Climate Social Fund for Combating Energy Poverty

EU wants to relieve low-income households

IF – 03/2022

Last year the European Comission proposed introducing a Climate Social Fund as part of its “Fit for 55” legislative package. This meant that the EU had declared war on air and environmental pollution. Businesses regretted this because greenhouse gas emissions should be reduced by 2030 and even cut by 55 per cent when compared to 1990.

Energy prices are increasing rapidly

The Climate Social Fund is intended to protect mainly low-income households from the increase in fuel prices. People with low incomes are being especially challenged as electricity and heating costs are now higher as are their housing and living costs. People living in rural areas who are dependent on a car due to poor public transport connections are now burdened with high fuel prices.

Estimate: 31 million people will be affected by energy poverty

The rise in energy prices has occurred earlier than expected as a result of the conflict in Ukraine. This is hitting the EU particularly hard. There are still only numerical estimates of how many citizens in Europe are being affected by real energy poverty. Eurostat, the European statistical office, found that in 2021, 31 million people might be living in energy poverty. However, a uniform European definition of this “energy poverty” term still does not exist.

In fact the question as to how energy poverty should be defined remains unanswered. An attempt at a solution was presented by the two conservative MEPs, Esther de Lange (EPP/NL) and David Casa (EPP/MLT). As a correspondent they have to report on the Parliament's position regarding the EU’s Social Climate Fund.

Both proposed that the following passage should be used as a definition in their draft: "Households in the lowest tenth of the income bracket whose energy costs exceed twice the median ratio of energy costs to disposable income after deducting housing costs". Not only are the increasing electricity and gas costs compared against income, but housing costs are also taken into account.

The financial breakdown is still unclear

The transition to climate neutrality is also promoting lasting social change. The European Comission envisages 50 per cent co-financing together with the member states. However, the Parliament called for a distinction to be made between EU states with a strong budget and those with a weak one. The contribution from economically poorer states should drop to 40 per cent and rise to 60 per cent for economically stable states.

It remains to be seen exactly what the final arrangement and the benefits for citizens will look like. The final report from the European Parliament is likely to be finalised in May and it will be sent to the European Parliament's Employment Committee for voting on.