Deal reached on multi-billion EU fund to help the vulnerable through climate transition

A new agreement at EU level will see a new multi-billion euro Social Climate Fund set up to help families and small businesses through the climate transition.

On Saturday night, the European Council and European Parliament reached a provisional agreement to a create a new fund to help vulnerable groups experiencing energy and transportation hardship.

PN MEP David Casa, who was lead negotiator as co-rapporteur, said that the fund is the closest that the EU has ever been to ensuring a fair and socially inclusive climate transition.

“In the pipeline are billions available to member states to invest in the energy needs of millions of households and small businesses. This is positive for our energy needs, for the climate, and for our citizens.”

PN MEP David Casa with Frans Timmermans, EU Commission vice-president in charge of the European Green Deal, after the deal was struck on Sunday

The fund will help finance temporary direct income support measures to tackle the increase in road transport and heating fuel prices.

It will also cover long-lasting structural investments, including buildings renovation, decarbonisation solutions and integration of renewable energy, purchasing and infrastructure for zeo- and low-emission vehicles, as well as the use of public transport and shared mobility services.

The fund is expected to start in 2026, a year before the extension of the Emissions Trading System (ETS) to cover buildings and road transport.

The ETS allows electricity producers and energy-intensive industries to purchase “allowances” to cover their carbon emissions. The system works under the “polluter pays” principle.

At first, the fund will be financed through the revenues from auctioning 50 million ETS allowances, estimated at around €4 billion.

Once the ETS extension enters into force, the fund will be finances from auctioning ETS II allowances, or the allowances for buildings and road transport. This will amount to a maximum €65 billion, with an additional 25% covered by national resources.