Europe seeks faster route to generate revenue from carbon fines and tax profits

The European Parliament will be moving to vote on a proposal – yet to be endorsed by the Council of the EU unanimously – for the EU’s new generation of ‘own resources’ revenue sources.

Member states will also have to ratify any new Own Resources Decision, the law governing the EU’s revenue.

As things stand, MEPs from the parliament’s committee on budgets – with 15 votes to 5 – took a step to introduce three new income sources: revenues from emissions trading (ETS); the resources generated by the proposed EU carbon border adjustment mechanism (CBAM); and a temporary statistical own resource based on corporate profits.

The proceeds of the new “Own Resources” introduced by this amended decision will be essential to repay the debt under the EU recovery plan, afflicted by rising interests and their resultant impact on the EU budget.

The new sources of revenue could ensure a reliable financing of the EU budget on a long-term basis and also accommodate new priorities while avoiding reductions of existing EU programmes and policies, MEPs say.

Denmark, Germany, the Netherlands, Austria and Sweden have also benefited from lump sum reductions for the 2020-2027 budgetary framework, which increased unexpectedly and disproportionately. In order to avoid further distributional distortions, MEPs are demanding that these lump sums be adjusted annually on the basis of a fixed deflator of 2% per year.

“The Parliament has done its part. Now it’s time for the Council to quickly find an agreement on the introduction of new direct revenue streams for the EU budget,” said Portuguese MEP José Manuel Fernandes (EPP).

“We need new own resources to enable the European Union to respond effectively to future crises and uphold its commitments to European citizens, all without burdening future generations with debt. Without these new sources of direct revenue, EU funding programmes are slated to face cuts exceeding €15 billion annually.

“To avoid that, we are left with two options: either increasing member states’ contributions to the EU budget, thereby burdening citizens, or approving new own resources. The latter is the preferred path forward, and the Council must address the issue of own resources with the utmost urgency.”

MEPs hope to obtain both approval by the plenary and a green light from the Council under the current Spanish presidency of the EU. “The Council must speed up. I call on it to agree on this package as swiftly as possible. Europe cannot rely on the Orbán’s Council presidency in 2024 when it comes to social justice; it simply won't happen,” said French co-rapporteur Valérie Hayer (RENEW).

In 2020, the EU institutions agreed on a legally binding roadmap introducing new sources of EU revenue: the plastics own resource, introduced in 2021, was the first new source of EU revenue since 1988.

The Commission then proposed three further own resources, which the EU countries have not yet adopted: revenue from emissions trading and carbon fines, and tax on corporate profits.

The “Own Resources Decision” (ORD) is the legal basis that provides for the revenue sources of the EU budget, and it is also the legal basis authorising funds to be borrowed on the financial markets to finance the Next Generation EU Recovery Instrument (NGEU).

The Council adopts the decision by unanimity after having consulted the European Parliament. Before entering into force, the ORD needs to be ratified by all member states.