The Emissions Trading Scheme (ETS) and the Carbon Border Adjustment Mechanism (CBAM)

The CBAM and amendments to the ETS have been enacted but not in terms of becoming
own resources for the EU, as there have already been two sets of proposed amendments to the
2020 Own Resources Decision so far, neither of which have resulted in legislative
amendments. Assessing the capacity of either measure to produce sufficient revenue to repay
the NextGenerationEU debt is difficult because of multiple issues, which this chapter divides
into three categories. First, there is the uncertainty generated by the EU’s conflicting
objectives. Both measures depend on carbon usage in order to generate revenue, and
significant continued carbon usage if they are to generate enough revenue to repay the debt.
However, both measures are fundamental to the EU’s green policy objectives. Second, the
potential revenue either measure could raise is based on estimated figures. Third, it is unclear
whether the revenue raised will be enough to repay the full cost of borrowing in the form of
both principal and interest. This chapter questions whether the EU has the ability to repay the
NextGenerationEU debt with these measures, or whether has it otherwise so far developed
only debt capacity.