As the climate emergency threatens to disrupt human life and ecosystems as we know them, the European Union hopes to set an example for other countries by achieving net-zero emissions by 2050. While the grand ecological transition may benefit the EU economy and enhance its quality of life, several distributional challenges will need to be addressed in order to ensure the social and economic welfare of European citizens. As a result, the EU developed the Social Climate Fund. The question that arises in this context is, how does the EU envision facilitating a just, green transition through this fund, and will it be able to effectively address the future challenges faced by vulnerable individuals and households?
The costs of climate neutrality
If one thing is certain about the green transition, it is that it will not be cost-free. The shift away from fossil fuels will likely bring about an additional financial burden on people from disadvantaged backgrounds, who often lack the resources to adapt to the use of renewable technologies. To alleviate these concerns, the European Commission proposed the creation of the Social Climate Fund (SCF), which will provide €72.2 billion for the period 2025-2032. One of the main goals of the SCF is to alleviate the potential impact of the implementation of the new Emission Trading System (ETS2) on low-income individuals and firms. The main challenge arises from the fact that ETS2 will introduce a carbon market for road transport and buildings. In this context, the SCF intends to offer Member States financial assistance in providing temporary income support and implementing measures that will reduce the dependence on fossil fuels in the medium-to-long term. The regional distribution of the Fund will also consider the uneven job impact of the green transition as some regions will have to cope with significantly more job losses in the fossil fuel sectors, for example through their shift away from coal mining.
At the national level, the proposal aims to preserve the Union’s fundamental values and principles of inclusion and non-discrimination throughout the transition to climate neutrality. The SCF, for example, acknowledges that carbon pricing can put additional pressure on women in particular, who represent 85% of single-parent families as noted by the EC. Children from single-parent families are usually more susceptible to child poverty. Similarly, individuals suffering from a disability are more at risk of poverty and social exclusion. The SCF will ensure that the well-being of the most vulnerable is taken into account throughout its implementation. As such, the SCF envisions a more equitable way for affordable and sustainable heating, housing, and mobility.
Leaving the vulnerable behind in the “just transition”?
While the goal of mitigating inequalities through the SCF is laudable, it is important to note that only a part of the Fund will go to social compensation. Béla Galgóczi, a European Trade Union Institute researcher, pointed out that the rest of the SCF is dedicated to incentivising electrical vehicles, investing in charging infrastructure and the decarbonisation of buildings. This means that a significant part of the SCF will not serve low-income households – one of the main target groups of this fund – as these social categories tend to have other priorities, such as changing their polluting vehicles into more fuel-efficient ones. If the EU does not include additional measures for the SCF, the allocation of funds to the implementation of measures and investments for reducing fossil fuel dependency risks disproportionately benefiting rich households and exacerbating already existing inequalities.
Moreover, critics of the fund point out that it is insufficient to cover the costs incurred by the poorest Europeans during the green transition. Camille Defard, a researcher at the Jacques Delors Institute, warns that higher energy bills caused by the carbon price could exacerbate challenges for European households while bringing few decarbonisation benefits. She suggests that “the Social Climate Fund as currently proposed will not be enough to mitigate the negative and unfair effects of the ETS2 on Europeans, leading to a high risk of social unrest.” Environmental advocates from WWF as well as Friends of the Earth have also pointed out that ETS2 is an unjust climate policy that could push millions into energy poverty if the mechanism is not revised. Another problem is that the money allocated for the fund – also criticised for its limitations – is predicted to reach poor families in the second half of this decade by which time it will be too late. Nonetheless, the European Commission remains adamant that the SCF will help citizens from different socio-economic backgrounds and regions.
Giving voice to the youth
GCE has been actively engaged in the debate on the SCF and other similar funds launched by the Commission to tackle the inequalities arising from the Green Deal. Our latest debate with the European Parliament on 29 November, for instance, addressed the Just Transition Fund (JTF) launched in July 2021. Similarly to the SCF, the JTF is supposed to address the inequalities emerging from the green transition, and it does so by supporting the economic conversion of those regions of the EU whose economy relies on fossil fuels. A key part of this process is the involvement of local stakeholders and actors in the transition away from coal mining activities precisely because the future of the target communities cannot be adequately shaped in the absence of civil society. However, a recent report by the GCE has found that very few member states have engaged the youth in the drafting of plans for a just transition and, in the instances where this happened, involvement has been superficial. The actual impact of the youth involvement is also hard to quantify due to a lack of transparency in the publication of the plans by member states. What is more, many young people lack the opportunities to become politically engaged in top-down decision-making, particularly in those communities where levels of public mobilisation are low.
Since the fund will reshape the socio-economic conditions of entire regions, we believe that young people are a key stakeholder, despite not being explicitly mentioned in EU legislation. Young people from the target communities need to have a say in decisions that will ultimately impact their own future and career prospects. Thus, a key takeaway from the 2021 debate with Members of the European Parliament organised by GCE was that the plans of States risk funding the closing activities of existing local businesses instead of creating new opportunities for future generations and thus ensuring intergenerational justice. GCE is actively working to make sure the meaningful inclusion of young people in decision-making is a key precondition of any financing from the JTF, the SCF and any other similar fund. If this is not assured, then these funds will perpetuate the current inequalities among generations instead of creating a prosperous future for those born in the regions most affected by the phasing out of fossil fuels.
Conclusion
Overall, the SCF is presented as a tool to address some of the social and distributional challenges that are set to arise throughout the green transition. Phasing out fossil fuels will come with a series of profound changes in living conditions and job opportunities, especially in the regions that have been historically dependent on the production and consumption of oil, gas and coal. For this reason, meaningful youth participation needs to become a pivotal component of measures related to the energy transition in order to ensure that future generations will not be left behind on the road to net-zero.
Written by Sebastian Baciu and Stéphanie Rycken
27/10/2021
