In the article titled “Carbon Tax through ETS2: New Burden or New Opportunity?”, published in the newspaper Epohi, Ioanna Souka, Energy Policy Analyst at The Green Tank, explores the social and economic challenges linked to the introduction of the new Emissions Trading System (ETS2) in Greece starting in 2027.
Focusing on the role of the Social Climate Fund (SCF) and the corresponding national plan, she examines whether the proposed measures are sufficient to protect vulnerable households from rising energy and transport costs. She raises the central question: Can ETS2 become a lever for a fair and sustainable energy transition?
The article was published in Greek in the newspaper Epohi on July 26, 2025. You can read it in Greek here.
Read the full article in English:
“Carbon Tax through ETS2: New Burden or New Opportunity?”
The path to climate neutrality is anything but simple—but it is now urgent. Natural disasters—from floods to wildfires—are intensifying in the context of a man-made climate crisis that increasingly affects us all. At the same time, successive energy crises—especially since Russia’s invasion of Ukraine—have heightened uncertainty and driven electricity prices higher. The common denominator: our dependence on fossil fuels.
The need to break free from this dependence is no longer just environmental—it’s also social and economic. That’s why it has become central to EU policy, with climate mitigation measures now in motion. But for these measures to be truly effective, they must be accelerated and, above all, implemented in a socially fair way so as not to disproportionately burden the most vulnerable.
ETS: The “flagship” of EU climate policy
A central tool for reducing emissions is the EU Emissions Trading System (ETS), in effect since 2005. In practice, companies in covered sectors—power generation, energy-intensive industry, aviation, and now shipping—pay for their emissions based on a carbon price set by supply and demand. The ETS has delivered results, especially in the power sector, where emissions in Greece fell by 70.4% between 2005 and 2024.
Recognizing the effectiveness of the ETS, the EU decided in its 2023 revision of the ETS Directive to establish a new, similar system—ETS2—which will come into effect in 2027 and apply to buildings and road transport. These sectors are particularly critical. Transport is now the most polluting sector in Greece, largely due to household use (75% of sector emissions). In buildings, emissions are lower, but electrification remains limited (36% in 2021).
Who will bear the cost of ETS2?
Under ETS2, fossil fuel suppliers will pay a carbon tax—a cost likely to be passed on to end consumers. For the system to be effective, it must be implemented in a socially just way, supporting vulnerable groups—households and small businesses—that will be disproportionately affected. Even before ETS2 is implemented, one in four households in Greece (26.5%) is considered energy vulnerable, while 14% face transport vulnerability. Carbon pricing risks making things worse, and meaningful support measures are urgently needed.
To address the inequalities that ETS2 could create, the EU has established the Social Climate Fund (SCF). With a budget of €86.7 billion across the EU and €4.8 billion for Greece, the SCF aims to fund structural measures that permanently reduce reliance on fossil fuels. These will be set out in each country’s Social Climate Plan (SCP). Greece’s draft plan was recently published for consultation. While it contains some positive elements, it also includes significant shortcomings and gaps.
Are the resources of the Social Climate Plan enough?
The plan relies solely on the SCF, without tapping additional revenues from emissions auctioning under ETS1 and ETS2—revenues that could amount to €11.9 to €15.5 billion, according to the study “Policy proposals to address the impacts of ETS2 in Greece” by The Green Tank and Facets. Even if all available resources are used, the study estimates that only 538,000 to 630,000 households could be supported between 2027–2032—a far cry from the 1.5 million households identified in the plan as potentially vulnerable. The lack of a clear definition of vulnerability and the absence of cost estimates for the proposed measures raise questions about the plan’s targeting, adequacy, and effectiveness.
Buildings and transport: Can the measures reach those who need them?
In the buildings sector, the plan includes climate-impactful actions—but lacks clear justification. As a result, there are gaps in the selection of energy solutions and in the level of proposed subsidies. For low-income households—many of which cannot afford upfront investment—100% subsidies are essential for successful implementation. There is also a need for comprehensive intervention packages (energy upgrades, heat pumps, solar panels) that address root problems and lead to complete fossil fuel independence.
A major omission is the lack of support for energy communities, despite their eligibility under EU rules and their potential to deliver collaborative, equitable, and cost-effective solutions. The inclusion of social housing as a measure is welcome, but it targets a very limited number of beneficiaries, with unclear criteria and high costs.
In the transport sector, although measures to promote sustainable mobility are included, the plan lacks detail on costs and beneficiaries. There are no provisions for free or reduced public transport fares for vulnerable groups—an incentive that could boost public transit use. Meanwhile, the green mobility program targets just 10,000 households, while transport vulnerability affects hundreds of thousands.
While the SCP rightly focuses on long-term structural measures, it must not overlook the need for immediate financial relief, especially in the early years of ETS2 when the new “carbon tax” will be immediately felt by households. The plan’s allocation of just 10–15% of the budget to direct support appears not only inadequate but also poorly justified. Moreover, these funds are reportedly earmarked for subsidies like heating or rental assistance—even though EU regulations clearly prohibit such recurring national expenditures from being covered by the SCF.
The Social Climate Fund has a seven-year horizon. But energy and transport vulnerability require lasting solutions, and that means leveraging all available resources. ETS2 can—and must—become an opportunity not just to cut emissions and reduce fossil fuel dependency, but to place social justice at the heart of the energy transition. What’s needed is political will, and sound, well-documented planning to ensure the system’s effective implementation.
