EU plans new social fund to shield citizens from carbon costs - draft

© Reuters. FILE PHOTO: A power-generating windmill turbine is pictured during sunset at a renewable energy park in Ecoust-Saint-Mein, France, September 6, 2020. REUTERS/Pascal Rossignol

By Kate Abnett

BRUSSELS (Reuters) - The European Commission will on Wednesday propose a fund to support vulnerable households if its plan to expand carbon pricing to transport and buildings results in higher fuel bills, according to a draft document seen by Reuters.

The EU's executive Commission is putting the finishing touches to a bumper package of 12 climate policies it will propose on Wednesday.

One proposal - a plan to create a carbon market for fuels for transport and heating buildings - has some EU governments particularly worried, as they fear it could raise people's bills for home heating and filling up their cars.

To address those concerns, the European Commission wants to put 20% of the expected revenues from the new carbon market in a fund to support vulnerable and low-income households, according to a draft proposal, seen by Reuters on Monday. It did not confirm the expected size of the fund.

EU countries would need to draw up plans showing how they would spend the cash on measures such as renovating buildings and installing zero-carbon heating systems to lower home heating bills, or expanding use of low-emission transport, the draft said.

Member states would need to finance at least half of the expected cost of their plans themselves, and should use revenues they get from the new carbon market to do this, it said.

Low-income households typically spend a bigger share of their income on heating, and the proposal cited a 2019 survey in which roughly 7% of EU citizens said they could not afford to properly heat their homes.

The proposal said the EU budget could finance the first payments from the "Climate Action Social Facility" in 2025, the year before the buildings and transport carbon market is due to launch.

The Commission declined to comment on the proposal, which could change before it is published on Wednesday. Once it is published, EU countries and the European Parliament must negotiate the final rules.