Last week, European Commission President Ursula von der Leyen sent a letter to EU leaders hinting at possible tweaks to the bloc's green policies — including its carbon pricing system for transport and heating fuels, known as ETS2.
In the letter, she reaffirmed her belief that “a market-based approach, in conjunction with other measures, is the right way to modernise these sectors.” Her comments come months after several EU countries warned that ETS2 could put too much strain on households and risk a public backlash.
In a sense, those concerns capture the very logic behind ETS2. The carbon pricing system is meant to impact families in order to influence household behaviour by making carbon-intensive choices expensive and greener options more attractive.
However, market-based approaches only succeed if they recognise that households differ not only in what they emit, but in what they can realistically change.
A big chunk of Europe’s greenhouse gas emissions comes from our private lives. According to Eurostat’s Quarterly Greenhouse Gas Emissions in the EU, households accounted for 25.5% of total emissions in the first quarter of 2025, followed by electricity and gas supply at 19.3%.
Steering this massive chunk of emissions toward cleaner options is essential for hitting Europe’s climate targets. Carbon pricing schemes like ETS2 are meant to push people toward cleaner choices by making pollution more expensive.
The problem is, those price signals don’t hit everyone the same way. They disproportionately burden low-income households, who spend a larger share of their income on energy and have far less ability to invest in efficiency improvements or new technologies.
When energy costs divide
Of course, the issue of energy poverty is not ignored in policy debates — there are compensation mechanisms, rebates, and social funds to soften the blow.
Yet the discussion about why we should incorporate socioeconomic factors too often remains framed as a question of justice and even compassion.
That’s important, yes, but incomplete. Because this isn’t just a matter of fairness — it’s a matter of effectiveness.
Let’s look at what happens when energy prices go up.
For wealthier households
For higher-income families, the idea that higher diesel prices will suddenly make people drive less or take public transport is unrealistic.
To change their behaviour, the price increase would have to be enormous. Mobility and heating aren’t lifestyle choices — they’re necessities.
People don’t treat them like buying the latest fashion or booking a weekend trip. So, when energy prices rise, higher-income households don’t cut consumption right away. Change happens gradually.
The next time they buy a car, they might go electric. When they renovate, they might finally invest in double-glazed windows — upgrades they were likely planning anyway, now made more attractive by higher energy costs.
For lower-income households
For the poorer families, it’s the opposite. Change happens immediately, not because of climate awareness, but because the money isn’t there.
If your budget is tight at the end of the month, you’re not buying an electric car or installing a heat pump. You cut where you can — you drive less, or not at all; you turn down the heat and pile on blankets.
Energy poverty becomes isolation, sometimes even a health risk. Eventually, you can’t cut any further. The only “adjustment” left is accepting less comfort, fewer savings, and no real way to transition.
The price wall of inequality
The truth is, the ETS should affect households — that’s how it’s designed to drive change. But for as long as inequality shapes who can adapt and how quickly, it won’t be fully effective.
The Social Climate Fund is a step in the right direction, but it mostly mitigates the social fallout rather than addressing the core issue: that price signals alone can’t deliver the same results across unequal households.
To make carbon pricing work, policies must account for both short- and long-term adjustment capacities — ensuring that everyone, not just those who can afford it, can take part in the transition.
The path to a greener Europe must be wide enough for everyone to walk it.
