The study aims, on the one hand, to present the expected impacts of introducing the regulation on the heating and fuel costs of various household groups and, on the other, to examine options for alleviating the burden on households—whether in the short term through direct income support or in the long term through financial incentives for investment. Furthermore, it addresses how the introduction of the regulation should be assessed from Hungary’s perspective, considering both the costs involved and the financial resources generated by the regulation.

The study is structured as follows. The first chapter outlines the basic assumptions and methodological framework of the analysis. Chapter 2 presents a static analysis of the regulation's short-term impact on natural gas and fuel costs. Chapter 3 details the modeling results for the building sector. Chapter 4 models the expected impacts on road transport. Chapter 5 examines the spillover effects of ETS2 fuel price impacts using a static input-output model. Methodological details regarding the calculations are provided in the appendices.

Our key findings:

• The introduction of ETS2 presents a social challenge but generates significant funds to support investments that also help achieve other national economic and EU targets (such as reducing energy imports and carbon emissions, and improving energy efficiency) without imposing additional budgetary burdens.
• In both the building and transport sectors, the available funds exceed the additional costs resulting from emissions charges; this allows for investment support as well as temporary direct financial aid for lower-income groups. For these groups, it is advisable to lower the barriers to entry for building renovation support programs (e.g., by covering the co-financing requirement or simplifying administrative procedures).
• Our calculations indicate that the impact of rising fuel prices on corporate costs is also reflected in consumer prices for households (representing a price pressure of 0.87% at a carbon price of €60/tonne). Even if the ETS2 regulation were not introduced in Hungary—thereby avoiding a direct ETS2 cost shock—a certain degree of price-increasing effect would still filter through via imported finished goods and intermediate inputs; this indirect effect accounts for nearly two-thirds of the price increase observed under the introduction scenario, yet Hungary would not benefit from the funds associated with ETS2. A lack or insufficiency of incentives steers investments and the use of household funds in the wrong direction (e.g., towards gas boilers or biomass) and entrenches the current consumption pattern. The natural gas price, distorted by utility cost reduction measures, has prevented approximately 280,000 building renovation projects that would have been economically viable from a systemic perspective. Thermal insulation projects alone account for nearly 130,000 economically viable investments that failed to materialize due to these price-reduction policies.
• The ETS2 offers an opportunity to implement long-delayed building renovation projects. The average annual rate of residential renovation would rise from the current 0.6–0.8% to 1.8–2.0%. Some households would undertake this using their own resources, while others would do so given appropriate incentives. For vulnerable and at-risk households, the necessary renovations could be carried out—even without personal financial contribution—by leveraging ETS2 funds. A significant portion of these would constitute community investments that are justified from a systemic standpoint and offer a rapid return on investment. The effectiveness of the regulation depends heavily on the availability of low-emission technologies at an appropriate price point; model results indicate that while cost-effective technological options exist in the building sector, the transport sector shows only a very slight reduction in emissions compared to the technological changes already underway, meaning ETS2 has no significant impact on the technological transition.