EU eyes social fund alongside extended CO2 pricing

The European Commission is considering setting up a "climate action social fund" to help low-income households bear the cost, if introduced, of carbon pricing in the road transport and building sectors, commission vice-president Frans Timmermans said this week.

"Part of the revenues generated from emissions trading in road transport and buildings could be put into a dedicated fund, so that member states can use those revenues to compensate the cost of this transition to vulnerable citizens," Timmermans said during a European Economic and Social Committee debate.

Recipients could use the funds to switch to zero-emission heating and cooling, or electric cars, he said.

"The climate rationale is clear, and logical" for introducing carbon pricing to incentivise reducing transport and heating fuel emissions, Timmermans said. But "any proposal on emissions trading in these new sectors, must come with a proposal for the social impact at the same time."

The commission is considering extending carbon pricing to the road transport and building sectors as part of a package of reforms aimed at bringing the EU's climate policy in line with the region's new target to cut its net emissions by at least 55pc by 2030 compared with 1990 levels, up from 40pc previously.

This could either be implemented by extending the scope of the existing EU emissions trading system (ETS), or by setting up a parallel ETS. The commission will present its proposals on 14 July.

The European Parliament's Green bloc warned last month against including housing and transport in the EU ETS, citing social injustice risks and "distraction" from policies such as energy efficiency or CO2 standards for cars.

A study drawn up by consultancy Cambridge Econometrics and commissioned by non-governmental organisation Transport and Environment indicated that there could be an increase in diesel prices of €0.50/litre by 2030, as well as a doubling of home heating bills, on average, if the EU uses only the ETS to cut emissions from the two sectors.

By Victoria Hatherick