Germany must support other EU countries in preparing for social impacts of new CO2 price – env agency

The German government should use its national experiences to support EU neighbours in preparing for the impact of the upcoming second emissions trading system on transport and heating fuel prices, said Dirk Messner, president of the Federal Environment Agency (UBA). As a key climate action instrument, the European Union decided to introduce the Emissions Trading System II (EU ETS II) for the transport and building sectors alongside its successful system for energy and industry. It is set to come into force in 2027, at which time the CO2 price could lead to significantly higher costs for fuels like petrol or heating oil across the EU, hitting low-income households especially hard. Germany considers introducing a climate bonus ("Klimageld"), a per-capita payment to citizens to return the revenues from carbon pricing. Germany already has a CO2 price for transport and heating fuels, so it is unclear whether there would be a price jump in the country, and how significant it could be. Other countries do not yet have such a carbon price and people there could be hit much harder.

"I would ask the German government to not only prepare for ETS II with a climate bonus here, but support other member states to move into a similar direction. Social funds at the European level will not offer enough public money to manage these social imbalances," said Messner at an event about the EU's climate policy future after the 2024 elections, organised by the European Commission in Berlin,. The UBA head welcomed the introduction of the second ETS but advocated for additional support especially for vulnerable groups. "Let's prepare for the social dimension of ETS II […] and generally improve on the social dimension of the European Green Deal." Messner said Germany could help to "avoid having the same dynamic we saw during the heating system discussion" last year, where the government "drafted a regulation, then realised there are social implications and then reacted ex-post." The country faced heated debates over costs and burdens in 2023 due to a controversial law to phase out fossil fuels for heating in homes.

At the same event, Leena Yla-Mononen, executive director of the European Environment Agency, called carbon pricing "one of the most effective tools" in climate action, but also emphasised the need for support for especially vulnerable parts of the populations. The EU had decided to introduce the Social Climate Fund alongside the ETS II, to provide EU countries with funds to do so, but "the funding for compensation for those who cannot keep up with the transition is not sufficient, neither at the European level, nor at the member state level," said Yla-Mononen. "The Social Climate Fund must be equipped to keep up with the pace," she said.