The Social Climate Fund (SCF) is meant to be a tool that increases the effectiveness and mitigates the welfare impact of the expansion of carbon pricing to buildings and road transport through the introduction of the Emissions Trading System 2 (ETS2). The SCF will help vulnerable households and transport users respond to higher fossil fuel prices by enabling investments into low-carbon solutions. It can also provide temporary direct income support to cover the initial impacts on vulnerable groups until the long-lasting investments take effect, but this is not the main support mechanism.
Importantly, the SCF interventions need to primarily address potential impacts related to the introduction of ETS2. This limitation of scope, as well as that of budget, mean that this instrument cannot address the overall energy poverty problems of a country. However, additional ETS2 revenues (or other funding sources) can be used meaningfully toward similar aims outside the direct scope of SCF, including through complementary financing mechanisms.
In Romania, the highest incidence of ETS2 will be limited to the minority of households connected to the natural gas grid, who are generally outside the lowest income brackets. For a household with an average monthly consumption of natural gas of 100 cubic meters, a carbon price of 45€/t results in a monthly impact of around €8.2/month.
While outside the direct scope of the SCF, the numerous rural households who use woody biomass for heating, while not directly affected by ETS2, are expected to transition to more convenient heating sources – providing help for them to leapfrog to low-emissions solutions represents an opportunity. In urban areas, despite the recent decline, district heating remains a relevant option that could be enabled by the SCF.
The impact will be more widespread on transport users, where fossil fuels covered by ETS2 dominate the fuel mix. For a carbon price of 45€/t, the simulated price increase is 0.12€ per liter of diesel and 0.10€ pe liter of gasoline. Improving access, quality and emissions performance of public transport and access to low-emissions vehicles are viable options for the implementation of the SCF.
All in all, compliance with the SCF will require significant efforts, data collection, mapping of existing programmes, and justifications for additional measures and investments, as well as credible milestones and targets. However, this process also comes with significant opportunities.
Recommendations for Romanian decision makers
- Seize the opportunity of the SCF to tackle energy (and transport) poverty more systematically in Romania. The effort needed for collecting data and designing the SCPs will be substantial and could, with the help of SCF or other EU-funded technical assistance and capacity building programmes, be used optimally by rethinking the climate-energy-social policy interactions, by acquiring and managing more data, reducing the exclusion error, and tackling the multiple and concurring sources of vulnerability.
- Design SCP interventions in synergy with other funding instruments, either existing or potential. There are many possible interactions between SCF and the NRRP, Regional Programme, Sustainable Development Programme, the Just Transition Programme, and the Environmental Fund Administration. When needed interventions do not fit within the scope or budget of the SCF, they can be complemented through other funds.
- Enable wide and meaningful consultation to ensure the measures and investments are correctly tailored to the needs of vulnerable groups and are designed in an inclusive manner with beneficiaries and local authorities.
Ana-Maria Niculicea, EPG Researcher
Ana-Maria Niculicea is a Researcher at Energy Policy Group, in the Clean Economy programme. She coordinates research activities on climate governance with a focus on enhancing national climate governance and the social acceptance of the transition to a low carbon economy. Additionally, she conducts research on social acceptance of CCUS technologies in the Horizon2020 ConsenCUS project.
She holds a MSc in Politics, Economics and Philosophy from University of Hamburg and a bachelor’s degree in Political Science from National University of Political Studies and Public Administration.
Contact: ana.niculicea@enpg.ro