Explanatory Memorandum to COM(2021)570 - Amendment of Decision (EU, Euratom) 2020/2053 on the system of own resources of the EU - Main contents
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| dossier | COM(2021)570 - Amendment of Decision (EU, Euratom) 2020/2053 on the system of own resources of the EU. |
|---|---|
| source | COM(2021)570  |
| date | 22-12-2021 |
1. CONTEXT OF THE PROPOSAL
The COVID-19 pandemic has caused the deepest economic recession for many decades in the EU 1 , which triggered a swift and resolute policy response at both national and EU level. All Member States have adopted exceptional discretionary measures, in addition to their “automatic stabilisers” in order to support economic activity and mitigate social impacts.
The EU also took unprecedented steps to address the crisis. With a total of EUR 1.8 trillion in 2018 prices, the EU’s multitiannual financial framework, coupled with the European Union Recovery Instrument (NextGenerationEU), is the largest stimulus package ever financed through the EU budget. NextGenerationEU was formally approved by the Council on 14 December 2020 2 with the support of the European Parliament and will deploy EUR 750 billion (2018 prices), raised on capital markets, to fund specific recovery and resilience actions in a limited period of time, in order to boost economic growth and invest in resilience and a greener and digital future.
Sufficient revenue is needed to cover the repayment of financing costs of NextGenerationEU borrowing, spread over three decades. Repayment of the principal may start before the end of the multiannual financial framework 2021-2027, if amounts not used for interest payments are lower than planned and in case new own resources are introduced 3 , and must be concluded by the end of 2058 4 .
In the framework of the Interinstitutional Agreement of 16 December 2020 5 , the European Parliament, the Council and the Commission stated that expenditure from the Union budget related to the repayment of the European Union Recovery Instrument should not lead to an undue reduction in programme expenditure or investment instruments under the multiannual financial framework. According to this Interinstitutional Agreement, it is also desirable to mitigate the increases in the GNI-based own resource for the Member States. The three institutions thus agreed to “work towards introducing sufficient new own resources with a view to covering an amount corresponding to the expected expenditure related to the repayment.” 6 The Commission committed to propose new own resources in 2021 with a view to their introduction at the latest by 1 January 2023 7 .
2. CONTENT OF THE AMENDING PROPOSAL
The Commission proposes to introduce new own resources, vesting the EU with the necessary resources, in particular in view of new budgetary expenditure for the repayment of the financing costs of NextGenerationEU borrowing and for the Social Climate Fund 8 .
The amended proposal specifies that 25% of most revenues generated from allowances to be auctioned from the emissions trading will accrue to the EU budget. This includes revenues from the current Emissions Trading System for stationary installations and aviation for which additional allowances would be auctioned as well as its extension to maritime transport and the introduction of a separate emission trading for road transport and buildings, in line with the proposal for an amendment of Directive 2003/87/EC 9 .
Allowances auctioned by the European Investment Bank for the Innovation Fund and the initial endowment of the Modernisation Fund are excluded. In order to remain neutral, the own resource scope also includes allowances in principle dedicated for auctioning by Member States, which based on discretion exercised by Member States are transferred free of charge to the power sector, used for compliance by effort sharing sectors, or auctioned by the European Investment Bank for the Modernisation Fund.
To address possible social impacts in relation to the introduction of emissions trading for road transport and buildings, the Commission has proposed to establish a Social Climate Fund. The Fund will benefit vulnerable households, micro-enterprises and transport users. For its duration the Fund will be financed by the own resources of the Union budget, including as of 2026 the revenues from the emission trading for road transport and buildings. The total financial envelope of the Fund for the 2025-32 period will be EUR 72.2 billion in current prices, corresponding in principle to an amount equivalent to around 25% of the expected revenue from the new emissions trading system for buildings and road transport for the period 2026-2032.
A temporary solidarity adjustment mechanism is proposed to mitigate the regressive distributional impacts of the emissions trading-based own resource, introducing a maximum contribution for lower-income and carbon-intensive Member States and a minimum contribution for typically higher-income and low-carbon Member States. This will avoid that some Member States contribute disproportionally to the EU budget in comparison to the size of their economy, during the period of transition to more sustainable economies and societies, and ensures a just contribution from all.
This proposal establishes that a share of the revenues from the sale of carbon border adjustment mechanism certificates will be transferred to the EU budget as own resources in the form of a national contribution.
Finally, this proposal provides that Member States will make a national contribution to the EU budget based on the share of the residual profits of the largest and most profitable multinational enterprises re-allocated to Member States in case they are end market jurisdictions where goods or services are used or consumed under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting agreement 10 on a reform of the international tax framework. While work on a Multilateral Convention is still ongoing at the international level, the Commission has announced that it would table a proposal for a Council directive in 2022 ensuring a consistent implementation of the Multilateral Convention on a partial re-allocation of taxing rights.
3. LEGAL FRAMEWORK
3.1.Own Resources Decision
Pursuant to Article 311(3) of the Treaty on the Functioning of the European Union, the Council, after consulting the European Parliament 'may establish new categories of own resources or abolish an existing category'. This provision explicitly allows for amending the Own Resources Decision to add new own resources as agreed in the Interinstitutional Agreement.
In accordance with the special legislative procedure set out in Article 311(3) Treaty on the Functioning of the European Union, the Council adopts the revised decision by unanimity after consulting the European Parliament. The decision will enter into force once it is approved by the Member States in accordance with their constitutional requirements.
3.2.Implementing legislation
In parallel, the Council needs to amend the implementing measures related to the own resources system to ensure that they remain fit for purpose. Additionally, new making available provisions are required for all new own resources. The Commission will table the necessary proposals in the first half of 2022.