COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS The next generation of own resources for the EU Budget
Date: 2021-12-22
Institutions: Directorate-General for Budget, European Commission
Subjects: EU Emissions Trading Scheme, EU budget, EU emission allowance, greenhouse gas, multiannual financial framework, own resources, reduction of gas emissions, tradeable emission permit

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 22.12.2021  COM(2021) 566 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS The next generation of own resources for the EU Budget  
 
 
1.  PREPARING FOR EUROPE AFTER COVID-19  

At the outset of the unprecedented COVID-19 crisis, the EU quickly came together 
with  a  strong  common  response.  On  27  May  2020,  the  Commission  presented  an 
ambitious,  innovative  and  exceptional  recovery  plan  to  set  the  Union  on  the  path  to  a 
sustainable  and  resilient  recovery.  The  European  Union  Recovery  Instrument 
(NextGenerationEU),  which  was  formally  approved  by  the  Council  on  14  December 
20201 with the support of the European Parliament, mobilises up to EUR 750 billion2 to 
address the economic and social damage brought about by the pandemic. Together with 
the  EU’s  long-term  budget,  the  multiannual  financial  framework,  a  total  of  EUR 1.8 
trillion are helping rebuild a post-COVID-19 Europe.  

The  aim  of  NextGenerationEU  is  to  emerge  stronger  and  more  resilient  from  the 
crisis,  setting  our  economies  on  a  path  of  sustained  growth.  To  achieve  this, 
NextGenerationEU  addresses  the  most  pressing  challenges  we  face  as  a  Union,  chiefly 
the twin green and digital transitions. The revenues generated by new own resources will 
help repay the financing of NextGenerationEU.  

The  European  Council  conclusions  of  21  July  2020,  stated  that  the  Union  would, 
over  the  coming  years,  ‘work  towards  reforming  the  own  resources  system  and  
introduce  new  own  resources’3.  In  the  subsequent  Interinstitutional  Agreement  of  16 
December 20204, the European Parliament, the Council and the Commission agreed that 
‘the  repayment  of  the  principal  of  such  funds  to  be  used  for  expenditure  under  the 
European  Union  Recovery  Instrument  (NextGenerationEU)  and  the  related  interest  due 
will  have  to  be  financed  by  the  general  budget  of  the  Union,  including  by  sufficient 
proceeds  from  new  own  resources  introduced  after  2021’5.  In  addition,  the  three 
institutions  recognise  the  importance  of  the  context  of  the  European  Union  Recovery 
Instrument and state 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. Furthermore, they state that it is also desirable to mitigate the increases in the 
GNI-based own resource for the Member States6. The Commission committed to propose 
new own  resources  in  2021 with  a view to  their introduction  at  the latest  by 1 January 
20237.   

1  Council  Regulation  (EU)  2020/2094  of  14  December  2020  establishing  a  European  Union  Recovery  Instrument  to 
support the recovery in the aftermath of the COVID-19 crisis, OJ L 433I , 22.12.2020, p. 23. 

2 All amounts in this document are in 2018 prices, unless indicated otherwise. 

3 Point 145 of the Conclusions of the European Council (17 to 21 July 2020).  

4  Interinstitutional  Agreement  of  16  December  2020  between  the  European  Parliament,  the  Council  and  the 
Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well 
as on new own resources, including a roadmap for the introduction of new own resources, OJ L 433I, 22.12.2020, p. 
28. 

5 Point D of the Interinstitutional Agreement provides that ‘the repayment of the principal of such funds to be used for 
expenditure under the European Union Recovery Instrument and the related interest due will have to be financed by the 
general  budget  of  the  Union,  including  by  sufficient  proceeds  from  new  own  resources  introduced  after  2021.  All 
related liabilities will be fully repaid by 31 December 2058’. 

6 Preamble, point E of the Interinsitutional Agreement. 

7 Commission Work Programme 2021, COM (2020) 690 final. 

1 

 
                                                 
2.  THE COMMISSION’S PROPOSALS 

2.1.  A basket of new own resources 

The Commission proposes to further embed EU policy priorities in the revenue side 
of  the  EU  budget.  Emissions  trading  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. The 
historic  OECD/G20  Inclusive  Framework  on  Base  Erosion  and  Profit  Shifting  (BEPS) 
agreement  on  a  ‘Two-Pillar  Solution  to  Address  the  Tax  Challenges  Arising  from  the 
Digitalisation  of  the  Economy’  of  8  October  20218  involves  137  countries  and 
jurisdictions representing more than 90% of global GDP. ‘Pillar One’ of this agreement 
will  re-allocate  a  share  of  profits  from  the  world’s  largest  and  most  profitable 
multinational  enterprises to  participating countries worldwide, ensuring that these firms 
pay  a  fair  share  of  tax  wherever  they  operate  and  generate  profits.  These  initiatives 
require EU action, and therefore constitute an appropriate base for EU own resources. 

The Commission is proposing to amend the Own Resources Decision9 so that part of 
the  revenue  generated  by  the  legislative  proposals  put  forward  on  14  July  2021  on  a 
carbon  border  adjustment  mechanism10  and  emissions  trading11  will  accrue  to  the  EU 
budget.  In  addition,  building  on  the  historic  OECD/G20  Inclusive  Framework  on  Base 
Erosion and Profit Shifting agreement, the Commission is proposing  to establish a new 
own resource based on a share of the residual profits of the largest and most profitable 
multinational  enterprises  that  will  be  re-allocated  to  EU  Member  States.  This  own 
resource  would  be  introduced  once  the  Multilateral  Convention  negotiated  by  the 
Inclusive Framework on Base Erosion and Profit Shifting, and the related EU Directive, 
would both be in force and effectively apply. The introduction of all new own resources 
will require the adoption of the underlying sectoral proposals. 

The  Commission  proposes  that  25%  of  the  revenues  generated  by  EU  emissions 
trading become an own resource for the EU budget. The Commission has proposed a 
wide-ranging legislative package to reduce further greenhouse gas  (GHG) emissions by 
2030,  with  the  objective  of  reaching  climate  neutrality  by  2050.  In  particular,  this 
includes the strengthening of the existing EU Emissions Trading System (ETS)12 and its 
extension  to  the  maritime  sector,  increasing  the  auctioning  of  aviation  allowances,  and 
establishing  a  new  emissions  trading  system  for  building  and  road  transport.  While 
revenues  from  the  auctioning  of  emission  allowances  under  the  present  EU  Emissions 
Trading System 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.  It 
would  also  include  proceeds  for  allowances  available  for  auctioning,  but  that  Member 

8 Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, 
OECD/G20 Base Erosion and Profit Shifting Project, 8 October 2021. 

9 Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European 
Union, OJ L 424, 15.12.2020, p.1  

10 Proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment 
mechanism, COM(2021) 564 final. 

11 Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC establishing 
a system  for greenhouse gas emission allowance trading within the Union, Decision (EU) 2015/1814 concerning the 
establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and 
Regulation (EU) 2015/757, COM(2021) 551 final. 

12 Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the EU. 

2 

 
                                                 
States  chose  not  to  auction,  using  the  flexibility  inbuilt  in  the  EU  Emission  Trading 
System13.  Allowances  auctioned  by  the  European  Investment  Bank  to  finance  the 
Innovation Fund and the initial endowment of the Modernisation Fund are excluded from 
the  scope  of  the  own  resource.  Revenues  for  the  EU  budget  are  estimated  at  around 
EUR 9 billion  per  year  over  the  period  2023-2030,  a  share  of  which  will  enable  the 
financing of the Social Climate Fund.  

The  Commission  additionally  proposes  a  temporary  solidarity  adjustment 
mechanism  to  ensure  a  fair  emissions  trading-based  own  resource  contribution 
from all Member States. In particular, until 2030, an upper and lower boundary for the 
EU  emissions  trading  own  resource  contribution  will  apply,  in  relation  to  the  gross 
national 
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 will  ensure a  just 
contribution from all. 

income  key.  This  will  avoid 

The Commission proposes that 75% of the revenues generated by a carbon border 
adjustment  mechanism  become  an  own  resource  for  the  EU  budget.  The  main 
objective  of  the  carbon  border  adjustment  mechanism  is  to  support  the  reduction  of 
global carbon emissions, by addressing the risk of carbon leakage. In the context of the 
mechanism,  declarants  will  need  to  acquire  a  sufficient  amount  of  certificates  to  cover 
the emissions of their imported goods. Under the proposal for a regulation establishing a 
carbon  border  adjustment  mechanism,  Member  States  would  be  responsible  for 
collecting  revenues  from  the  sale  of  carbon  border  adjustment  mechanism  certificates. 
Revenues  for  the  EU  budget  are  estimated  at  around  EUR 0.5 billion  per  year  over  the 
period 2023-203014. 

The  Commission  proposes  an  own  resource  equivalent  to  15%  of  the  share  of  the 
residual profits of the largest and most profitable multinational enterprises that are 
reallocated  to  EU  Member  States  under  the  agreement  on  a  reform  of  the  international 
tax framework. On 8 October 2021, 137 countries that are members of the OECD/G20 
Inclusive Framework on Base Erosion and Profit Shifting agreed on a two-pillar solution 
on  the  re-allocation  of  profits  of  multinational  enterprises  and  on  an  effective  global 
minimum tax rate. ‘Pillar One’ of the agreement provides for the re-allocation of a share 
of the residual profits of the largest and most profitable multinational enterprises to end 
market  jurisdictions  where  goods  or  services  are  used  or  consumed.  The  practical 
implementation  aspects  of  the  agreement  are  still  being  finalised.  The  Commission  has 
committed in its 2022 Work Programme to table a proposal for a Directive giving effect 
to  the  agreement  in  compliance  with  EU  law  and  in  line  with  the  requirements  of  the 
Single Market. Under the Commission’s own resources proposal, Member States would 
provide a national contribution to the EU budget based on the share of the taxable profits 
of multinational enterprises re-allocated to each Member State under Pillar One. Pending 

13 The derogation to provide allowances for free to the power generation sector, cancellation of allowances under the 
effort sharing regulation, additional discretionary transfers to the Modernisation Fund. 

14 The carbon border adjustment mechanism is not expected to generate revenues in the transitional period from 2023 
to  2025,  in  line  with  Regulation  (EU)  [XXX]  of  the  European  Parliament  and  of  the  Council  establishing  a  carbon 
border adjustment mechanism. 

3 

 
                                                 
the  finalisation  of  the  agreement,  revenues  for  the  EU  budget  could  amount  to  up  to 
EUR 2.5-4 billion per year15. 

2.2.  Amendment  of  the  regulation  laying  down  the  multiannual  financial 

framework for the years 2021-2027 

Repayment  of  NextGenerationEU  will  follow  a  stable  and  predictable  profile  of 
reduction of liabilities, through appropriate provisions in the multiannual financial 
framework.  A  steady  stream  of  revenue  from  new  own  resources  would  ensure 
predictability  and  stability  of  repayment.  To  reflect  how  proceeds  from  new  own 
resources  can  enable  repayment  of  NextGenerationEU16,  the  Commission  is  therefore 
proposing  an  automatic  adjustment  mechanism  of  the  ceilings  of  the  multiannual 
financial framework17 based on the collected amounts of new own resources18. 

Figure 1 - NGEU planned reduction of liabilities 

NGEU outstanding debt p.a.
in EUR billion

900

800

700

600

500

400

300

200

100

0

Linear amortisation  
2027 -2058 

Source: European Commission. Amounts in current prices. 

The Commission has put forward a proposal for a Social Climate Fund19 to protect 
vulnerable  households  from  having  additional  financial  burden  coming  from  the 

15 A more precise number cannot be identified at this time given that the discussions on certain technical implementing 
details of the OECD/G20 ‘Pillar One’ agreement are still ongoing. The range provided is based on a series of broad 
assumptions and cannot be further qualified also due to data limitation issues as regards the potential companies that 
may ultimately contribute to the reallocation of taxing rights under the agreement. 

16  In  line  with  point  150  of  the  Conclusions  of  the  European  Council  (17  to  21  July  2020),  which  states  that  ‘the 
proceeds  of  the  new  own  resources  introduced  after  2021  will  be  used  for  early  repayment  of  Next  Generation  EU 
borrowing. The Commission is invited to propose a revision of the MFF to this effect in due course’. 

17 As established in Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual 
financial framework for the years 2021 to 2027, OJ L 433I , 22.12.2020, p. 11. 

18 The automatic adjustment mechanism is capped at EUR 15 billion (in 2018 prices), which corresponds to an annual 
average  of  EUR  17.4  billion  (in  current  prices)  for  the  period  2024-2027.  The  amounts  needed  for  repayment  of 
NextGenerationEU after 2027 will depend on the actual amount of borrowing to finance non-repayable support, as well 
as any repayment of that borrowing carried out in the current multiannual financial framework. 

19  Proposal  for  a  regulation  of  the  European  Parliament  and  the  Council  establishing  a  Social  Climate  Fund, 
COM(2021) 568 final. 

4 

 
                                                 
the  Fund 

establishment of a new emissions trading  system in the EU for buildings and road 
to  amounts 
transport.  The  financial  envelope  of 
corresponding in principle to some 25% of the expected revenues from the inclusion of 
buildings  and  road  transport  in  the  scope  of  EU  emissions’  trading.  This  additional 
expenditure was not foreseen in the Commission’s initial proposal for a new multiannual 
financial  framework.  To  that  end,  the  Commission  proposes  to  include  an  increase  of 
Heading 3 and, correspondingly, of the payments’ ceiling, in the targeted amendment of 
the  multiannual  financial  framework  regulation,  to  accommodate  the  additional 
expenditure for the Fund for the period 2025-2027. 

is  commensurate 

A  key  advantage  of  using  the  EU  budget  to  address  the  social  impacts  of  the  new 
emissions trading system is that the Social Climate Fund will then rely on the control 
provisions already in  place for the  general  budget.  It  will  be under the oversight  of the 
Court of Auditors and the European Parliament, after a recommendation by the Council, 
would  need  to  grant  discharge  to  the  Commission  for  its  operation.  This  will  ensure 
accountability  of  expenditure  and  provide  assurances  on  the  quality  of  the  Fund’s 
expenditure. 

3.  NEXT STEPS  

The Interinstitutional Agreement of 16 December 2020 provides that the institutions will 
take  the  necessary  steps  to  facilitate  a  swift  approval  of  the  framework  for  new  own 
resources. The Council committed to deliberate on the first basket of new own resources 
by 1 July 2022 in view of their introduction by 1 January 2023. Furthermore, in view of 
the  commitment  taken  in  the  Interinstitutional  Agreement  and  the  need  to  present  an 
adequate  amount  of  new  own  resources  for  the  repayment  of  the  European  Union 
Recovery Instrument, the Commission will present a proposal for a second basket of 
new own resources by the end of 2023.  

In  this  context,  as  reiterated  in  the  ‘Communication  on  Business  Taxation  for  the  21st 
century’20  of  May  2021,  the  Commission  will  propose  additional  new  own  resources, 
which  could  include  a  Financial  Transaction  Tax  and  an  own  resource  linked  to  the 
corporate sector. This second package will build on the ’Business in Europe: Framework 
for Income Taxation (BEFIT)’ proposal foreseen for 2023.  

A  rapid  agreement  on  the  proposals  amending  the  Own  Resources  Decision  and  the 
regulation laying down the multiannual financial framework for the years 2021-2027, as 
well  as  a  swift  approval  by  Member  States,  in  accordance  with  their  respective 
constitutional requirements, of the amended Own Resources Decision, would provide the 
Union the means for its ambitions – a climate-neutral, digital, just, inclusive and resilient 
society for all Europeans. 

The  Commission  will  continuously  assess  the  adoption  process  in  view  of  ensuring 
adequate amounts for the repayment of the European Union Recovery Instrument. 

20 COM(2021) 251 final. 

5