Romania must use Social Climate Fund to reduce energy and transport poverty – report

Romania, which will be one of the biggest beneficiaries of the Social Climate Fund (SCF), must use the funds for investments that support vulnerable groups and citizens in energy or transport poverty, according to a report by the Centre for the Study of Democracy (CSD).

Romania will receive 9.25% (€6 billion) of the €65 billion Social Climate Fund financing package between 2026 and 2032.) Funding is intended to mitigate the potential negative effects of the ETS2 carbon tax mechanism on households, particularly those vulnerable to energy or transport poverty.

The report by the CSD, in collaboration with Wise Europe in Poland and Adelphi in Germany, underlines the need to direct these funds towards investments that support vulnerable groups. Central and Eastern European countries, including Romania, are identified as requiring special attention due to their high levels of energy poverty.

In Romania, households that rely on gas for heating are more vulnerable to the ETS 2. The forthcoming carbon tax scheme could lead to additional costs reflected in energy bills, potentially exacerbating existing energy poverty. The CSD report estimates that a carbon tax of €70 per tonne of CO2 could increase total household expenditure by up to 5%.

But other types of households will also be indirectly affected by the ETS2 system, so “there is a great need to develop programmes adapted to the energy needs of low and middle-income households, which are vulnerable to any price increases,” says Andreea Vornicu, one of the report’s authors.

This funding will create “a great opportunity to reduce the high rate of energy poverty recorded at the national level if the vulnerable categories of consumers are correctly identified”, said Andreea Vornicu.

According to official data from the National Institute of Statistics, 37% of Romanian households were in energy poverty in 2022.

While low-income households are less directly affected due to their reliance on non-ETS 2 fuels such as wood, they may still experience indirect impacts through increased demand and prices for alternative fuels.

Middle-income households, which lack significant economic flexibility, will be directly affected by ETS 2-induced price changes and require government support to switch to low-carbon heating solutions and implement long-term measures such as building upgrades.

The report predicts that households with the highest incomes will be most affected in the transport sector, with an increase in total expenditure of around 4%.

One of the most important tasks for the authorities in the coming period is to “identify the households that will be most affected”, Andreea Vornicu concluded.

(Catalina Mihai | Euractiv.ro)

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