The European Commission has said it wants a fund to prevent fuel poverty, amid warnings from an ally of France’s Emmanuel Macron that a proposed trading scheme to cut emissions from transport and buildings is “political suicide”.
The commission president, Ursula von der Leyen, is due to unveil the plans for a trading scheme on Wednesday as part of a sprawling set of proposals to get the EU on track to cut greenhouse gas emissions by 55% by 2030, including goals to increase use of electric vehicles and phase out petrol-powered cars by 2035.
Speaking before the launch to the Guardian and other European newspapers, she sought to assuage fears that the plan would trigger a rise in household energy bills and petrol prices. “We will make sure households with small incomes get support for mobility, driving and heating,” she said.
But the plan to create an emissions trading system (ETS) for transport and buildings has been denounced as “politically suicidal” and “a huge political mistake” by Pascal Canfin, the chair of the European parliament’s environment committee and a key Macron ally. “It’s a very bad idea,” he said
In a stark warning, he said the commission was “going to trap” lower middle class families. Hardest hit would be people in regions with poor public transport and tenants who could not pay for energy efficiency upgrades to their homes, he said. “It’s a huge political mistake, including for the European project,” Canfin said.
The French government, which takes over the EU’s rotating presidency in 2022, was forced to abandon a fuel tax rise in 2018 after a fierce backlash from gilets jaunes (yellow vest) protesters.
“If you take a household, someone starting work at 6am with no tram, no buses and no alternative to the car, and then going to the school to get the kids, the carbon price – it doesn’t work,” said Canfin, who sits in the centrist Renew Europe group, allied to the French president’s La République En Marche party.
“So you are going to have higher carbon prices and no alternatives. That’s exactly what drove frustration and anger, because people are ready to change, but in order to change they need alternatives, otherwise they are trapped.”
EU officials argue that a cap-and-trade system is the best way to tackle pollution from transport and buildings, which together account for about 58% of greenhouse gas emissions on a conservative estimate. While emissions from industry have fallen, transport pollution continues to rise.
“We have to reverse that trend,” Von der Leyen said. “One tool that has proven its worth is the emissions trading system. It says those who emit CO2 must pay for it.”
In a leaked version of its proposal, the commission admits an ETS for buildings “would likely have a regressive impact … as low-income households tend to spend a greater proportion of their income on heating”.
Bas Eickhout, a Dutch Green MEP, said the plans risked giving EU member states an excuse not to act by taking the pressure off reluctant governments to improve energy efficiency in buildings and get petrol-powered vehicles off the roads.
Revenues from the EU’s social climate fund would be “very low”, Eickhout said, casting doubt on the ability to pay for the vast scale of renovation needed in homes and electrification of road transport.
“Whether you like it or not, the European Union is weak, weakly equipped [in this area]. Social compensation comes down to a tax system and that is all national competence, so this entire construct needs much more national responsibility.”
Money for the fund would come from ETS revenues, meaning its potential value is dependent on carbon market prices. The commission proposes using one-fifth of ETS revenues for its “social climate fund”, although it would be set up with money from the EU budget.
In response to her critics, Von der Leyen said that without an emission trading system the EU would have to reach the same goals in another way. “This would come with more norms, more standards, more milestones and more taxes. I am deeply convinced that it is better to use a market-based instrument like the ETS, because that is going to give the leeway to the creativity, the entrepreneurship, the innovation strength of our businesses and our industry to deliver for the consumers.”
The EU created the world’s first international cap-and-trade system in 2005, requiring electricity companies and heavy industry to buy permits to pollute. In a move that could stoke international criticism, the EU intends to extend the ETS to all international ships docking in EU ports, having already included flights within the European Economic Area.
Foreign importers of steel, aluminium, fertiliser and other polluting industries will also face a charge at the EU border, under a long-discussed plan to ensure European industries are not undercut by more lightly regulated rivals. “Carbon has to have a price everywhere,” Von der Leyen said. “It is not fair if exporters from third countries undercut [EU industry] efforts by coming to the single market with cheap but carbon heavy products.”
The plans, expected to consist of a dozen draft laws, will have to be agreed by lawmakers in the European parliament and EU council of ministers before coming into force.