The 27 national EU leaders are discussing by video link an unprecedented stimulus package based on a proposal by the bloc’s executive to raise 750 billion euros for a recovery fund that would top up the next EU budget worth 1.1 trillion euros.
If approved, the plan would need to lay out how to repay the debt, with the European Commission proposing raising new EU funds to achieve that, including using the EU emissions trading system (ETS) to garner 10 billion euros.
That proposal has faced opposition from east European states that want to keep hold of their carbon revenue.
Poland, the Czech Republic, Lithuania, Estonia and Bulgaria are all against the idea, EU diplomatic sources said.
“Expanding the ETS revenue is unacceptable to us, it would cost us too much,” a senior EU diplomat from one of the countries told Reuters.
The EU’s ETS puts a price on pollution by forcing power plants and factories to buy permits to cover their emissions. Proceeds from those carbon permit sales – totalling 14.6 billion euros in 2019 – currently go to national budgets.
The Commission proposed that, from 2021, countries keep the same ETS revenue as in recent years, while extra proceeds from expanding the scheme to shipping would go to EU coffers.
Another eastern EU diplomat said it would put a disproportionate burden on poorer members of the bloc.
That draws a battle line between the east and their western peers such as France and Luxembourg which favour the idea.
Supporters say the ETS proposal, and the Commission’s idea to tax non-recycled plastic to raise further EU revenue, could be implemented faster than other schemes, such as a digital tax and imposing carbon costs on imported goods.
The fight over carbon reflects bigger divisions over a push by western EU countries including Germany, France and the Netherlands to deliver a “green” economic recovery from the pandemic, while the east frets about costly climate aims.
“We refuse to put the Green Deal above the recovery,” one government official from an eastern EU country said, referring to the EU’s flagship plan to slash emissions to zero by 2050. “There is no Green Deal without a recovery.”