Overview of the Study and Its Origin
The research “Heating Up Inequality? Socio‑spatial impacts of ETS2 on European housing and cohesion” is authored by Thomas Schwab, Sara Hagemann, Johannes Többen, Imke Rhoden, Sandra Venghaus, and Jochen Linßen, senior experts and project managers at the Bertelsmann Stiftung, a German think‑tank focused on social and economic policy. The work was produced in early 2026 and published under a Creative Commons Attribution 4.0 licence, making it freely reusable with proper credit. It combines extensive synthetic modeling of 188 million EU households with micro‑data to assess the distributional effects of the forthcoming Emissions Trading System 2 (ETS2) on residential heating.
ETS2 Policy Context and Scope
ETS2 will extend EU‑wide carbon pricing to building and road‑transport emissions, initially setting a carbon price around €60 per tonne of CO₂ and potentially rising to €180 in the long run. The system will affect roughly half of all EU households—about 103 million—that rely on fossil‑fuel heating (gas, oil, coal). Existing national carbon pricing schemes in nine member states will be replaced, while the remaining 18 will experience carbon pricing for the first time. Revenue from ETS2 is earmarked for the Social Climate Fund and national climate plans.
Key Findings on Cost Impacts
At the moderate price of €60/t CO₂, the average additional heating cost per household is about €60 per year, with 89 % of affected households facing less than €100 extra. However, cost increases are highly uneven. In Poland, average additional costs reach €372 per household, while in Sweden and Denmark households may see cost reductions because national carbon prices already exceed the ETS2 level. At a high price of €180/t CO₂, average extra costs rise to roughly €285 per household, and 84 % still stay below €400. The 10 % most affected households experience average additional costs of €220 at €60/t and €715 at €180/t, representing roughly 7‑9 % of their disposable income.
Regional Disparities and Vulnerable Groups
Eastern and Southern European regions show the greatest burden. Households in Poland, Hungary, Slovakia, and Bulgaria spend a higher share of income on heating—up to 6.8 %—compared with wealthier Western and Northern regions. Low‑income households in the poorest member states face the largest increase in the share of income devoted to heating, sometimes exceeding 1 percentage point at €60/t and up to 9 percentage points at €180/t. The most strongly affected 10 % of households tend to have lower disposable incomes (average €20 000), larger household sizes, higher likelihood of homeownership, and a higher share of elderly and female members.
Revenue Allocation and Compensation Potential
ETS2 is projected to generate €6.27 billion annually in additional heating expenditures at €60/t and €29.51 billion at €180/t. The Social Climate Fund will provide up to €65 billion between 2026‑2032, complemented by national ETS2 revenues. At €60/t, these funds are sufficient in all member states to fully compensate the most affected households, though competition with transport‑related costs may limit resources. At €180/t, the funding gap widens, and three member states (Slovakia, Germany, Poland) would see the most affected households’ costs exceed available Social Climate Plan resources.
Investment Needs Beyond Compensation
Replacing fossil‑fuel heating systems typically requires €10 000‑30 000 per household. Even a modest public support scheme of €5 000 for half of fossil‑heated households would exceed total ETS2 revenues in most large economies, highlighting a substantial financing shortfall for large‑scale retrofit programmes. The study therefore recommends complementary funding sources such as cohesion policy, grants, concessional loans, and guarantees to unlock investment at scale.
Policy Recommendations for Sustainable Housing
- Targeted Support: Use granular synthetic data to identify and aid the 10 % most affected households, focusing on cost‑burden relative to income rather than income alone.
- Complementary Investment: Mobilise additional public funds beyond ETS2 revenues to finance heating system replacements, especially in Eastern Europe where needs are greatest.
- Data Infrastructure: Invest in administrative and data‑linkage capacities to efficiently verify eligibility and deliver support.
- Cross‑Country Learning: Share best‑practice designs of Social Climate Plans to ensure equitable, efficient distribution of resources. Overall, the study provides a detailed, data‑driven picture of how ETS2 will reshape heating costs across Europe, underscoring the need for well‑targeted compensation and substantial additional investment to achieve a just and climate‑neutral housing transition.