Compensating and Supporting Citizens for Higher Energy Prices due to Carbon Pricing

As carbon pricing becomes more salient for households, especially with the launch of the  EU ETS 2 for buildings and road transport in the EU, protecting vulnerable citizens remains essential to fairness, social acceptance, and the durability of carbon pricing. This Thematic Brief samples and describes selected citizen-facing measures that compensate for, or support households in avoiding, higher energy costs due to carbon pricing. The Brief focuses on compensation and support measures in the heating, transport fuels, and electricity sectors, and only where a direct link to a carbon pricing instrument exists. It distills key design choices and trade-offs across instrument types, targeting and eligibility considerations, delivery mechanisms, and objectives, and collates a concise list of measures with references to complementary studies.

The Brief features three illustrative case studies: Austria’s Klimabonus (broad-based compensation with regional differentiation; discontinued after the 2024 payment year), Germany’s CO₂ Cost-Sharing Act paired with federal funding for efficient buildings (BEG), and California’s Climate Credit (on-bill credits funded by consigned allowance revenues). Each case study delves into the compensation or support measure’s rationale, beneficiaries, governance framework, delivery, reporting, and review findings. The Brief concludes with a short synthesis of key take-aways from an ICAP expert dialogue held on 10 September 2025.