EU carbon price revenues sufficient to support vulnerable households on heating – report
Clean Energy Wire
The EU’s new Emissions Trading System (ETS2) would have uneven impact across countries, but it should generate enough revenue to support the bloc’s most vulnerable households struggling with higher heating costs, found a report by Bertelsmann Stiftung.
The ETS2 will implement a price for carbon emissions in transport and buildings in an attempt to reduce emissions through market mechanisms. It will result in raised costs for 103 of the 188 million households in Europe because they rely on fossil fuels for heating. While most households can absorb the extra costs, the report found, roughly 10 percent of affected households would see significant increases in outgoings relative to the household income, if the price started around 60 euros per tonne of carbon (EUR/t CO2).
Households in Germany and France would be unlikely to notice a change as they already have comparable carbon prices. In Sweden and Denmark, where current national carbon prices exceed 60 EUR/t CO2, the ETS2 may even reduce heating costs. The most vulnerable households are located in eastern countries like Poland, Hungary, or Slovakia, but also in parts of Spain, Italy, or Greece. They are characterised by lower disposable incomes and already pay a comparatively high share of their income on heating. Typically, they will be more likely to live in single- or two-family homes, have larger household sizes and include more elderly and female members.
EU countries recently decided to delay the start of ETS2 for transport and building emissions by one year to 2028 based on concerns that costs for consumers would sharply increase. Experts, however, have warned about delaying the instrument which would incentivise companies and people to make more climate-friendly investments. The EU’s Social Climate Fund is supposed to financially assist households, small companies, and others for example with direct income support, or grants for the installation of climate-friendly heating. The fund will partly be filled with revenue from ETS2. It is up to member states to decide how exactly to use money from the fund – and the remaining revenues of emissions trading.