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The Social Climate Fund was proposed by the European Commission in July 2021 and revised by the Council of the European Union in June 2022.
The European Court of Auditors (ECA) has been asked by the Council to deliver an opinion on the revised proposal.
The Social Climate Fund has the potential to make an important contribution to the EU achieving climate neutrality by 2050, and is intended to address the social consequences of rising energy prices.
Auctioning EU Emissions Trading System (ETS) allowances from the buildings and road transport sectors will provide financing for the Fund of up to €59 billion in the 2027-2032 period. However, since the Commission has not yet adopted the associated procedures, it is unclear how the revenue so generated should be quantified and managed.
The auditors emphasise that prices for emission allowances tend to fluctuate significantly, which makes them a relatively volatile source of EU revenue.
It is also unclear when the revenue will be available, and whether it will be commensurate with the Fund’s ambitious objectives and corresponding investment needs. The lack of a specific impact assessment for the proposal adds to this issue.
The proposal for a Social Climate Fund builds on basic features from the Recovery and Resilience Facility (RRF), such as national plans, complementarity with other EU and national funds, and compliance with the ‘do no significant harm’ principle.
However, the auditors consider that certain weaknesses they already highlighted for the RRF are also relevant for the Social Climate Fund:
- the risk of double funding and overlapping objectives with other public instruments and financing;
- insufficient attention to value for money due to added complexity and administrative burden. The new resources provided by the Fund are likely to add to the pressure on Member States’ ability to spend, and many of them are already facing delays in absorption of EU funds;
- potentially weak links between payments and fulfilling the intended result. For example, the Commission will mainly assess the likelihood of achieving green objectives when evaluating national plans, less so when it assesses payment requests;
- gaps in performance assessment, as well as in assurance and accountability, may not guarantee the protection of the EU’s financial interests.
