THE STATE OF THE EUROPEAN UNION REPORT. Europe in a period of transition

THE EU NEXT GENERATION RECOVERY FUND, THE YEAR OF ITS IMPLEMENTATION 53 in the USA, would have the potential to deactivate many of the corporate tax evasion operations in the EU, such as those derived from abuse of transfer prices. So then, the aforementioned budgetary agreement from the European Parliament-Council on 14 December 2020 now proposes a quota for the increase in collection which would mean that introducing this Commission pro- posal would lead to bringing the EU more own resources. A few taxes associatedwith the full development of the European GreenDeal: the Emissions Trading Systemand the Carbon Border AdjustmentMechanism Firstly, it should be mentioned that the European tax on non-recycled plastic has been in force since January 2021, taxing waste from non-recyclable plastic packaging. Furthermore, two very important proposals deserve a mention that form part of the “Fit for 55” package presented in July 2021 by the Commission. This package constitutes the first attempt at legislative development of the European Green Deal (EGD), the Commission’s government programme for the next few years. Among the many initiatives within the EGD, two important green taxation instruments and market correctors are directly linked to meeting the goals for decarbonisation, set both in the Paris Agreement and in the actual EGD. The first of the claims to create a new source of own resources assigning to the Union Budget 20% of the revenue from the emission trading system (ETS). The EU has been a pioneer in this field, as it has used the ETS as an instrument to influence CO2 prices in the EU emissions market since 2005. This ETS regime has been subsequently extending to other countries and zones in the world. This system claims to raise the CO2 prices for certain products by internalising their environmental costs. For this reason, it subjects a series of particularly CO2-inten- sive industrial sectors to a system of carbon quotas. This determines the quantity of carbon emissions that can be released as a maximum for the sector. This maximum CO2 emissions quota is progressively reduced depend- ing on the environmental goals agreed in international commitments. Companies with emission levels below the thresholds set at any time can accumulate emission rights in their favour that they can offset later. They can also sell their emission rights to other companies in the market. In some cases, the quotas were assigned free of charge, but from 2013 onwards, the companies in question had to begin to pay for them at the CO2 market price. The idea is that companies will progressively receive fewer free quotas until this no-charge aspect is phased out in 2030. The ETS is used to stimulate innovation to develop sectors with a more intensive use of clean energies. Al- though it is true that companies which withstand higher prices for the emissions will have to pass on this increase to the end consumer. This might lead, as currently seen, to a rise in electricity prices, while the renewables are settling into the energy mix for MS. In the Fit for 55 package, the Commission is con- templating a reform of the European system of emission rights, aware that this has some significant shortfalls. Firstly, the aim is to extend the ETS regime to carbon-in- tensive sectors that have been excluded so far, such as the automotive or construction industry. Furthermore, the reform wishes to progressively eliminate subsidies for aviation and include maritime transport emissions in the European ETS system. Finally, and regarding sectors already covered by the current ETS system, the Commission aspires to increase the envisaged annual emission reduction percentages to accelerate decarbonisation. On the other hand, the Commission aims to use this legislative package to approve a new tax figure to com- plement the aforementioned ETS regime. This is what is known as the “Carbon Border Adjustment Mechanism” (CBAM).The CBAM would also be used as a source of ex- tra financing for own resources associated with the NGEU. The CBAM would work like a tariff on imports with a view to being applied to the same CO2-intensive products