In Brussels, PIK explains social flanking of the new emissions trading system

Following the launch of the first EU emissions trading system for energy production and energy-intensive industry (ETS1) in 2005, ETS2 will introduce EU-wide carbon pricing for road transport and buildings from 2027 onwards. In Germany, it will replace the national pricing system launched in these sectors in 2021. In a conference room at the European Parliament, Edenhofer, the co-organisers, and around 50 international media representatives and experts from the Brussels political scene discussed how this market-based climate protection scheme can be accompanied by instruments for social compensation.

According to the PIK Director, the ETS2 will result in unequal burdens not only between rich and poor, but also within income groups, mainly due to different living situations. As an effective and targeted compensation measure, Edenhofer presented the concept of climate money for buildings, developed by researchers at the institute. This would be differentiated according to building groups and financed from the full carbon price revenues in the building sector.

This instrument can compensate for individual burdens even in cases of hardship, and avoid over- and under-compensation while still maintaining the incentive to switch to fossil-free technology. The concept was published in November 2024 by the Berlin-based climate research institute MCC, which has been part of PIK since the beginning of 2025. The press release and scientific paper can be found here.