Impact of extended emissions trading on vulnerable households

Subject: Impact of extended emissions trading on vulnerable households

The Commission’s proposal for a Regulation establishing a Social Climate Fund (COM(2021) 568 final) provides a definition of the notion of ‘vulnerable households’.

In that proposal and the accompanying impact assessment the Commission states that ‘the increase in the price for fossil fuels will have significant social and distributional impacts that may disproportionally affect vulnerable households’. This comes as a consequence of the inclusion of buildings and road transport in the emissions trading system in the context of the revision of Directive 2003/87/EC.

In view of the above:

1. What criteria did the Commission rely on for its definition of ‘vulnerable households’, in particular for its definitions of the notions of ‘energy poverty’ and ‘lower middle-income households’?

2. Is the Commission in possession of disaggregated estimates for the individual Member States, Portugal in particular, showing the number of people who fall within the category of ‘vulnerable households’, i.e. the number of people belonging to households in energy poverty or households, including lower middle-income ones, that lack the means to renovate the building they occupy?

Answer given by Ms Simson on behalf of the European Commission

(2 May 2022)

While defining vulnerable households the proposal for the Social Climate Fund refers to the definition of energy poverty, which is provided for the first time in the EU‐wide context by the proposed recast of the Energy Efficiency Directive (1).

The definition has the intention of creating a common framework for the Member States to capture their relevant national, regional and local circumstances and the combination of root causes of energy poverty (low income, poor energy efficiency of homes and high energy expenditure (2)).

The problems addressed by the Fund and the possible solution were analysed in two consecutive impact assessments on the Climate Target Plan (3) and the revision of the emissions trading system (ETS) Directive (4).

The latter acknowledged that concerning buildings, the new ETS would likely have a regressive impact on disposable income, as low- income households tend to spend a greater proportion of their income on heating.

Eurostat energy poverty indicators, identified by the Commission in its 2020 Energy Poverty Recommendation (5) contain information per Member State, including Portugal.

Income and Living Conditions (6) and Household Budget Survey (7) databases offer homogeneous statistics to estimate income and living conditions of European households and Member States may use additional Eurostat indicators deemed complementary to strictly energy poverty indicators, in addition to disaggregation available through the use of microdata.

⋅1∙ COM(2021) 558 Proposal for a directive of Energy Efficiency (recast), t he definition introduced in Article 2(49) reads as follows: ‘energy poverty’ means a

household’s lack of access to essential energy services that underpin a decent standard of living and health, including adequate warmth, cooling, lighting, and energy to power appliances, in the relevant national context, existing social policy and other relevant policies. ⋅2∙ As laid out in Directive (EU) 2019/944.

⋅3∙ SWD(2020)176.

⋅4∙ SWD(2021)601.

⋅5∙ Commission Recommendation (EU) 2020/1563 of 14 October 2020 on energy poverty C/2020/9600

⋅6∙ https://ec.europa.eu/eurostat/web/microdata/european-union-statistics-on-income-and-living-conditions

⋅7∙ https://ec.europa.eu/eurostat/web/microdata/household-budget-survey