The impact of the new EU Emissions Trading System on households

The document examines the socio-economic risks associated with the EU's 'Fit for 55' package, specifically the introduction of ETS2. It argues that carbon pricing alone is insufficient to drive decarbonization and may disproportionately affect low-income rural households. While the Social Climate Fund provides a mechanism for compensation and investment, the authors suggest a broader approach including digitalization, subnational capacity building, and structural inequality reforms is necessary for a fair transition.

• The proposed EU ETS for fuels for road transport and buildings (ETS2), combined with a strengthened existing ETS for electricity, is expected to create strong regressive distributional impacts on European households if not paired with mitigation policies.
• Vulnerable households, particularly those in low-population density areas at risk of poverty and social exclusion, are most at risk because they rely more on car transport and have less financial capacity to afford decarbonization costs.
• Price signals from the ETS2 may be insufficient on their own to transform socio-technical systems; effective reduction of carbon footprints requires complementary measures such as digitalization, infrastructure upgrades, and capacity building.
• The Social Climate Fund, proposed at EUR 72 billion over eight years (2025-2032), aims to provide income support and investments to reduce fossil fuel reliance, but its per capita support may be insufficient, potentially not exceeding EUR 100 in countries like Sweden.
• A just transition requires moving beyond direct financial compensation to include structural adjustment assistance, reskilling the labour force, and addressing non-economic losses such as psychological and social impacts.
• Public acceptance of climate policy is heavily dependent on perceived fairness, which is influenced more by subjective beliefs and partisan values than by the actual level of income inequality or the existence of compensation mechanisms.

APA

Strambo, C., Xylia, M., Dawkins, E., & Suljada, T. (2022). The impact of the new EU Emissions Trading System on households. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2022/06/sei-report-eu-ets-strambo-june-2022-2.pdf

Chicago

Strambo, Claudia, Maria Xylia, Elena Dawkins, and Timothy Suljada. The impact of the new EU Emissions Trading System on households. Stockholm Environment Institute, 2022. https://www.sei.org/wp-content/uploads/2022/06/sei-report-eu-ets-strambo-june-2022-2.pdf.

Wikipedia

{{cite report |last1=Strambo |first1=Claudia |last2=Xylia |first2=Maria |last3=Dawkins |first3=Elena |last4=Suljada |first4=Timothy |title=The impact of the new EU Emissions Trading System on households |publisher=Stockholm Environment Institute |date=June 2022 |url=https://www.sei.org/wp-content/uploads/2022/06/sei-report-eu-ets-strambo-june-2022-2.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{strambo2022impact, author = {Strambo, Claudia and Xylia, Maria and Dawkins, Elena and Suljada, Timothy}, title = {{The impact of the new EU Emissions Trading System on households}}, institution = {Stockholm Environment Institute}, year = {2022}, month = jun, url = {https://www.sei.org/wp-content/uploads/2022/06/sei-report-eu-ets-strambo-june-2022-2.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }