[23.08.21] Guest article-Fit for 55 and Energy Poverty: Will the new package help energy poor?

Guest Article by Zita Kakalejcikova (Habitat for Humanity Intl)

On the 14th of July 2021, the European Commission presented the revisions and initiatives linked to the European Green Deal climate actions. In particular, they introduced the climate target plan to reduce net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels, under the new Fit for 55 package.

Clearly the European Union representatives feel the urge and pressure of the very visible effects of the climate change that are happening right in front of our eyes. Europeans have always been the frontrunners when it came to the fight against Climate Change. The European Union sees our generation to be the last to still have the chance to act in time, even though many scientists claim it might be too late. Nevertheless, the European Union sees it as no longer an aspiration but rather an obligation to do what is possible to reverse the effects of the climate change.

This new proposal builds on this premise and on policies and legislation the European Union has already put in place – the European Green Deal. With the announcement of the European Green Deal, the Commission President Ursula von der Leyen pledged to put forward a comprehensive, responsible plan to increase the European Union’s emissions reduction target for 2030.

As the European Commission communicates, the Fit for 55 package consists of a set of inter-connected proposals, which will drive towards this goal of ensuring a fair, competitive and green transition by 2030 and beyond. Overall, the package strengthens eight existing pieces of legislation and presents five new initiatives, across a range policy areas and economic sectors: climate, energy and fuels, transport, buildings, land use and forestry.

Of course, all of these areas are extremely important and indeed even interconnected and together would contribute to CO2 reductions. However, as Habitat for Humanity is a housing organization that seeks for everyone to have a decent home, it is important for us to see how this package will impact on the lives and homes of vulnerable energy poor citizens.

We very much welcome that the new package sees this as an opportunity to reduce systemic inequality, considers the vulnerable citizens and aims to address energy poverty. The EU Commission’s Fit for 55 package includes significant measures to strengthen energy efficiency laws to help tackle energy poverty.

As a positive development, the European Commission plans to set up a new Social Climate Fund that will provide dedicated funding to Member States to support European citizens most affected or at risk of energy poverty. The Social Climate Fund will provide €72.2 billion in current prices for the period 2025-2032 in the EU budget from the new Emissions Trading System. Its volume will in principle correspond to 25% of the expected revenues from the new emissions trading covering the building and road transport sectors, starting one year before carbon pricing comes into effect in order to be ready for the change. It will be combined with national contributions of at least to 50 percent.

The Commission claims the Fund will help mitigate the costs for those most exposed to fossil fuel price increases during the transition and enable Member States to support vulnerable low and middle-income households affected by the impact of the extension of emission trading to building and transport.

Even though this is a sincerely well intended plan to secure just and fair transition, many organizations fear that the amount of funding on the table will be insufficient to deliver wide-spread renovations and renewables for energy poor households. Additional fear is that it will also fail to offset the disastrous impact that the new ETS might have on energy bills, especially for low-income Europeans who could see their energy bills skyrocket.

To put it in the light, in the new package the Commission proposes to start applying emissions trading from 2026 for road transport and buildings. The European Commission sees applying emissions trading to fuels in the buildings sector to help bring cleaner heating fuels to the market, shorten payback periods for investments in renovation and accelerate fuel-switching in heating and cooling in existing buildings. On the other hand, many organizations working with poor, vulnerable and energy poor citizens fear that as a result of emitting CO2 to produce fuel for heating and transport will become more expensive as the European Trading Scheme might have the same effect as a carbon tax.

Making carbon more expensive is one of the ways to incentivize the shift towards clean energy, however the evidence shows that low-income households who in Eastern Europe might many times mean homeowners in multi apartment buildings, or in other parts of EU the residents of social housing, will end up paying more for their energy without having the possibility to switch to a cleaner source of heating.

The sector’s experience has also proved that the contribution of energy efficiency to decarbonisation can sometimes be limited as users’ behaviour and the carbon content of heating and cooling also plays a major role. An optimal situation would require a balance between energy efficiency, decarbonisation of heating and cooling and accompanying measures for residents.

Habitat for Humanity along with 9 partners is running a H2020 project ComAct. ComAct aims to make impactful energy-efficient improvements in multi-family apartment buildings in the Central and Eastern European (CEE) region and in the former Soviet Union republics (CIS region) affordable and manageable for energy-poor communities as well as to create the necessary assistance conditions for lifting them out of energy poverty. ComAct does this through working will all relevant actors in the ‘eco-system’ such as policy makers, financial institutions and homeowners themselves, intervening in three dimensions:

  • Empower and activate the communities of homeowners’ associations
  • Develop and adapt financial tools that provide financing for low-income families
  • Optimise technical solutions that provide most favourable cost-benefit ratio for the energy efficient improvements in multi-family apartment buildings.

Through this, ComAct aims to contribute to EU and national targets related to energy poverty, reduction of greenhouse gases emissions, save energy and increase investments in in sustainable energy.

Reducing the effects of climate change is without doubt the obligation of our generation. It is extremely important that the European Unions takes this task seriously and acts. It is very much welcome that the Green Deal and Fit for 55 package policies are thinking of the most vulnerable ones and it will be even more important going forward as these policies unfold, to carefully observe and consider all the possible negative effects that these transformations might have on the poor and most vulnerable population and act upon them.