Social Climate Fund – unlocking the potential for a socially just transition

Briefing    |    21 November 2023

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One of the key initiatives of the Fit for 55 package (part of the European Green Deal) is the expansion of the Emissions Trading System to cover previously unregulated sectors, including building and transport. To mitigate potential adverse effects on vulnerable households and businesses, the package also introduces the new Social Climate Fund, which should serve as a compensatory mechanism.

This briefing summarises the most important aspects of the regulation that establishes the Social Climate Fund. It demonstrates how EU Member States can use it effectively to support the most vulnerable low-income groups and to mitigate any possible negative impacts of new climate policies. It also looks at potential synergies with already existing funds, e.g. the Cohesion Fund and the Recovery and Resilience Facility.

Since 2020, the European Union has made visible progress in revising existing legislative files and introducing new ones that are crucial to the EU’s climate goals. Yet, a fully successful decarbonisation cannot be achieved without a strong social dimension. If the societal consequences of the transition are not considered and proactively addressed, we risk perpetuating or even deepening pre-existing inequalities and excluding the most vulnerable members of society from the transition.