Heating Up Inequality? Socio-spatial impacts of ETS2 on European housing and cohesion

Schwab, Thomas and Hagemann, Sara and Többen, Johannes and Rhoden, Imke and Venghaus, Sandra and Linßen, Jochen (2026): Heating Up Inequality? Socio-spatial impacts of ETS2 on European housing and cohesion.

Abstract

ETS2 will introduce uniform EU-wide carbon pricing for heating, affecting about half of all households across the Union. Using a synthetic EU population of 188 million households, this study shows that most can absorb the additional costs, but a significant minority faces high burdens—especially in Eastern and Southern Europe. ETS2 revenues can cushion these impacts but are insufficient to fund large-scale heating system replacements. Targeted support and complementary investment policies are essential for a fair and effective transition.

• Item Type: MPRA Paper
• Language: English
• Keywords: ETS2, carbon price, heating
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R28 - Government Policy

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