As part of the revision of the EU emissions trading system (EU ETS) under the Fit for 55 legislative package, the European Commission is proposing to extend emissions trading to the building and road transport sectors. Emissions from these sectors will not be covered by the existing EU ETS but by a new, separate emissions trading system.

How much will the Member States co-finance the Fund?

Member states will be contributing nationally from their own budgets to the measures undertaken (co-financing 25%).

What about combination with Structural Funds?

Max 15% of the national investments from the Social climate plans can be combined with Cohesion policy programmes.

Co-financing: up to 25% and a maximum of 15% of the national investments from the Social climate plans can be combined with Cohesion Policy programmesiary Member State before issuing each disbursement decision.

What is it?

As part of the revision of the EU emissions trading system (EU ETS) under the Fit for 55 legislative package, the European Commission is proposing to extend emissions trading to the building and road transport sectors.

Emissions from these sectors will not be covered by the existing EU ETS, but by a new, separate emissions trading system.

To address any social impacts that arise from this new system, the Commission proposes to introduce the Social Climate Fund for 2026-2032.

What are the key elements?

  • Distributors of fuels and gas for heating will have to purchase CO2 allowances from January 1st 2027.
  • The amount of CO2 allowances available will decrease over time (-5% every year)
  • However, the price of C02 allowance will be capped at €45 until 2030
  • If the current spike in energy prices continues, enforcement will be pushed back a year.

How will it be financed?

The Fund for the period 2026-2032 will be established and finance by a part of the revenues from the ETS Buildings and Transport.

The expected amount available from the auctioning is €65 billion.

How can the different countries benefit?

Each Member State should submit to the Commission a ‘Social climate plan’ (by end of 2025), containing the measures and investments they intend to undertake to cushion the impacts of the new emission trading system on vulnerable households.

Such measures could include increasing the energy efficiency of buildings, the renovation of buildings, the decarbonisation of heating and cooling in buildings and the uptake of zero-emission and low-emission mobility and transport, and measures providing direct income support in a temporary and limited manner (max 37% of the total amount used in one Member State). .