Economica.net – Romania will receive 6 billion euros to mitigate the impact of the future carbon tax on the price of gas and motor fuels. What do the authorities have to do to get the money

The financing tool is intended to mitigate the potential negative effects on households generated by the introduction of the carbon tax mechanism ETS 2. This new mechanism for taxing fossil fuels used for heating homes and in road transport will be applied in the EU from 2027. We have already written about the effects of taxation in the two texts below:

The entire population of Romania will pay a new tax for gas consumption. Since when and by how much the bill increases

New tax on petrol and diesel! When will it apply and how much will we pay extra

The funds will have to be used for investments that support vulnerable groups, citizens in energy or transport poverty, signals the Center for the Study of Democracy (CSD), the initiator of ORSE, in a report on the effects of the application of ETS 2 on countries in the region, published today. The report “Identification of vulnerability to ETS 2 in the Central and Eastern European region based on the example of Romania and Poland. Recommendations for social climate plans’ was carried out by CSD together with non-governmental organizations in Poland (WiseEuropa) and Germany (adelphi, Berlin).

According to the report, the Member States of Central and Eastern Europe need special attention in the context of the application of ETS 2 and the Social Climate Fund. They have their own patterns of energy and transport vulnerabilities. Lower incomes than the EU average, a large stock of old and energy-inefficient buildings and reliance on polluting fuels for heating are all common features across the region. Moreover, in these countries, a large part of the population still lives in rural areas, in thermally inefficient houses, without the financial resources to insulate them and trapped in the use of inefficient heating fuels. All this leads to high levels of energy poverty.

“In Romania, households that use gas-based devices for home heating and are already energy poor will be the most vulnerable to ETS 2. But other types of households will also be indirectly impacted by the ETS 2 system. Therefore, a the big stake is to develop programs adapted to the energy needs of low- and middle-income households that are vulnerable to any price increases. These households are already in precariousness or at high risk of energy poverty if they do not benefit from long-term interventions. One of the most important tasks for the authorities in the coming period is to identify and profile the households that will be most affected. This 6 billion euro financing from which Romania will benefit will create a major 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, researcher at the Center for the Study of Democracy and co-author of the study.

What must the authorities do to get the money

In order to access the money available through the Social Climate Fund, the beneficiary states must develop, by mid-2025, clear and comprehensive action plans that identify households vulnerable to rising energy bills, as well as vulnerable transport users.

The investments will target:

• decarbonizing building heating and cooling systems or reducing the energy used by buildings, including the integration of renewable sources;
• accelerating the adoption of zero-emission mobility, including refueling and recharging infrastructure, switching to the use of public transport and developing multiple modes of transport;
• measures to provide financial support to low-income households in the worst energy-performing buildings and to address the social impact of the ETS 2 carbon price on low- and middle-income transport users.

The impact of ETS 2 on Romanian consumers

In Romania, 37% of households were in energy poverty in 2022, having spent more than 10% of their income on energy bills (electricity and heating), according to CSD modeling based on data contained in the Family Budget Survey carried out by the National Institute of Statistics. Therefore, any further increase in natural gas prices, such as that generated by ETS 2, would bring an additional cost that will be reflected in energy bills. Thus, at a cost of 70 euros / ton of CO2, the total expenses of a household will increase by up to 5%, according to the estimates contained in the report published today by the CSD. For those on average incomes, the additional expenditure will be largely related to heating.

As for transport, the biggest impact, around 4% on total expenditure, would be felt by households in the highest income deciles, according to the report published by the CSD. This result is consistent with the fact that high-income households tend to use personal cars for daily commuting more than low- and middle-income households. However, special attention should be paid to the mobility of consumers in the top income deciles, where low impact may mask limited mobility and the need for better public transport infrastructure and services.

The Romanian Energy Poverty Observatory (ORSE) is a project initiated by the Center for the Study of Democracy, a think-tank established in 2006 within the Department of Political Sciences, Faculty of Political, Administrative and Communication Sciences, “Babeș-Bolyai” University in Cluj , within which it functions as an accredited research center.