Can the EU’s expanded emissions trading system ensure a just transition for vulnerable Europeans and the climate?

The European Union is expanding its Emissions Trading System (ETS2) to cover buildings and road transport, starting in 2027 or 2028. While intended to accelerate decarbonisation by applying the 'polluter pays' principle, the system risks disproportionately impacting low-income households. To mitigate this, the EU has established the Social Climate Fund (SCF) to support vulnerable groups and finance energy retrofitting. Carbon Market Watch advocates for increasing the SCF cap, strengthening energy performance standards, banning internal combustion engines by 2035, and ensuring that carbon pricing is complemented by binding national targets under the Effort Sharing Regulation.

• The ETS2 will extend carbon pricing to the buildings and road transport sectors, which currently account for 15% and 22% of the EU's direct emissions respectively. Once fully implemented, 75% of the EU's carbon emissions will be subject to the EU ETS carbon pricing mechanism by 2030.
• ETS2 operates as an 'upstream' regulation targeting fuel distributors. To prevent extreme price volatility, the system includes a safeguard where 20 million additional allowances enter the market if the price reaches €45 per tonne. The official launch is set for 2027, though it may be delayed to 2028 if fuel prices are deemed too high.
• Revenue from auctioning is split: 75% goes to member states for low-carbon transitions, and 25% (up to a €65 billion threshold) is allocated to the Social Climate Fund (SCF). To access SCF funds, member states must provide 25% co-funding and submit National Social Climate Plans (NSCPs) that prioritize dual social and climate benefits.
• Carbon Market Watch recommends several policy enhancements to ensure a just transition, including increasing the Social Climate Fund cap to €72.2 billion, banning the production of internal combustion engines by 2035 or earlier, and ensuring the Modernisation Fund is not used for fossil fuel gas expansion.

APA

Scott, E. (2023). Can the EU’s expanded emissions trading system ensure a just transition for vulnerable Europeans and the climate? Carbon Market Watch. https://carbonmarketwatch.org/2023/10/05/can-the-eus-expanded-emissions-trading-system-ensure-a-just-transition-for-vulnerable-europeans-and-the-climate/

Chicago

Scott, Eleanor. Can the EU’s expanded emissions trading system ensure a just transition for vulnerable Europeans and the climate? Carbon Market Watch, 2023. https://carbonmarketwatch.org/2023/10/05/can-the-eus-expanded-emissions-trading-system-ensure-a-just-transition-for-vulnerable-europeans-and-the-climate/.

Wikipedia

{{cite press release |last1=Scott |first1=Eleanor |title=Can the EU’s expanded emissions trading system ensure a just transition for vulnerable Europeans and the climate? |publisher=Carbon Market Watch |date=5 October 2023 |url=https://carbonmarketwatch.org/2023/10/05/can-the-eus-expanded-emissions-trading-system-ensure-a-just-transition-for-vulnerable-europeans-and-the-climate/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{scott2023can, author = {Scott, Eleanor}, title = {{Can the EU’s expanded emissions trading system ensure a just transition for vulnerable Europeans and the climate?}}, publisher = {Carbon Market Watch}, year = {2023}, month = oct, url = {https://carbonmarketwatch.org/2023/10/05/can-the-eus-expanded-emissions-trading-system-ensure-a-just-transition-for-vulnerable-europeans-and-the-climate/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }