Plastic and carbon proposals to help plug Brexit budget gap

The last "negotiating box" announced by Charles Michel, the president of the European Council, included a plastic tax as part of the so-called "own resources" - referring to sums that the EU could itself collect.

"As the budget is rather tight, all new own resources will help to mitigate the pressure [on member states] while contributing to the ecological and digital transition," the president of the European Commission, Ursula von der Leyen, said on Thursday (20 February), ahead of the extraordinary summit in Brussels on the seven-year, 2021-2027, EU budget.

"It is important to modernise the budget. I insist that if Europe wants to prosper in the future It will need to invest in it," she added.

The plastic-based contributions would be calculated by applying a levy of €0.8 per kg to the weight of plastic packaging waste that is not recycled.

However, according to the council's last proposal, an additional mechanism would also be introduced to avoid having an excessively regressive impact on national contributions.

Who will pay most?

In 2017, a total of 14.5m tonnes of packaging waste was generated in the EU - although the amount varied across member states: from 64kg per inhabitant in Bulgaria to 231kg per inhabitant in Luxembourg.

Likewise, the recycling rate of plastic packaging also varies widely among member states.

France, Finland and Estonia have the lowest recycling rate of plastic packaging waste (30 percent), which could make them the biggest plastic-based contributors.

According to initial estimates, this could mean an additional payment of €20m from Estonia.

However, according to the European Parliament, Ireland, Latvia, Denmark, Greece, Austria and Hungary also recycle plastic packaging at a low rate.

This new plastic tax for member states could generate on average €6.6bn per year.

Bloc imports carbon tax?

However, Brexit has left a €60-75bn hole in the forthcoming seven-year budget.

And to partly fill this gap, Michel's last "negotiating box" also proposes allocating a portion of revenues from carbon trading, known as the Emissions Trading System (ETS), to the EU budget.

In 2018, ETS revenues from selling EU carbon permits generated over €14bn.

Finally, there would be the possibility to introduce other initiatives that could expand the EU budget over the course of the 2021-2027 period - such as a digital tax, an aviation levy, a carbon border tax and a financial transaction tax.

Last December, the European Commission presented the Green Deal, which included the possibility of having a "carbon border adjustment mechanism" for selected sectors.

This would allow the EU to protect Europe's economy and industry against more carbon-emitting competitors from outside the bloc while contributing to the next budget.

The latest proposal for the EU budget states that at least 25 percent of expenditure should be spent on climate-related projects, while the European Parliament is calling for "at least" 30 percent.

However, critics warn that this might not be enough to meet the 2050 goal of climate-neutrality.

"The current EU budget does not fulfil the needs of the climate-neutral transition," according to the director of Climate Action Network Europe (CAN Europe), Wendel Trio, on Tuesday, who wants 40 percent of the budget to be for green projects.

Raphael Hanoteaux, EU policy officer for NGO CEE Bankwatch Network, had a slightly different perspective. "EU leaders must focus on the quality - not the quantity - of budget spending", he said.

"Debates over the size of the pot miss the mark, because effective spending means no money wasted on obsolete fossil fuels while giving priority to investments for action to curtail climate change," he added.