The “climate social fund” aims to offset the impact of probable increases in energy prices, via direct aid and the financing of work to reduce their consumption.
The Twenty-Seven agreed on Wednesday June 29 on the amount of the European “social fund” to cushion the impact on consumers of a carbon market extended to cars and housing, making it possible to conclude an agreement on five key texts of the plan EU climate.
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Meeting in Luxembourg, the European Ministers of the Environment adopted their common position on the reform of the carbon market, the objective of zero-emission new cars by 2035, the distribution of climate efforts between States, and the imposition of targets for natural “carbon sinks” (forests, etc.), with a view to negotiations with MEPs to finalize these texts. But the proposal for a “social climate fund”, another key part of the plan presented by the European Commission in July 2021, was the subject of bitter negotiations until late at night, threatening to block the agreement on the other texts of the package.
The European plan provides for obliging fuel and heating oil suppliers to buy quotas covering their CO2 emissions on a new carbon market, as is already the case today for electricity suppliers and certain industries. Worried about the additional cost for consumers, Brussels had proposed a “social fund” fed by the revenue from the new “housing and road transport” carbon market, in order to offset the impact of probable price increases for vulnerable households, via direct aid. and the financing of work reducing their consumption.
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Agreeing on the principle, the Twenty-Seven disagreed on the size of the fund. Brussels was aiming for an amount of 72.2 billion euros for 2025-2032: far too high for a group of so-called «frugaux» (Germany, Denmark, Netherlands, Finland…). Berlin had proposed to reduce the share of revenues from the new carbon market allocated to the fund to a bare minimum, lowering it to 20 billion euros, so that a larger share of these revenues would go to national budgets. Germany finally raised its proposal to 48 billion on Tuesday. Conversely, many countries in Eastern or Southern Europe found the social mechanism largely insufficient.
France, which holds the rotating presidency of the EU, rallied the majority of states to a compromise of 59 billion euros for a more limited period (2027-2032), by redirecting 11.5 billion euros to the social fund. euros from carbon market revenue that was originally intended for the European ‘innovation fund’. This strategy has made it possible to increase the social fund without further cutting into the revenue from carbon emissions going to the States, a red line for the “frugal”. The agreement did not convince Poland, which denounced “decisions that risk undermining popular support for the climate plan”. Latvia is also concerned about a “fund too small, unable to respond to the challenges encountered”and hopes for its recovery during negotiations with MEPs.
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The States also agreed on Wednesday to gradually eliminate the free emission quotas granted to certain industrial sectors, as a carbon tax on imports from third countries increases between 2026 and 2035. The Council proposes a much more gradual rate of reduction than recommended by Brussels and MEPs. The free quotas allocated to airlines would be eliminated by 2027. Finally, the Twenty-Seven approved the inclusion of maritime transport in the carbon market, but with accommodations “transient” for winter navigation, journeys “Public service” and serving small islands.