THE STATE OF THE EUROPEAN UNION. Reforming Europe in a time of war

THE STATE OF THE EUROPEAN UNION 36 Climate and Social Policy as Two Sides of the Same Coin Comprehensive reforms in the climate and energy sectors have a significant impact on social issues, for better or for worse, depending on how they are designed. There is now widespread agreement on this fact, even in Brussels. However, the social aspect is often not yet adequately addressed in EU legislation. Nevertheless, awareness of social issues and political risks has increased in recent years. In this sense, in the summer of 2022, the Council adopted a recommendation for a fair transition to climate neutrality. According to it, the people most affected by the climate-neutral restructuring of the economy are to be supported. The Member States are also called upon to give greater consideration to employment policy and social aspects of climate-neutral conversion in the future. Tax and social systems are to be fairer, in particular by shifting the tax burden away from the labour factor. How- ever, there has been a lot of ‘should’ but very little ‘must’: the Member States are not legally obliged to implement these measures. As is so often the case, these are only recommendations. However, at the same time there has also been pro- gress. In June, for example, the European Parliament passed legislation to set up a Social Climate Fund (SCF). It is intended to help those most at risk of energy and mobility poverty to bear the higher costs of the ener- gy transition. The SCF is directly linked to the European Emissions Trading System 2, which includes buildings and transport. The European Emissions Trading System (EU ETS) has been the EU’s central climate instrument since 2005. To date, the aim has been to reduce green- house gas emissions from the participating energy sec- tor and energy-intensive industry and, since 2012, of intra-European air traffic. The current expansion of emissions trading was to initially include all emissions – private and commercial – from trade and transport. But in the first half of 2022, criticism grew. In view of rapidly increasing energy pric- es, the members of Parliament balked at imposing fur- ther burdens on the population. Therefore, initially only commercial buildings and commercial traffic are to be included. Private households and private transport are to follow in 2029. This compromise convincingly illustrates the dilem- ma in which European parliamentarians currently find themselves. In order to achieve the 1.5 degree target, transport and housing should have been comprehensive- ly included in emissions trading as a matter of urgency. In contrast to industry, emissions in the transport and build- ings sector have hardly fallen in recent years. A steering effect via a gradual increase in the price of CO2 would therefore be thoroughly desirable. However, the justified fear of the economic and social consequences caused by a further price increase made such a step seem politically risky and socially insensitive. The Social Climate Fund is intended to redistribute more of the revenue from the auctioned allowances to poorer Member States, and in particular, to low-income households and affected micro-enterprises. According to current planning, the fund has a term of eight years. It will come into force in 2024. By 2027, the fund’s financial volume is expected to be around €16.39 billion; by 2032, the amount could rise to €72 billion. However, whether this sum will actually be reached depends on the next EU budget negotiations as well as on the question of wheth- er private transport and buildings will also be included in the ETS in the future. In order to gain access to the SCF, Member States must submit national social climate plans. In addition, they must also match the funds with an equal amount from national resources, including national revenues from the ETS 2 for road transport and buildings.The funds can be used for temporary direct measures to stabilise income, such as reducing energy taxes and fees to coun- teract the increases in transport and heating prices; and investing in building renovation, renewable energy, and the shift from individual travel to public transport, car- pooling, car sharing, and active transport such as cycling. Measures can include tax incentives, vouchers, subsidies, or interest-free loans. Moreover, in the national social cli-