehicles as well as the use of public transport and shared mobility services.
The proportion of direct income support will be 37.5% of these national plans, with this share gradually decreasing.
In any case, this agreement was reached thanks to a major concession by the European Parliament on the ETS2 system: while this was not in its mandate, or only in the form of a possibility from 2029, the Parliament accepted that the ETS2 should also be extended from 2027 to households, and no longer only to commercial road transport and commercial buildings. The SCF will therefore also be used to cover support for households that are also subject to ETS2.
The European Parliament was also unable to defend supporting sustainable investments only for zero-emission technologies; the agreement reached provides that support can still go to low-emission technologies as long as they are not replaced by zero-emission technologies.
The European Parliament nevertheless managed to get the financing of the SCF to be addressed within the next multi-annual budgetary programming so as not to rely solely on external revenues. The agreement also establishes a first ever European definition of energy poverty.
The agreement will be presented to the European Parliament’s Environment Committee (ENVI) at the end of January and then to the plenary in February. Esther de Lange (EPP, Dutch), the Parliament’s co-rapporteur, welcomed the agreement which “will help vulnerable households in the energy transition, for example with vouchers for insulation or support for the transition to greener transport”.
However, the agreement was considered disappointing by some, including The Left MEP Leila Chaïbi (French), who criticised the European Parliament’s capitulation on the extension of ETS2 to households. “On the quiet, the EU is validating the increase in the price of petrol and heating for households. A betrayal of the Parliament’s mandate”, she reacted on Twitter. (Original version in French by Solenn Paulic)