The European Commission will propose on 22 December a ‘basket’ of three new EU own resources, the revenue from which will “help pay back” the €750 billion ‘Next Generation EU’ economic recovery plan between 2028 and 2058.
These new own resources should enter into force on 1 January 2023, after unanimous agreement in the EU Council (see EUROPE 12849/13).
The EU Emissions Trading System (ETS) and a Carbon Border Adjustment Mechanism “are EU-wide instruments serving the common objective of reducing greenhouse gas emissions at the least cost, by capping emissions and providing a carbon price signal”, according to a draft communication on ‘The next generation of own resources for the EU Budget’, seen by EUROPE, which is therefore likely to evolve between now and the adoption of the proposal by the Commission on 22 December.
In addition, the “historic” agreement of the ‘OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS)’ for a ‘Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy’ involves 137 countries and jurisdictions representing more than 90% of the world’s GDP, the Commission recalls (see EUROPE 12808/20). “These initiatives require EU action, and therefore constitute an appropriate base for EU own resources”.
ETS. The Commission proposes that a certain percentage (not known at this stage in the draft) of the revenue generated by the ETS should become an own resource for the EU budget. While revenues from the auctioning of emission allowances under the current ETS accrue largely to national budgets, “the Commission is proposing that, in the future, part of the revenue from EU emissions trading flows into the EU budget”.
The allowances auctioned by the European Investment Bank to finance the Innovation Fund and the initial endowment of the Modernisation Fund would be excluded from the scope of the Own Resources Decision. Revenues for the EU budget are estimated at around €X billion per year over the period 2023-2030, part of which will finance the Social Climate Fund.
The Commission proposes a ‘temporary adjustment’ to ensure a fair contribution of all Member States to the ETS-based own resource. Currently, revenues from auctioning allowances (ETS) flow to national budgets according to a fixed distribution key, without taking into account the relative economic prosperity of the different Member States.
Thus, in order to avoid “an excessively regressive impact” on national contributions, the Commission proposes to apply a temporary adjustment to the ETS own resource until 2030: an upper and lower limit for the ETS own resource would apply depending on the gross national income key. The aim is to avoid some Member States contributing disproportionately to the EU budget in relation to the size of their economy and to ensure “a fair contribution from all”.
Carbon Border Adjustment Mechanism. The Commission proposes that ‘X’% of the revenues generated by a Carbon Border Adjustment Mechanism become an own resource for the EU budget to “support the reduction of global carbon emissions, by addressing the risk of carbon leakage”. Member States would be responsible for collecting revenues from the sale of the certificates of the mechanism in question. Revenues for the EU budget is estimated at around €X billion per year over the period 2023-2030.
Digital levy. The Commission proposes an own resource equivalent to ‘X’% of a share of the residual profits of the largest and most profitable multinational companies, which are re-allocated to EU Member States under the agreement on a reform of the international tax framework.
The practical aspects of the implementation of the agreement are still being finalised, says the Commission.
Member States would provide a national contribution to the EU budget based on the share of taxable profits of multinational enterprises re-allocated to each Member State. Revenues for the EU budget could be as much as €X billion per year.
MEP David Cormand (Greens/EFA, France) regrets that the Commission is not saying anything at this stage about the financial transaction tax, which would bring in €55 billion per year.
The carbon adjustment mechanism would, he said, “in the best case scenario, generate €10 billion per year”.
Link to the draft communication: https://bit.ly/3DY7vhK (Original version in French by Lionel Changeur)