Use of the revenues from excess emissions premiums

Excess emission premiums are imposed on manufacturers if their average specific emissions exceed their targets in a given calendar year. Until 2019, the revenues from the excess emission premiums have been limited, and did not exceed 3 million euros in any given year.

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However, with the increasing stringency of the EU fleet wide targets, it is not excluded that these revenues may increase significantly in the years to come. Even if more significant amounts would become available, they will, however, still be highly variable and difficult to predict over time.

6.2.3.1 Option REV 1: Assigning the revenue to a specific fund or programme

The possibility of assigning the revenue has been evaluated for the Just Transition Fund and the Innovation Fund.

The objective of the Just Transition Fund (JTF) to support the transition process towards the EU’s 2030 target for energy and climate and a climate-neutral EU economy by 2050 is consistent with the overall objective of re-skilling and up-skilling of workers as expressed in the review Article of Regulation (EU) 2019/631.While the JTF does not foresee any means of channelling support directly to the automotive sector, it is not excluded that the sector could benefit indirectly, inter alia through re-skilling and up-skilling of workers, if such support is in line with the aims of the Member States’ territorial just transition plans as approved by the Commission.

The Innovation Fund pursues objectives that are formally consistent with those of Regulation (EU) 2019/631. However, in its current set-up, as defined in the EU ETS Directive, it would not be possible to target the objective of re-skilling and up-skilling referred to in the review Article of Regulation (EU) 2019/631, nor to ring-fence any revenue from the premiums specifically to the automotive sector. Assigning the revenue to the Innovation Fund is therefore conditional on (i) the revision of the EU ETS Directive, and on how the automotive sector may be addressed, at least indirectly, by support from the Fund, and (ii) on the addition in the Directive of the relevant provisions on the receipt and distribution of the assigned revenue. It would also be necessary to revise the implementing legislation on the operation of the Innovation Fund as well as on the management of the revenue of the Fund by the EIB.

Environmental impacts

There are no direct environmental impacts. Where additional spending possibilities are created, there may, however, be some indirect beneficial impacts, by channelling the amounts available to climate related expenditure.

Economic impacts

Assigning the revenue to a specific fund or programme may in principle lead to increased spending possibilities. The overall impact of that revenue may, however, be limited, considering that the CO2 emission performance standards provides a framework for manufacturers to meet their specific emission targets. It does not aim at raising revenues.

Based on the current set up of the two Funds, it should also be noted that support could not be directly addressed to the automotive sector.

Social Impact

While the possibility is foreseen under the JTF to specifically support the up-skilling and reskilling, including training, of affected workers, it is likely that the social impact of assigning the revenue from the premiums to either of the two funds will have a limited social impact, considering that the amounts available may be quite small.

Administrative burden

Assigning the revenue will increase the administrative burden.

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Due to the variability and unpredictability of the revenue, mechanisms will be needed to ensure that before being assigned, the amounts reach a level that would at least exceed the cost associated to the additional administrative burden resulting from the assignment and the need to distribute the additional resources.

This may be achieved by either allowing the revenues to accumulate over a longer period, or provide for a threshold over which the revenue would be assigned (if below the threshold, the premiums would be considered as revenue for the general budget).

In the case of the JTF, the additional resources resulting from the assigned revenue will be distributed among Member States in accordance with the distribution mechanisms foreseen in the JTF Regulation. Member States will, in order to include those additional resources, have to amend their spending programmes and those amendments will subsequently have to be approved by Commission Decisions. While excess emission premiums may be imposed annually, it would lead to excessive administrative burden if this would result in the need to annually revise and approve Member States’ spending programmes.

In the case of the Innovation Fund, the revenue from the premiums could only be assigned once the amount is certain and can be included in the relevant financing decision preceding the call for projects. In order to ensure the certainty of the amounts, the premiums would have to be accumulated and this would require that the agreement with the EIB on the management of the revenue of the Innovation Fund would have to be renegotiated, including the fees charged by EIB to cover the additional costs.

6.2.3.2 Option REV 2: Consider the revenue from the excess emission premiums as an “own resource”

The EU budget is financed primarily by own resources. These are defined in Council Decision (EU, Euratom) 2020/2053 and do not currently include revenue from financial penalties such as that from excess emission premiums.

As mentioned in Recital (8) of that Decision, work should, however, continue, in the course of the multiannual financial framework for the period 2021-2027, towards the introduction of other own resources. A pre-condition for this option to be considered, is that the revenue may be defined as an “own resource” under that Decision. However, the inter-institutional agreement of 16 December 2020 states that the Commission should, in its proposal for defining additional own resources, give priority to revenue from the emissions trading system, the carbon border adjustment mechanism and a digital levy.

Environmental impact

There are no specific environmental impacts.

Economic impact

The objective of considering the revenue from the premiums as an “own resource” would be that this revenue can be considered additional to other own resources. As compared to the current approach, where the premiums are considered revenue for the general budget, this could in principle lead to increased spending possibilities.

It should, however, be noted that this option would not allow targeting the automotive sector any more than the current approach.

Social impact

There are no specific social impacts resulting from this option.

Administrative burden

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It is expected that the administrative burden would increase as compared to BAU.

Own resources consist in principle of contributions from the Member States. Should the revenue from the premiums be considered as own resources, they would first have to be distributed among Member States and would as such reduce the Member States’ contributions from other sources. This distribution would lead to additional administrative burden and is likely to be disproportionate considering the potentially limited and uncertain amounts that could be made available through this source of revenue.