Negotiators agreed to establish the Social Climate Fund (SCF) to benefit vulnerable households, micro-enterprises and transport users that are particularly affected by energy and transport poverty. Only measures and investments that respect the principle of ‘do no significant harm’ and aim to reduce fossil fuel dependency will receive support.

Focus on tackling energy and transport poverty

EU countries will have to submit “Social Climate Plans”, after consulting with local and regional authorities, economic and social partners as well as civil society, which will cover two types of initiatives.

Firstly, the Fund will finance temporary direct income support measures to tackle the increase in road transport and heating fuel prices – with a limit of up to 37.5% of the total estimated cost of each national plan. It will also cover long-lasting structural investments, including buildings renovation, decarbonisation solutions and integration of renewable energy, purchasing and infrastructure for zero- and low-emission vehicles, as well as the use of public transport and shared mobility services.

Timeline and financing

At Parliament’s request, the SCF will start in 2026, one year before the Emissions Trading System (ETS) is extended to cover buildings and road transport (the so-called “ETS II”). If energy prices are exceptionally high, the ETS extension may be postponed by one year.

In the beginning, the fund will be financed through the revenues obtained…