Background of Social Climate Fund
Recently, the European Union said that it would consider setting up a social climate fund to establish a new carbon emission trading system and provide funds for member countries to improve carbon emissions. The EU’s goal is to achieve zero greenhouse gas emissions by 2050. To achieve this goal, the EU plans to reduce carbon emissions by 55% by 2030.
To provide incentives for carbon emission reduction and establish new investment opportunities, the EU proposes to establish a social climate fund to mitigate the impact of carbon pricing on the market. The Social Climate Fund will also contribute to the EU’s plan to achieve zero air, water, and soil pollution.
Application Fields of Social Climate Fund
According to the document, the social climate fund will first be applied to the construction and transportation sectors. This is because the carbon emissions of these sectors are determined by their own characteristics, and short-term emission restrictions will have a greater impact on these sectors, such as increasing business costs, and ultimately making consumers bear this pressure. For example, the study found that the 2030 carbon emission reduction target would increase household energy expenditure by 0.7% to 0.8%.
Therefore, the social climate fund is prepared to auction carbon emission trading quotas. The income from the auction can be used as compensation to consumers through the redistribution mechanism to improve energy efficiency or invest in renewable energy.
Budget Setting of Social Climate Fund
EU requires that each member submit a social climate plan before June 2024, and members should mention how to address the impact of carbon price changes on enterprises and consumers, to ensure that emission reduction policies can provide subsidies to affected individuals. The social climate fund will provide support to member countries and focus on the following areas:
Energy consumption;
Building reconstruction;
Low emission or zero emission transportation;
Reduce greenhouse gas emissions;
Reduce the number of affected individuals;
The social climate fund will start operation in 2025 and end in 2032. The overall budget is expected to be 72.2 billion euros, including 23.7 billion euros from 2025 to 2027 and 48.5 billion euros from 2028 to 2032. In addition, all member countries will also contribute funds according to the actual emissions, raising a total of about 140 billion euros.
After assessing the social climate plans submitted by members, EU will allocate funds according to their relevance, effectiveness, and consistency. Members can receive the fund twice a year in eight years and provide specific emission reduction progress. In addition, EU will conduct post evaluation to check the effect of fund investment.
Actions Other than Social Climate Fund
In addition to the establishment of a social climate fund, EU is also prepared to take other actions to achieve the emission reduction plan. For example, EU is prepared to modify the requirements for energy tax and reduce the tax subsidy policy for fossil fuels. EU is also preparing to establish a carbon boundary system to levy import taxes on countries with relatively low carbon emission requirements, to avoid the negative effects of EU policies (Some industries may open outside EU and export products to EU).
In terms of specific targets, EU requires that by 2030, the proportion of renewable energy in total energy should reach 40%, and the proportion of fuel vehicles should be reduced by 55%. In 2035, charging stations will be set every 60km on expressways, and hydrogen energy stations will be set every 150km. The EU Forest strategy requires planting 3 billion trees by 2030, reducing 310 million tons of carbon dioxide emissions. In addition, the European Central Bank has also considered including climate change into the priority regulation in the next three years.
Reference:
Social Climate Fund (europa.eu)
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