Opinion

European financing for the European refugee crisis

Protecting the EU's external borders is a shared task, which can be most effectively carried out if paid for with common funding. A tax on carbon combined with borrowing could fund refugee policy and also help the EU achieve its climate goals.

By: and Date: May 11, 2016 Topic: European Macroeconomics & Governance

This op-ed was originally published in La RepubblicaEl Pais, and Naftemporiki. It will also appear in Frankfurter Allgemeine Zeitung, L’Opinion and Dienas Bizness.

La_Repubblica_logo

2000px-El_Pais_logo_2007.svg

faz

lopinion

Dienas Bizness logo

 

As countries are struggling to implement the EU-Turkey deal on refugees, the debate on how to finance EU migration policy is heating up. Italy has proposed issuing ’EU Migration Bonds’ to fund migration in EU countries, while Germany’s finance minister Wolfgang Schäuble has proposed that expenses related to migration, including enhanced European border controls, be financed with a commonly agreed tax on fuels.

Pooling resources to fund migration and border controls makes sense in an EU that has largely removed internal border checks. Protecting external borders is a shared task, which can be most effectively carried out if paid for with common funding. EU countries should also work with neighbouring countries to influence their policies, and cooperate on dealing with migrants.

This is what the EU has been doing in the deal with Turkey and is also discussing as regards Libya. Again, EU actions will be much more effective if different policies are closely coordinated between countries. Once the political and administrative capacity is in place, the EU’s external policies will also need their own source of funding.

The IMF has estimated the short-term fiscal costs of asylum seekers to be at an average of around 0.1% of GDP. However, some countries are spending significantly more. Added to the asylum costs are the costs of other policies, such as more effective policies outside the EU and funding Frontex, the EU’s external border control agency. Handling the refugee crisis and funding the response to it cannot be left to Greece, Italy and the other peripheral countries alone nor can Germany and Sweden accept and fund almost all refugees arriving. It must be a joint endeavour.

Common border controls and migration policy represent a permanent cost – as the Italian paper argues, migration flows towards the EU will likely continue. Permanent costs require permanent resources and cannot be funded by deficits. The idea to create a common tax to fund such costs is therefore welcome. Wolfgang Schäuble’s idea to use a petrol tax points in a sensible direction.

In fact, a tax on carbon at European level would also help achieve the EU’s climate goals agreed at the Paris summit. If Europe wants to take its commitments on climate policies seriously, it must re-activate the European Emission Trading System, but also raise taxes on greenhouse gas emissions that are not covered by the ETS. With about 1.5 million tons of oil consumed every day in the EU, a tax increase on oil could raise enough revenue to deal with the refugee crisis. Although the cost would be paid by the consumer, in the long run a properly functioning approach at the European level would save money.

Nevertheless, the Italian proposal rightly emphasizes the importance of borrowing. The costs of dealing with the refugee crisis will vary over time. Currently, there are significant one-off costs to build the necessary infrastructure, build-up Frontex, buy necessary equipment and so on. According to standard neoclassical economic theory, high costs that are temporary should be funded by borrowing, keeping the tax rate constant over time, to avoid inefficiencies and prevent wrong investment choices.

Both the Italian proposal and the German finance minister rightly point out that addressing the refugee crisis requires resources, and that a European approach to finding these resources is desirable. The German finance minister is right that tax resources are needed, and introducing a tax that contributes to achieving the climate goals makes sense. At the same time, it is useful to be able to complement tax revenues with borrowing in order to fund temporarily high expenditures.

To make this a workable proposition, it is important that the right legal and administrative framework is built. The EU treaties, in particular articles 191 and 192, allow for the creation of a tax to meaningfully achieve the EU’s environmental objectives. A carbon tax is internally recognized as the right tax to achieve the goal of preventing climate change. Since the EU would move into new territory with such a step, careful political and administrative planning is needed. But both climate change and migration policies are common public goods that need common resources to be most effective.

 

 


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read article More on this topic More by this author
 

Blog Post

How to extend carbon pricing beyond the comfort zone

Rapid emission cuts need a carbon price for the whole economy. This must be introduced in careful stages. 

By: Georg Zachmann Topic: Energy & Climate Date: April 1, 2021
Read article Download PDF More on this topic
 

Policy Contribution

Navigating through hydrogen

Policymakers must address the need to displace carbon-intensive hydrogen with low-carbon hydrogen, and incentivise the uptake of hydrogen as a means to decarbonise sectors with hard-to-reduce emissions.

By: Ben McWilliams and Georg Zachmann Topic: Energy & Climate Date: April 1, 2021
Read article More on this topic
 

External Publication

Form a climate club: United States, European Union and China

If the three biggest economies agree a carbon tax on imports, it will catalyse climate action globally.

By: Guntram B. Wolff and Simone Tagliapietra Topic: Energy & Climate Date: March 23, 2021
Read article More on this topic More by this author
 

Opinion

Central banks don’t have to pick winners and losers to fight climate change

Disclosures and financial regulation don’t get enough respect as tools to reduce emissions.

By: Rebecca Christie Topic: Finance & Financial Regulation Date: March 11, 2021
Read about event More on this topic
 

Past Event

Past Event

A new carbon pricing paradigm for the path to net zero

Which role carbon pricing could and should play in the future policy mix?

Speakers: Ottmar Edenhofer, Peter Liese, Sam Van den Plas, Beatriz Yordi Aguirre and Georg Zachmann Topic: Energy & Climate Date: March 9, 2021
Read article Download PDF More on this topic
 

Policy Contribution

A whole-economy carbon price for Europe and how to get there

Putting carbon pricing at the centre of the EU climate policy architecture would provide major benefits. Obtaining these benefits requires a uniform, credible and durable carbon price – the economic first-best solution, however, several preconditions required to attain this solution are not yet met. This paper proposes a sequenced approach to ensure convergence of the policy mix on the first-best in the long run.

By: Ottmar Edenhofer, Mirjam Kosch, Michael Pahle and Georg Zachmann Topic: Energy & Climate Date: March 9, 2021
Read article
 

Opinion

The EU can’t separate climate policy from foreign policy

How to make the European Green Deal succeed.

By: Mark Leonard, Jean Pisani-Ferry, Jeremy Shapiro, Simone Tagliapietra and Guntram B. Wolff Topic: Energy & Climate, Global Economics & Governance Date: March 5, 2021
Read article More on this topic
 

Opinion

欧洲如何实现碳中和?一种建议

“欧洲绿色协议”目前缺少的一个工具是碳底价,它可以为ETS和非ETS部门设定最低碳定价。经过多年的讨论,现在可能已经到了引入这一制度的时候了。

By: Maria Demertzis and Simone Tagliapietra Topic: Energy & Climate Date: March 5, 2021
Read article More on this topic
 

Blog Post

Carbon price floors: an addition to the European Green Deal arsenal

As the European Union sets out a more ambitious climate policy, carbon price floors provide an opportunity to place greater emphasis on altering expectations, so that market agents anticipate today higher future pay-offs from low-carbon investment.

By: Maria Demertzis and Simone Tagliapietra Topic: Energy & Climate Date: March 3, 2021
Read about event More on this topic
 

Past Event

Past Event

The economics of biodiversity

Join us in conversation with Sir Partha Dasgupta and Frans Timmermans to mark the publication of The Economics of Biodiversity: The Dasgupta Review

Speakers: Sir Partha Dasgupta, Maria Demertzis, Frans Timmermans and Guntram B. Wolff Topic: Energy & Climate Date: March 3, 2021
Read article More on this topic More by this author
 

Podcast

Podcast

Can central banks save the planet?

“We are not going to lead our society to a low-carbon economy by continuing to finance the status quo. “

By: The Sound of Economics Topic: Energy & Climate Date: February 24, 2021
Read article More on this topic More by this author
 

Blog Post

A brown or a green European Central Bank?

The European Central Bank portfolio is skewed towards the brown economy, reflecting a bias in the market. Can and should the bank deviate from the market allocation?

By: Dirk Schoenmaker Topic: Energy & Climate Date: February 24, 2021
Load more posts