As part of the efforts to meet EU’s 2030 climate targets and to implement the European Green Deal, the EU is expanding its carbon pricing policy to cover more polluting sectors. At the heart of this is the EU Emissions Trading System (ETS) — a market-based mechanism that sets a cap on greenhouse gas emissions and allows companies to buy and sell emission allowances. Since 2005, ETS has helped reduce emissions from power, large industry and aviation by putting a price on carbon and encouraging cleaner technologies.
From 2027, a new carbon pricing will cover emissions from buildings, road transport, and fuels used in smaller industry sectors (ETS2). To address the social impacts expected from this new carbon pricing, a Social Climate Fund (SCF) has also been established, with the purpose to support vulnerable groups in the EU, especially those affected by energy poverty and/or transport poverty. Running from 2026 to 2032, the SCF will mobilise at least €86.7 billion (mainly from ETS2 revenues and national co-financing), which will be directed at investments for a green and just transition.
What is the Social Climate Fund?
The SCF supports investments in two sectors:
- Buildings: Energy-efficient renovation, clean heating & cooling – including insulation, heat pumps and solar panels for vulnerable households.
- Road transport: Zero- and low-emission mobility and enhanced public transport – from e-buses and affordable public transport to support for EV purchase/leasing and cycling infrastructure.
Member States must submit their Social Climate Plans (SCPs) for approval by the Commission, outlining measures and investments tailored to their national and local contexts. These Plans must contain milestones and targets based on the achievement of which the Commission will make payments. A summary of a mandatory public consultation should be also included with the consulted stakeholders, i.e. regional and local authorities, representatives of economic and social partners, relevant civil society organisations, youth organisations and more.
Why cities are crucial
Thanks to their experience on the ground and knowledge of local needs and challenges, the cities and their authorities will have a role to play both in the implementation of the Plans:
- Data & targeting: Cities can identify and map local vulnerabilities, ensuring that SCF financed measures and investments reach those in need;
- On-the-ground delivery: Local authorities can directly be responsible for implementing the investments on the ground;
- Stakeholder engagement: Local authorities and civil society working hand in hand on the ground, offer strong collaboration that can ensure uptake of needed investments for helping vulnerable groups;
- Information sharing: Being the closest to the citizens, cities can contribute to raising awareness, sharing information, and building trust — ensuring that climate and social measures are known, well understood, and implemented.
What cities can do now
The active involvement of local authorities in the design and implementation of the Social Climate Plans is key for the ownership of the Fund and the successful implementation on the ground.
National authorities responsible for Social Climate Plans have been appointed by each Member State. As Plans are being discussed and finalised, cities, if not yet in the in the loop, are invited to join the consultation process for their design, noting that modifications to the Plans will remain possible through the duration of the Fund.
The Social Climate Fund is a first of a kind instrument, as it brings together the climate and social perspective, encouraging simultaneously a reduction in emissions, as well as the alleviation of energy and transport poverty. By proactively engaging in national processes of SCF design and implementation, cities can turn EU climate policy into real, positive change on the ground.
For more information
- Social Climate Fund: Social Climate Fund - European Commission
- Note on good practices of public consultation for the Social Climate Fund: Support for the implementation of the Social Climate Fund - Publications Office of the EU
- ETS2: ETS2: buildings, road transport and additional sectors - European Commission
- Fit for 55 package: Fit for 55: Delivering on the proposals - European Commission
This article is a contribution from DG CLIMA, written by Alice Giro. Alice Giro works as Policy officer in the European Commission. She is part of the Unit responsible for the Social Climate Fund in DG CLIMA. In the European Commission, the Social Climate Fund is jointly managed by DG EMPL and DG CLIMA.
Details
- Publication date
- 23 July 2025