A coalition of 29 climate and civil society organisations together with stakeholders representing progressive industry, have called on policymakers to establish a lending facility for revenue generated by the forthcoming EU Emissions Trading System for road transport and buildings (ETS2).
In a letter organised by Carbon Market Watch, Transport and Environment and Germanwatch, the signatories call on MEPs, the European Commission and member state governments to ensure that implementation of ETS2, a key element of the EU’s ‘Fit for 55’ package, is socially just while maintaining its needed climate impact.
By reducing the total number of pollution permits available for trade year by year, ETS2 aims to incentivise and facilitate cleaner technology choices for consumers, while decarbonising buildings and road transport in a cost efficient manner.
The ETS2 also provides an important source of financing for climate and social measures in EU member states by channeling its revenue through the Social Climate Fund (SCF) scheme. As the June 2025 submission deadline for Social Climate Plans – which outline how member states will spend their SCF allocation to combat transport and energy poverty – fast approaches, it is time to consider how and when the remaining ETS2 revenue should be spent to maximise the benefit to people and the climate.
Signatories believe that to better prepare member states for the implementation of ETS2, early access must be granted to revenue before the system begins in 2027.
Currently the EU-27 will only have access to a limited €4 billion of the Social Climate Fund pot in 2026, a sliver of the €86.7 billion total envisaged for the SCF between 2026 and 2032, including member state co-financing of 25%. Remaining ETS2 revenue is predicted to be worth nearly €200 billion between 2027-2032, considering a price of €45 per tonne of CO2.
Introducing a lending facility would increase the amount currently foreseen for the preparation of ETS2 by extending loans to member states, guaranteed by future ETS2 revenue for investment based on the SCF spending principles, before 2026.
Pre-access to future ETS2 revenues will allow member states to provide grants and direct investment for renewable heating and cooling systems and zero emission transport options for those in energy and transport poverty before the ETS2 impacts households.
Economic growth can be boosted through increased investment, while also encouraging acceptance of the new ETS2 emission trading system among citizens and national governments. This will ensure a smoother and more effective implementation of ETS2 and play an important role in enabling a just climate transition.
