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The European Commission is going to raise the price of fuels sharply, with a view to a rapid climate transition. A social climate fund must limit the social effects.
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In ten days’ time, the European Commission will propose a comprehensive legislative package to achieve the strict climate targets for 2030: a 55 percent reduction in CO2 emissions. One of those measures is already causing a lot of controversy. Families will be confronted with higher prices, both at the pump and for heating homes.
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In concrete terms, Europe wants to make distributors of heating oil and natural gas for homes and suppliers of diesel and petrol at filling stations pay a high price for their fuels. The European Commission is aiming for a system of tradable emission rights from 2025, parallel to the existing emission trading for the energy-intensive industry.
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To make the Green Deal a success, we need to invest much more, so that everyone can participate.
Kathleen van Brempt
MEP (Forward)
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Emissions trading works with a price incentive. The scarcity of emission rights pushes the price up, forcing companies to look for less polluting alternatives. Without a similar price system for transport and buildings, Europe will not achieve its 2030 ambition, it is heard in European circles: emissions from road transport are still rising and the renovation of buildings is excruciatingly slow.
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Social Fund
Citizens are therefore not directly taxed on their fuel consumption. In this respect, the EU system differs from the new German energy tax of 25 euros on the use of fuels or from the French fuel tax of 2018 that swept the ‘gilets jaunes’ off the street. But it is almost certain that the fuel distributors will pass on their hard-earned allowances to the consumer.
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European Parliament Member Kathleen van Brempt (Vooruit) is concerned about the social impact: ‘By setting up an emissions trading system, we threaten to pass on the costs to the consumer through increased fuel prices, with no guarantee of a sustainable and affordable alternative. To make the Green Deal a success, we have to invest much more, so that everyone can participate.’
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There will be a social climate fund, specifically intended to compensate for energy poverty.
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Nevertheless, the Commission is trying to limit the bill. There will be a social climate fund, specifically intended to compensate for energy poverty and to help people who are dependent on a car. That fund will be accessible to all Member States. At least half of the revenues from emission rights for transport and buildings must go to social compensation.
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New business models
Member States are also obliged to take action against energy poverty. The national targets for reducing CO2 emissions in buildings and transport also remain in place. Because a European pricing instrument exists, those goals will also be easily achieved. On the other hand, the Commission will be stricter in assessing the national plans against energy poverty, because there is money in return.
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Energy-intensive companies and energy producers will be forced to question their business model as alternative energy sources become more attractive. If you give a signal to the market, you get a dynamic going, is the reasoning.
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On the other hand, the renovation wave offers great opportunities for SMEs in the construction sector and that is already starting to sink in. New business models are also emerging to reduce household energy bills: in Brussels and other cities, companies are already installing solar panels on other people’s roofs for free. The residents do not see these panels included in their energy bill, but the home has become more energy-efficient.
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Energy tax
In the same breath, the Commission will also seriously tighten the standards for car emissions by 2030. As a result, combustion engines and plug-in hybrids will no longer be sold in Europe in about 15 years. The tax on fuels is also being revised.
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There will always be discussion about the pace, but I think the auto sector has understood that this is the way forward.
Frans Timmermans
European Commissioner
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Extensive electrification is very important with a view to climate neutrality: electricity must therefore not only become greener, but also cheaper. New fuels such as hydrogen must also be given a competitive advantage.
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According to European Commissioner Frans Timmermans, responsible for the Green Deal. the car industry has really embraced the idea that it should become low-carbon. “There will always be discussion about the pace, but I think they have understood that this is the way forward,” he told the Financial Times.
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Wood burning
In Belgium, heating oil, natural gas and wood combustion are barely taxed, while electricity is used six times more: nowhere in Europe is the difference so great. The risk of energy poverty during the climate transition is therefore greater in our country than in other countries.
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So the Commission’s choice has an impact on how we live and move. Yet there are no good alternative solutions, says a source at the Commission. ‘If Europe were to draw up very strict regulations beyond the decimal point and impose taxes, these would of course also be passed on to the consumer. The difference is: you then have no returns. Now you have something to compensate through the proceeds from the emission rights.’
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