Understanding the European Social Climate Fund: An overview of the issues and challenges
As part of its commitment to achieve carbon neutrality by 2050, the European Union has launched a package of proposals known as “Fit for 55”. The aim of these proposals is to reduce the EU’s carbon emissions by 55% by 2030. Although these directives are primarily aimed at governments and businesses, they could have a significant economic and social impact on the daily lives of Europeans, particularly those most dependent on fossil fuels, including the most disadvantaged households. In response to these challenges, the EU has set up the Social Climate Fund. This fund aims to mitigate the social impacts of measures taken to combat climate change and to support the populations and economic sectors most likely to be affected by the transition to a low-carbon economy.
Objectives and resources of the Social Climate Fund
The aim of the Social Climate Fund is to mitigate the social consequences of the European Union’s environmental policy by avoiding a sharp rise in the price of energy bills for consumers (individuals and micro-enterprises) as a result of the increase in the cost of fossil energy products due to the introduction of a new European carbon market.
This new instrument, which has been the subject of fierce debate between the Member States and the European Parliament, has been allocated 65 billion euro by the EU, to be supplemented by national governments on their own territory, to reach a total of 86.7 billion euro over the period 2026-2032. It will be financed by the sale of carbon quotas on the new market set up at European level.
How the Fund works
With a budget of more than 10 billion euro a year, the Fund will become a major instrument of the European Union, complementing existing measures for economic, social and territorial cohesion (ESF+, ERDF, etc.). The Fund will be implemented by the Member States, each of which will be required to draw up a Social Climate Plan with the approval of the European Commission. The aim of this plan is to accelerate the reduction of CO2 emissions through social policies.
The Fund will offer financial support in various forms. It will be able to support long-term investments in decarbonisation, the development of renewable energies, the introduction of infrastructure for low-emission vehicles and the renovation of buildings. In addition, it will finance temporary direct income support measures to help vulnerable households cope with rising road transport and heating fuel prices. The main objective of this financial instrument remains to support investment in housing and mobility in order to reduce inequalities.
Points to watch around the Social Climate Fund
Although the legislative framework has been adopted for 2022, the implementation of the fund is the subject of criticism, and its positioning between two multiannual financial frameworks (2021-2027 and 2028-2034), as well as the renewal of the institutions, could compromise its smooth operation.
Indeed, the forthcoming elections could lead to a revision of the legislative texts adopted during this term of office, particularly with regard to the ecological and social aspects. The form and scope of the fund could thus be revised and become the subject of new negotiations between the Member States and the Parliament, as part of the discussions on the next EU budget.
Conclusion
The Social Climate Fund is seen as an important instrument for reconciling ecological and social issues in the various Member States. From 2026, when it comes into effect, it will play a crucial role in housing and mobility policies, improving the social conditions of Europeans while putting Europe on the road to carbon neutrality in 2050.
