João Pedro Gouveia as session chair of the "ETS-2 Distributional Impacts, Energy Poverty, and the Social Climate Fund (HYBRID)" at the 7th World Congress of Environmental and Resource Economists (WCERE) in NOVA SBE, Carcavelos.

Co-chair: Jakub Sokolowski, University of Warsaw, Poland

From 2027, the European Union will introduce a dedicated emissions trading system for buildings, road transport and additional small-emitting sectors (often referred to as ETS-2). The new system will price carbon in heating and transport fuels upstream, with first auctions expected around 2027 and full compliance obligations from 2028. This will extend carbon pricing to a significant portion of household energy use and mobility, with potentially regressive effects unless revenues are carefully reinvested.

To cushion vulnerable groups and sustain political acceptability, the EU has established the Social Climate Fund (SCF) under Regulation (EU) 2023/955. The SCF will operate from 2026 to 2032 and is expected to mobilise at least €86.7 billion, combining EU resources and at least 25% national co-financing, primarily financed by revenues from ETS-2 allowance auctions. The Fund will support both targeted income support and structural investments (e.g. renovation, clean heating, low-carbon mobility) for vulnerable households, micro-enterprises and transport users.

This session addresses distributional incidence, inequality, energy poverty, and the design of public finance. It brings together:

Micro-simulation and indicator-based analysis of who is “energy poor” in the EU and how different measurement choices (2M, M2, arrears, expenditure-based metrics, etc.) affect targeting.



Evidence on ETS-2 impacts and revenue recycling from country case studies (with a focus on Poland, the biggest beneficiary of the Social Climate Fund).



Insights from the Energy Poverty Advisory Hub (EPAH), the EU’s central platform on energy poverty, supporting local authorities with diagnosis tools, indicators and implementation guidance.



A policy design perspective on Social Climate Plans and SCF implementation from the European Commission’s DG EMPL.



A market and delivery perspective from the buildings sector, focusing on supply chains, financing, and implementation bottlenecks in scaling renovations and heating system upgrades.

We combine academic evidence, Commission analysis, advisory practice, and industry experience. The session aims to help environmental and resource economists engage with ETS-2 and the SCF as a policy laboratory for designing and evaluating distributional policies.