Urgent need for fair climate policy
Author: Anas Nadi
The decarbonisation of buildings and road transport is one of the most urgent and complex challenges facing Central and Eastern Europe (CEE). These two sectors are not only responsible for a large share of the region’s greenhouse gas (GHG) emissions, but they also directly affect people’s daily lives, how they heat their homes, how they travel to work or school, and how much they spend on energy and fuel.
As part of its commitment to climate neutrality, the European Union is expanding its carbon pricing mechanism introducing the EU Emissions Trading System 2 (ETS2) — which will take effect in 2027 (It may be postponed to 2028). This system will apply to fuel used in buildings and road transport, aiming to cut emissions by making fossil fuel use more expensive. But while carbon pricing is an important tool for environmental policy, it comes with serious social risks. Without adequate protections, higher fuel prices could increase energy and transport poverty, especially among low- and middle-income households and rural populations.
To support a fair and inclusive transition, the EU has created the Social Climate Fund (SCF). The SCF is designed to provide financial support to vulnerable households and micro-enterprises, helping them adapt to the rising cost of fossil fuels and invest in clean alternatives such as home renovations, solar panels, or better access to public transport.
In this context, civil society organisations from six CEE countries, Green Liberty from Latvia, Clean Air Action Group from Hungary, Economic Policy Institute from Bulgaria, Institute for Sustainable Development Foundation from Poland, The Slovenian Foundation for Sustainable Development from Slovenia, Focus Eco Center from Romania have joined forces with the European Environmental Bureau under the ClimateFair Monitor project, funded by the European Climate Initiative (EUKI). One of the objectives of the project is to assess national decarbonisation challenges and find out whether they are putting in place proper policies to ensure fairness, effectiveness, and transparency in their decarbonisation strategies. Find full report here.
A closer look of decarbonisation in CEE: Country profiles and progress
Each participating country presents a different picture in approaches to decarbonisation. However, across the board, the report finds that low-income households, rural communities, and renters are at the highest risk of being left behind unless support is better targeted and access to funding is simplified.
In Hungary, the policy framework is guided by the National Energy and Climate Plan (NECP) and Long-Term Renovation Strategy (LTRS). But implementation has been slow, and public investments often go to projects that do not support decarbonisation. According to data, 2.5 to 3 million people in Hungary live in poverty. In rural areas, many households still heat with low-quality wood or coal and even burn household waste despite it being illegal and highly polluting. The number of households heating with wood more than doubled between 2020 and 2022, from 15% to 37%. Meanwhile, fossil fuel subsidies remain widespread, and energy price caps introduced in 2013 while politically popular have primarily benefited high-consumption, higher-income households. In 2023 alone, the caps cost the Hungarian government 1.8% of GDP. Car ownership continues to grow, increasing from 2.6 million in 1998 to 4.3 million in 2023, while 2,000 kilometres of railways have been shut down, worsening transport poverty in many regions.
Latvia, by contrast, has taken more proactive institutional steps. A Ministry of Climate and Energy was established in 2023 to centralise climate governance, and the Social Climate Plan is being prepared with EU support. Latvia’s share of renewable energy reached 43.5% of gross energy consumption in 2023, close to its 2025 target. However, energy poverty remains widespread. Nearly a quarter of the population (24.3%) is at risk of poverty, and many buildings are outdated and poorly insulated. A renovation support programme launched in 2023, worth €173 million, received 338 applications in just one month, showing strong demand. Still, the funding will only allow for renovations of around 1.3% of the needed buildings. In the transport sector, emissions rose by 3.18% in 2023 compared to 1990, while car ownership jumped from 106 to 424 vehicles per 1,000 inhabitants since 1990. Public transport usage has fallen dramatically, bus ridership declined by nearly half since 2002, and tram and trolleybus use also dropped significantly.
Slovenia presents a more balanced picture. The country has made solid progress in tackling energy poverty, with the government adopting an Action Plan for Reducing Energy Poverty and offering targeted grants through the EKO Fund. One of the most socially inclusive programmes, ZER 2024, provides up to €18,000 in non-refundable grants to poor households for insulation, energy-efficient windows, and heating system upgrades. The EN-SVET network, active in 59 locations, provides free and individualised energy consulting, especially helpful for households navigating complex renovation procedures. On the transport side, Slovenia has introduced an integrated national ticket system for public transport and a progressive electric vehicle (EV) subsidy, where cheaper EVs receive higher subsidies up to €7,200 for vehicles under €35,000, and none for EVs over €65,000. Still, many lower-income families cannot afford even subsidised EVs, and rural communities often lack access to public transport.
In Romania, the long-term strategy “Neutral Romania 2050” outlines ambitious climate targets, but policy coordination remains fragmented. Although the government has set up the Inter-Ministerial Committee on Climate Change, there is still no national climate law. Renovation support comes from the Green House programme, which offers €6,000 per household for solar panel installation, and the Rabla programme, which funds the purchase of clean vehicles. However, both programmes suffer from weak outreach and accessibility — in some cases, applications close within seconds due to overwhelming demand and limited online capacity. Romania has also earmarked more than €3 billion in EU funding for road upgrades and €3.4 billion for modernising rail infrastructure. But experts warn that without proper governance, much of this investment may not deliver the expected climate or social benefits.
In Bulgaria, energy poverty remains a serious concern due to a high reliance on coal and solid fuels, especially in rural areas. Poland faces more political resistance to decarbonisation, as well as industrial challenges, but it is in the process of developing its Social Climate Plan. In both countries, transparent governance and public trust will be essential for the success of ETS2 and SCF policies.
Common lessons across the region
Despite differences between countries, several issues appear across the CEE region. One of the biggest challenges is that fossil fuel subsidies are still widespread and often regressive. In Hungary, for example, the wealthiest 10 percent of households receive 50 percent more gas subsidies than the poorest 10 percent. These subsidies also discourage investment in energy efficiency by making fossil fuels appear artificially cheap.
Another major issue is lack of public participation. In most cases, civil society organisations, municipalities, and affected communities have not been meaningfully involved in the preparation of Social Climate Plans. This not only weakens trust but also leads to poorly designed policies that fail to reflect real needs.
Misinformation and disinformation are also widespread, especially in countries with media ecosystems that are either state-controlled or fragmented. In Hungary, for example, large parts of the population are unaware of what ETS2 or SCF are except when they hear simplified claims like “Brussels wants to abolish cheap energy.” In this context, far right or populist forces often use climate policies as political targets, slowing down or blocking reform.
Access to funding is another common issue. Many renovation programmes require co-financing, upfront payments, or good credit history, which automatically excludes the very households that most need help. Even where subsidies are available, bureaucratic procedures and lack of information act as barriers.
What must happen before ETS2 enters into force?
With ETS2 set to begin in 2027, time is running short to make sure this important climate policy does not lead to social backlash. If low-income households are left to face rising fuel prices without meaningful support, resistance to climate policy could increase and the broader goals of the European Green Deal could be at risk.
The Social Climate Fund offers a unique opportunity. If used well, it can help modernise homes, expand clean transport, and reduce inequality. But this will require serious action at the national level. Governments must redirect fossil fuel subsidies, increase renovation funding, simplify application procedures, and offer direct compensation to households who need it most. They must also invest in public awareness campaigns and ensure that all major stakeholders including NGOs, local governments, and communities are involved in shaping the transition.
Socially just transition is possible and necessary
Climate change is not just a technical or environmental issue. It is a deeply social and economic issue, with the power to either increase or reduce inequality. Socially just transition in Central and Eastern Europe is possible but only if fairness is treated as a central condition for success, not an afterthought.
By investing in people, not just infrastructure, and by listening to those most affected, governments can build public trust and ensure that the path to climate neutrality is one that benefits everyone, not just the few. In this way, the decarbonisation of buildings and transport can help create not only a greener Europe, but a fairer and more resilient one as well.
Photo: Markus Spiske
