We have in Europe today a huge new opportunity to clean up our energy system, advance social justice and address catastrophic climate change. In this fact sheet, we illuminate the path to achieving these goals — carbon revenue recycling. In other words, we need to invest Europe’s EU Emissions Trading System auction revenues into strategic programmes for energy efficiency, especially in the housing sector.

The EU Emissions Trading System has recently been reformed, increasing the price for carbon allowances fourfold compared to 2017. As a result, the revenue received by European Member States is also rising rapidly and is projected to total 165 billion euros over the next 10 years. EU countries now have the opportunity to direct as much as 10 billion euros more toward climate solutions per year.

But it’s also crucial to look beyond the money. To make rapid progress in the short time available to act, we must also mobilise the power of carbon revenues to drive more carbon savings, more cost effectively. Not only will we achieve more and achieve it faster, we will improve the odds that solutions will be politically sustainable if we invest carbon revenues in programs that further lower emissions at low cost — especially end-use energy efficiency. According to the International Energy Agency, improving efficiency could provide over a third of the needed low-emission “energy supply” to meet global Paris targets. We have real-world evidence that recycling carbon revenues through strong efficiency programs can deliver seven to nine times more carbon savings than raising prices alone, at the same or even lower cost to the consumer.

But let’s not forget that consumers pay when we put a price on carbon. And this cost is more burdensome for low-income households who might already be suffering from energy poverty. When we recycle carbon revenues to support household efficiency, families will see long-lasting benefits: warmer and healthier homes and lower energy bills. Targeting carbon revenues to refurbish Europe’s huge building stock, and especially to renovate and improve housing for lower-income households, is a powerful tool to deliver a cleaner, faster and more just energy transition.