The Social Climate Fund (SCF) was created alongside the ETS 2 for emissions from fuel combustion in buildings, road transport and additional sectors. It will provide Member States with dedicated funding so that the most affected vulnerable groups, such as households in energy or transport poverty, are directly supported, and not left behind during the green transition.

Member States may use the SCF to support structural measures and investments in energy efficiency and renovation of buildings, clean heating and cooling and integration of renewable energy, as well as in zero- and low-emission mobility solutions. Moreover, Member States will have the option of spending part of the resources on temporary direct income support.

All these measures and investments will be compiled in national Social Climate Plans following a public consultation. Member States will submit these plans to the European Commission by June 2025. The Commission will assess the plans and disburse payments to the Member States only if the milestones and targets set in the plans are achieved.

To finance these measures and investments in support of the most vulnerable groups, the SCF will pool revenues from the auctioning of allowances from the ETS 2 as well as 50 million allowances from the existing EU ETS.