Tomorrow, the European Parliament is set to approve the Social Climate Fund, a critical component of the FitFor55 package designed to align climate action with social justice.

As part of its commitment in combating climate change and promoting social justice, the S&D Group has made significant contributions to this ambitious protective instrument to assist the most vulnerable citizens in transitioning to climate neutrality.

The fund is linked to the new Emissions Trading System (ETS), which will now include building and road transport emissions. To counter the risk of rising energy prices in these sectors, the S&D Group has advocated for ambitious measures and funding to support vulnerable households, transport users, and micro-enterprises disproportionately affected by the clean energy transition.

Parts of the revenue from the new ETS will finance the fund*, which will, in turn, be used for project-based investments to promote energy efficiency, building renovations, zero-emission mobility, as well as direct payments for low-income households at the national level.

Petar Vitanov, S&D negotiator for the committee on environment, public health and food safety, said:

"The Social Climate Fund is a significant initiative that will ensure that no one is left behind in the transition to a more sustainable economy. We are proud to contribute to this effort and work towards a climate-neutral, fairer Europe.

"Citizens with lower incomes, who already spend an above-average share on energy, will be the most affected by the inclusion of road transport and households in the new ETS. As the EU definition of energy poverty was too stringent, our Group has successfully expanded its scope to encompass transport poverty, better addressing the needs of transport users transitioning to zero-emissions mobility.

"The Social Climate Fund will respond to the actual price impacts resulting from the application of the polluter-pays principle. As carbon prices rise, the fund will also increase to address the impacts felt by vulnerable households and transport users. Thanks to our advocacy, the fund's implementation will commence next year, allowing citizens to benefit from it as soon as possible."

Klára Dobrev, S&D negotiator for the committee on employment and social affairs, said:

“Only with social justice as a guiding principle of every initiative we will be able to make the EU more resilient to various threats. In this context, we must ensure environmental justice to benefit disadvantaged communities that are disproportionately impacted by underinvestment in critical infrastructure, pollution, and climate change.

“The Social Climate Fund will be an essential tool for achieving our goal to guarantee that everyone has access to affordable sustainable transport and energy, and that no one is left behind on our path towards a society that preserves our planet for future generations. However, we call for more tools to address the unequal impact of climate change and environmental degradation on different income groups as well as the social consequences of the transformation of our societies towards climate neutrality.

“We therefore urge the Commission and EU member states to build upon the Social Climate Fund and develop green social protection schemes at the national level to strengthen social resilience against the impacts of climate change and environmental degradation. These schemes could include, among other things: social health protection for people affected by climate change; unemployment protection for workers who lose their jobs due to extreme climate or as a result of the closure of carbon-intensive industries; and funding schemes to support households in energy efficiency renovations in order to tackle energy poverty.”

* The Social Climate Fund (SCF) will be established over the period 2026-2032. In the first year, it will be financed through the revenues obtained from auctioning allowances from the existing ETS, estimated at around 4 billion euros. Once the new ETS enters into force in 2027, the SCF will be funded from auctioning ETS allowances up to an amount of 65 billion euros, with an additional 25% covered by national resources, amounting to an estimated total of 86.7 billion euros.