loading

News

Commission proposes EU own resources

Commission proposes EU own resources
27 December 2021

The Commission proposed to establish the next generation of own resources for the EU budget by putting forward 3 new sources of revenue: the first based on revenues from emissions trading (ETS), the second drawing on the resources generated by the proposed EU carbon border adjustment mechanism, and the third based on the share of residual profits from multinationals that will be re-allocated to EU Member States under the recent OECD/G20 agreement on a reallocation of taxing rights (“Pillar One”). In the years 2026-2030, these new sources of revenue are expected to generate on average a total of up to €17 billion annually for the EU budget.

The new own resources proposed will help to repay the funds raised by the EU to finance the grant component of NextGenerationEU. The new own resources should also finance the Social Climate Fund. The latter is an essential element of the proposed new Emissions Trading System covering buildings and road transport and will contribute to ensuring that the transition to a decarbonised economy will leave no one behind.

EU emissions trading

The Fit for 55 package of July 2021 aims to reduce net greenhouse gas emissions in the EU by at least 55% by 2030, compared to 1990, to stay on track to reach climate neutrality by 2050. This package includes a revision of the EU Emissions Trading System. In future, emissions trading will also apply to the maritime sector, auctioning of aviation allowances will increase, and a new system for buildings and road transport will be established.

Under the current EU Emissions Trading System, most revenues from the auctioning of emission allowances are transferred to national budgets. Now, the Commission proposes that in future, 25% of the revenue from EU emissions trading flows into the EU budget. Revenues for the EU budget are estimated at around €12 billion per year on average over 2026-2030.

In addition to the repayment of NextGenerationEU funds, these new revenues would finance the Social Climate Fund, put forward by the Commission in July 2021. This Fund will ensure a socially fair transition and support vulnerable households, transport users and micro-enterprises to finance investments in energy efficiency, new heating and cooling systems and cleaner mobility, as well as, when appropriate, temporary direct income support. The total financial envelope of the Fund in principle corresponds to an amount equivalent to around 25% of the expected revenue from the new emissions trading system for buildings and road transport.

Carbon border adjustment mechanism

The objective of the carbon border adjustment mechanism is to reduce the risk of carbon leakage by encouraging producers in non-EU countries to green their production processes. It will put a carbon price on imports, corresponding to what would have been paid, had the goods been produced in the EU. This mechanism will apply to a targeted selection of sectors and is fully consistent with WTO rules.

The Commission proposes to allocate to the EU budget 75% of the revenues generated by this carbon border adjustment mechanism. Revenues for the EU budget are estimated at around €1 billion per year on average over 2026-2030.

Reform of the international corporate taxation framework

On 8 October 2021, more than 130 countries that are members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting agreed on a reform of the international tax framework: a two-pillar solution to tackle tax avoidance and aims at ensuring that profits are taxed where economic activity and value creation occur. The signatory countries represent more than 90% of global GDP. Pillar One of this agreement will reallocate the right to tax a share of so-called residual profits from the world's largest multinational enterprises to participating countries worldwide. The Commission proposes an own resource equivalent to 15% of the share of the residual profits of in-scope companies that are reallocated to EU Member States.

The Commission has committed to proposing a Directive in 2022, once the details of the OECD/G20 Inclusive Framework agreement on Pillar One are finalised, implementing the Pillar One agreement in line with the requirements of the Single Market. This process is complementary to the Pillar Two Directive for which the Commission adopted a separate proposal. Pending the finalisation of the agreement, revenues for the EU budget could amount to roughly between €2.5 and €4 billion per year.

Image © European Commission

News

Related news

The Commission announced the adoption of the second annual work programme of the European Defence Fund (EDF). The EDF 2022 work programme will allocate up to...
More details European Defence Fund gets €1 billion boost
May 19
2022

REPowerEU Plan

Yesterday, the European Commission presented the REPowerEU Plan to end the EU’s dependence on Russian fossil fuels and tackle the climate crisis. This plan will be carried out...
More details REPowerEU Plan
The Commission announced the 63 regions, 7 cities and 4 Member States selected in the pilot project for Partnerships for Regional Innovation, an initiative developed...
More details Partnerships for Regional Innovation

Stay in touch with us!

For more information about our services and working opportunities at our company, do not hesitate to: