The Emissions Trading System (EU ETS) generates billions of euros, which should be used to fund climate transition. With the implementation of the ETS2 system and the Social Climate Fund, the question of the effectiveness and fairness of how Member States spend these funds becomes crucial. Not only does achieving climate neutrality depend on their effective redistribution, but so does protecting citizens from rising energy costs and maintaining public acceptance of the changes.

The aim of the project is to assess the use of EU ETS revenues between 2020 and 2024 in Germany, Poland, Spain, Italy and France. The study also provides recommendations for the optimal planning of the future use of climate funds, including the new ETS2 system.

The project adopted an approach combining quantitative analysis of financial data, stakeholder interviews and a comparative assessment of public policies. The Institute’s team of experts examined national spending patterns in terms of their effectiveness and actual impact on the climate. The work focused on identifying good practices and lessons learned from the experiences of the EU’s largest emitters to date.

The result of this work is a comprehensive comparative study and a set of recommendations for national and EU decision-makers. The full publication is available on the LIFE Effect project platform.

These measures enhance the transparency of spending from emissions trading and support the development of safeguard mechanisms. The findings of the study help to ground the debate on financing the transition in proven and socially just models.

The study was commissioned by Germanwatch as part of the LIFE Effect project, which received funding from the European Union’s LIFE programme.