TL:DR – European Investment Bank mobilises €3 billion to support vulnerable households amidst EU carbon tax changes this week.
• The European Investment Bank (EIB) is mobilising €3 billion to address potential energy bill increases from the upcoming EU carbon tax on road transport and buildings, as stated by the European Commission.
• The funds are intended to support low- and middle-income households during the transition, according to Climate Action Commissioner Wopke Hoekstra.
• EU countries must use these funds for the social climate fund and measures to mitigate price increases linked to ETS2, as per EU regulations.
• The new carbon tax has been delayed until 2028 due to concerns about its social impact.
EIB to frontload €3bn to mitigate impact of EU’s carbon tax on road transport and buildings
The European Investment Bank (EIB) is mobilising €3 billion to mitigate anticipated rises in energy bills due to the European Union’s planned carbon tax on road transport and buildings, according to a press statement from the European Commission. This action responds to pressure from the European Parliament, which has insisted that these funds be activated ahead of the new tax, effective from 2028, to aid vulnerable populations during the transition.
The immediate significance of this funding is to support low- and middle-income households as the EU implements measures aimed at reducing carbon emissions. Under the new system, energy firms will have to purchase permits for their carbon outputs, which is likely to increase fossil fuel prices, ultimately inflating energy costs for consumers.
EIB Funding to Support Vulnerable Households
Climate Action Commissioner Wopke Hoekstra stated that the €3 billion will be allocated to EU member states to assist households in the transition towards cleaner energy solutions. “The aim is to accelerate the deployment of solutions that reduce energy and transport bills, such as heat pumps and electric vehicle schemes,” he said.
The EIB will provide the funds to member states on the condition that they commit to returning revenue from the Emissions Trading System 2 (ETS2) to the EU’s climate bank. This new funding follows an earlier €4 billion allocated to the Social Climate Fund, bringing the total available to €7 billion before 2028.
Concerns Over Potential Economic Burdens
European lawmakers have voiced concerns that the implementation of the new carbon tax could become a financial burden for citizens. They emphasised the need to showcase positive examples of the transition before the tax takes effect. “It is very important that people see the possibilities before the price kicks in, so that we have good examples everywhere in Europe,” a statement from Members of the European Parliament (MEPs) said.
A think tank, EPICO, commented that while EIB’s frontloading is “not a breakthrough”, it may help EU countries prepare for the social impacts of ETS2. “Without sufficient early investment, ETS2 remains politically fragile,” warned EPICO’s executive director, Bernd Weber.
Implementation Delayed Until 2028
The EU’s carbon tax, originally scheduled to implement in 2027, has been postponed to 2028 due to concerns over its social impacts. Countries such as Poland, Hungary, and the Czech Republic have expressed opposition to the tax’s expansion, arguing that they are unprepared to comply.
Electric mobility advocates have cautioned that delays could lead to continued reliance on more polluting vehicles. They argued that the extra year should be used effectively to ensure a fair and sustainable implementation of ETS2.
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