Nataly Machado (PhD Candidate at the School of Law of the University of Minho, FCT research scholarship holder – 2023.04074.BD) and Cecília Pires (PhD Candidate at the School of Law of the University of Minho, FCT research scholarship holder – 2023.01072.BD)
As part of the Fit for 55 package – the set of measures adopted by the European Union (EU) to reduce greenhouse gas emissions by at least 55% by 2030 and to enable the goal of climate neutrality by 2050 – the EU Emissions Trading System II (ETS2) was created: a new emissions trading system, separate from the existing EU ETS, which will cover and address CO₂ emissions from fuel combustion in buildings, road transport, and additional sectors.[1]
According to calculations by the European Commission, more than 34 million people in the EU are already affected by energy poverty.[2] In 2023, one fifth of the resident population could not afford to keep their home adequately heated. Across the EU, this proportion reached its peak in Portugal and Spain (20.8%). In 2024, the proportion in Portugal decreased to 15.7%, but remained higher among the at-risk-of-poverty population (30.9%) and the elderly population (22%).[3]
With the ETS2, “the increase in the price for fossil fuels can disproportionally affect vulnerable households, vulnerable micro-enterprises and vulnerable transport users who spend a larger part of their income on energy and transport”.[4] In this regard, the ETS2 cap will be set to bring emissions down by 42% by 2030 compared to 2005 levels. All emission allowances in the ETS2 will be auctioned, and a share of the revenues will be used to support vulnerable households and micro-enterprises through a dedicated Social Climate Fund (SCF).[5]
The SCF was established by Regulation (EU) 2023/955[6] and aims to mitigate the social and economic impacts on the most vulnerable groups affected by the EU’s emissions trading expansion and the pricing of CO₂. These aforementioned groups will be particularly and disproportionately affected by the inclusion of greenhouse gas emissions from buildings, road transport and fuels from other sectors not covered by the existing ETS.[7]
This regulation is based on two central concepts: energy poverty and mobility poverty, along with three target groups for SCF support: vulnerable households, vulnerable micro-enterprises, and vulnerable transport users.[8] In energy, the focus is on households lacking access to essential energy services, affecting their health and quality of life. In mobility, the focus extends beyond access to transport to include those who cannot afford public or private transportation.
Initially, the SCF will be funded through the auction of 50 million ETS allowances (estimated at about €4 billion). Once the ETS extension is enforced, it will be financed through the auctioning of ETS2 allowances up to €65 billion, with an additional 25% from national resources, totalling an estimated €86.7 billion.[9]
To access the SCF, each Member State must submit a Social Climate Plan (the Plan) to the Commission by 30 June 2025, following a public consultation with local and regional authorities, economic and social partners, civil society organizations, youth groups, and other stakeholders. The Plan must include actions and investments to be financed by the SCF, along with associated costs, milestones, and targets. After each Member State’s public consultation, the Commission evaluates the Plan based on relevance, effectiveness, efficiency, and coherence. Upon approval, the Commission authorises payments contingent on the fulfilment of agreed milestones and targets. It will also monitor implementation through regular evaluations to ensure the SCF is used correctly.
On April 16, Portugal held its first public consultation (out of five sessions plus one formal public consultation).[10] Portugal presented its Social Climate Plan, coordinated, managed, and implemented by the newly created Agência para o Clima (ApC).[11] The Plan has a total budget of €1.6 billion, of which approximately €1.3 billion will come from the SCF and the rest from national funds (25%).
Following the presentation of Portugal’s Plan, the need became clear for effective coordination among different funds and plans, and for mechanisms to prevent fraud, corruption, conflicts of interest, and double funding, as set out in Regulation (EU) 2023/955.[12] Another critical requirement is compliance with the “do no significant harm” principle, which ensures economic activities or investments do not significantly harm environmental or social objectives, even if they contribute to another sustainability goal.[13]
The session included two roundtables with representatives from public entities and civil society. The first, titled “Sustainable and Accessible Mobility for All,” featured representatives from Instituto da Mobilidade e dos Transportes, I.P., Autoridade da Mobilidade e dos Transportes, Instituto Superior Técnico – Universidade de Lisboa, ZERO and Transportes Metropolitanos de Lisboa.
Around the concept of “mobility poverty”, the premise was raised that mobility, as a fundamental right, not only allows (or at least should allow) access to other fundamental rights (such as essential education and health services) but must also be worked on in a multidimensional way, with systemic, continuous and integrating solutions with urban planning.
Participants stressed the need to improve public transport access for vulnerable groups, expand access to zero-fare programs, and ensure accessibility for the elderly, disabled, and shift workers. They also highlighted the need to invest in public transport and active mobility infrastructure (like walking and cycling paths) and to integrate these with bike routes and safe parking to reduce reliance on private vehicles. However, investment alone is not enough – effective communication is essential so that vulnerable citizens know what services are available and how to access them.
The second roundtable focused on “Energy-Efficient Buildings: Toward a Just Transition and Carbon Neutrality,” with representatives from ADENE – Agência para a Energia, da Câmara Municipal de Lisboa, Instituto Superior Técnico – Universidade de Lisboa, DECO Proteste and S. Energia – Agência Regional de Energia.
Discussions around energy poverty began with calls to simplify application processes, which are often burdensome, especially in large or densely populated areas. The complexity and number of checks required at the national and EU levels cause significant delays. This raised concerns about balancing transparency and accountability with the need to meet targets on time, as required by Regulation (EU) 2023/955.
The panellists also raised the issue of how the characteristics of Portuguese buildings indicate a great need to finance the insulation of buildings and homes (namely the structural part of homes), since it is not enough to finance the renovation of household appliances for vulnerable families.[14] The approach of the programmes, according to one of the panellists, should be integrative and directed primarily at energy efficiency in the construction and/or renovation of buildings.
This perspective appears particularly sound, especially considering that, when it comes to buildings, and as highlighted by Professor Manuela Almeida (University of Minho),[15] efforts to reduce fossil fuel energy consumption should initially focus on the passive envelope measures, that is, measures that reduce energy needs through the use of appropriate materials and architectural and construction features. Active measures involving more energy-efficient systems and equipment should come only at a second stage. Therefore, passive measures are central to reducing thermal discomfort, a condition closely associated with energy poverty. Energy poverty also refers to a household’s inability to maintain adequate heating and cooling levels. Thermal discomfort is thus an explicit symptom of energy poverty. Measures that help reduce it also decrease energy consumption and, as a result, lower energy costs, making energy more accessible and contributing to the fight against energy poverty.
However, at this early stage of this public consultation, no mention was made of a key point that is also essential for reducing energy poverty in buildings: the need to integrate local renewable energy production. According to Manuela Almeida,[16] it is necessary to consider solutions beyond the building scale, extending to neighbourhoods, villages, and even entire cities. One may expect that upcoming sessions will present aspects of the Portuguese project that promote energy self-consumption initiatives, particularly those developed collectively, notably as Renewable Energy Communities (RECs). The legislation defines RECs in Article 2(16) and regulates them in Article 22 of Directive (EU) 2018/2001 (RED II).[17] Article 189 of Decree-Law 15/2022 (Decreto-Lei n.º 15/2022)[18] sets their legal definition in Portugal.
By operating based on collective ownership and democratic energy management, these initiatives make energy efficiency solutions more tangible. They help lower unit costs related to acquiring, installing, and maintaining energy production systems while fostering energy empowerment and reducing dependence on traditional energy markets. Unlike isolated solutions, RECs may reinvest any profits generated through collective self-production in the community – for example, by improving housing conditions, supporting vulnerable families, and promoting energy literacy. RECs also play a significant role in benefiting more vulnerable areas, as local actors can develop them in tandem with policies for urban regeneration, social inclusion, and the fight against territorial exclusion – thus aligning energy transition with social cohesion.
There was strong emphasis on communication and literacy support, helping citizens understand how to access funding, energy efficiency measures, and appliance upgrades. To this end, the need to expand “Espaços Energia” in Portugal, which are counters set up in local administration where citizens have access to information and personalised support in adopting savings measures, improving the thermal comfort of their homes and, above all, the eligibility criteria for direct income support or funding, as determined by Regulation (EU) 2023/95, was discussed.[19]
However, a preliminary analysis of the first session revealed a lack of clarity on the criteria and data Portugal will use to identify who qualifies as being in energy and mobility poverty under the Regulation’s definitions of vulnerable families, micro-enterprises, and transport users. In a public consultation – especially one that conveys both EU and national political priorities – it is essential to communicate what will be invested in the population and who the beneficiaries will be in this just transition addressing energy and mobility poverty.
Identifying SCF beneficiaries requires considering various economic (income, energy prices, expenses), infrastructure (building conditions, energy networks), climatic (temperature, humidity), and sociodemographic (age, education, unemployment) factors.[20] Not least because the concept of vulnerable groups is broader and emphasises that these groups are not only affected by energy or mobility poverty and low incomes, but also that they are strongly affected by the effects of ETS II on prices and do not have the means to invest in climate-friendly technologies or switch to alternatives.
Moreover, in a country like Portugal, where there is great disparity in energy poverty – with the Azores (34.3%), North (26.3%), Madeira (23.3%), and Alentejo (13.6%)[21] – and where climate, socio-economic, and territorial characteristics increase winter and summer vulnerability, little was discussed about specific measures for rural areas and islands, with most of the debate focusing on Portugal’s large and medium-sized cities.
Apart from their particularities, the topics discussed are important not only for urban areas, but also for the countryside. Portugal is much broader and more diverse than the metropolitan regions. And although urban buildings in the EU are responsible for 40% of energy consumption and 36% of greenhouse gas emissions,[22] addressing rural energy poverty is essential. This is because if we want to move forward with a just transition that leaves no-one behind, all people and territories must be considered. Nevertheless, it remains understandable that the building sector should be treated as a priority area for intervention, particularly because it directly impacts access to another fundamental right: adequate housing.
For now, what is known is that climate neutrality goals can only be successfully implemented if they are carried out in a way that is accessible to everyone, especially to those who cannot bear the costs of the green transition on their own, and if public participation in decision-making processes is safeguarded to ensure transparency regarding the costs incurred. This is the only way to achieve broad social acceptance of the goal of greenhouse gas neutrality by 2050.
There is still time for further development of sensitive and fundamental issues for tackling energy poverty and mobility poverty before the plan is presented to the Commission.
[1] For further information, see https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/ets2-buildings-road-transport-and-additional-sectors_en and Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32003L0087, accessed April 18, 2025.
[2] For further development, see https://energy-poverty.ec.europa.eu/discover-community/epah-atlas/life-energy-poverty-0-ep0, accessed April 20, 2025.
[3] Information available at https://www.ine.pt/xportal/xmain?xpid=INE&xpgid=ine_destaques&DESTAQUESdest_boui=715373584&DESTAQUESmodo=2, accessed April 20, 2025.
[4] See Recital (11) from the Regulation (EU) 2023/955 of the European Parliament and of the Council of 10 May 2023 establishing a Social Climate Fund and amending Regulation (EU) 2021/106, available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32023R0955, accessed April 18, 2025.
[5] Information available at https://apambiente.pt/clima/edificios-transporte-rodoviario-e-outros-setores-cele2 accessed April 18, 2025.
[6] See Regulation (EU) 2023/955 of the European Parliament and of the Council of 10 May 2023 establishing a Social Climate Fund and amending Regulation (EU) 2021/106, available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32023R0955, accessed April 18, 2025.
[7] See Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC.
[8] Information available at Article 2(1), (2), (10), (11) and (12), from Regulation (EU) 2023/955 of the European Parliament and of the Council of 10 May 2023 establishing a Social Climate Fund and amending Regulation (EU) 2021/106, available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32023R0955
[9] Information available at https://www.europarl.europa.eu/news/en/press-room/20221212IPR64528/deal-on-establishing-the-social-climate-fund-to-support-the-energy-transition, accessed April 20, 2025.
[10] See DGED, “Sessões públicas de apresentação do Plano Social para o Clima”, https://www.dgeg.gov.pt/pt/destaques/sessoes-publicas-de-apresentacao-do-plano-social-para-o-clima/, accessed April 20, 2025.
[11] See Decree-Law 122/2024, 31 December, available at https://diariodarepublica.pt/dr/detalhe/decreto-lei/122-2024-901661921, accessed April 20, 2025.
[12] For instance, see “Portugal 2030” (https://portugal2030.pt/), “Plano de Recuperação e Resiliência” (https://recuperarportugal.gov.pt/),“Fundo Ambiental” (https://www.fundoambiental.pt/) and other support such as the “Tarifa Social de Energia” (https://www.dgeg.gov.pt/pt/areas-transversais/politicas-de-protecao-ao-consumidor-de-energia/tarifa-social-de-energia/), accessed April 20, 2025.
[13] For further development, see Article 2(17) from Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, and Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment.
[14] In Portugal, there is a program, already in force since November 2024, “E-lar” dedicated to benefit vulnerable families and combat energy poverty with the purchase of more efficient household appliances. Information available at https://www.ambienteonline.pt/noticias/programa-de-apoio-a-eficiencia-energetica-lancado-em-abril, accessed April 22, 2025.
[15] See Cecília Bojarski Pires, José Gomes Mendes and Manuela Almeida, “Transição energética e participação cidadã: as comunidades de energia na UE”, CitDig, #Juniors2Seniors format of discussion, 2025, https://doi.org/10.34622/datarepositorium/ZIVOXE and https://citdig.direito.uminho.pt/pt/energy-transition-and-citizen-participation-energy-communities-in-the-eu-juniors2seniors-with-cecilia-bojarski-pires-jose-gomes-mendes-and-manuela-almeida/.
[16] See Rita Asceno, “O projecto nunca foi devidamente valorizado,” Revista Edifícios e Energia, no. 133 (January/February 2021): 40–50.
[17] See Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy renewable sources (recast).
[18] See Decree-Law 15/2022, 14 January, available at https://diariodarepublica.pt/dr/detalhe/decreto-lei/15-2022-177634016, accessed April 24, 2025.
[19] See Article 8(2), from the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability related disclosures in the financial services sector, and Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment.
[20] For further development, see João Pedro Gouveia et al., “Comparative analysis of energy poverty definition and measurement in Portugal and Spain”, in Utilities Policy, vol. 90 (2024): 1-25, 4, 10, https://doi.org/10.1016/j.jup.2024.101770, accessed April 22, 2025.
[21] For further development, see Andréia Azevedo Soares, “Mais de 47 milhões de europeus passam frio em casa”, Público, 10 February 2025, https://www.publico.pt/2025/02/10/azul/noticia/47-milhoes-europeus-passam-frio-casa-2121822, accessed April 22, 2025.
[22] See the information in European Parliament (Topics), “Energy saving: EU action to reduce energy consumption”, 1 December 2022, https://www.europarl.europa.eu/topics/en/article/20221128STO58002/energy-saving-eu-action-to-reduce-energy-consumption, accessed April 22, 2025.
Picture credit: by Akil Mazumder on pexels.com.