Making the ETS 2 and Social Climate Fund Work

Europe’s new carbon pricing mechanism, the ETS 2, will become a central a tool to foster the low-carbon transition and meet ambitious climate targets in the buildings and road transport sectors. On its own, the carbon price risks that vulnerable sections of European society will be negatively and unfairly burdened by rising energy costs. This is precisely why the ETS 2 is being paired with the Social Climate Fund, a mechanism to collect and channel revenues to support those who need it. 

However, for the Social Climate Fund to be a success, it must be implemented well.

This Policy Brief formulates the key starting points for policymakers now faced with developing their national Social Climate Plans. It is based on the Policy Report “Putting the ETS 2 and Social Climate Fund to Work: Impacts, Considerations, and Opportunities for European Member States”. 

For national policymakers, the challenge has three key aspects: 

1. ASSESS NATIONAL VULNERABILITY PATTERNS

• Select and define a set of vulnerability indicators

• Begin with already available national-level data

• Work to improve data sources and indicators over time

2. DESIGN A SET OF POLICY MEASURES

• Integrate local-level data, indicators, and delivery channels

• Start simple and improve accuracy over time

• Build on good-practice examples

• Take a holistic approach to policy design

3. STAKEHOLDER ENGAGEMENT

• Stakeholder consultation should start early

• Actively engage municipalities

• Hold regular meetings with stakeholders

• Develop a communication strategy