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: Macroeconomic policy

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 by this author
 

Opinion

European governance

Can the EU fiscal rules jump on the green bandwagon?

By and large, setting a new green golden rule would be a useful addition to the existing EU fiscal framework.

By: Guntram B. Wolff Topic: European governance, Green economy, Macroeconomic policy Date: October 22, 2021
Read article
 

Opinion

COP26: why carbon pricing is crucial to China’s climate change pledges

China’s emissions trading scheme is a welcome but to reach its full potential, it needs to cover more of China’s emissions, go beyond the electricity sector and let prices reflect the true cost of carbon.

By: Alicia García-Herrero and Junyu Tan Topic: Global economy and trade, Green economy Date: October 22, 2021
Read about event More on this topic
 

Past Event

Past Event

The contribution of hydrogen to European decarbonisation

What role will hydrogen play in Europe's decarbonisation?

Speakers: Alison Conboy, Matthias Deutsch, Ruud Kempener, Ben McWilliams and Andrea Pisano Topic: Green economy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 21, 2021
Read about event More on this topic
 

Upcoming Event

Oct
27
12:00

Can COP26 save the planet?

In this episode of the Sound of Economics Live Italy's Minister for Ecological Transition, Roberto Cingolani outlines his priorities for the upcoming COP Summit.

Speakers: Roberto Cingolani and Guntram B. Wolff Topic: Green economy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Upcoming Event

Oct
28
14:00

Can climate change be tackled without ditching economic growth?

What will be necessary to achieve climate goals and keep growing?

Speakers: Francesco Starace, Simone Tagliapietra and Guntram B. Wolff Topic: Green economy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event
 

Past Event

Past Event

Monetary policy in the time of climate change

How does climate change influence monetary policy in the eurozone? What potential monetary policy measures should be taken up to address climate risks?

Speakers: Cornelia Holthausen, Jean Pisani-Ferry and Guntram B. Wolff Topic: Green economy, Macroeconomic policy Date: October 20, 2021
Read article More on this topic More by this author
 

Blog Post

Better sustainability data is still needed to accelerate the low-carbon transition in capital markets

Investors need more trustworthy sustainability data. Regulators should leave space for better products to emerge, while remaining alert to well-known patterns of misconduct in capital markets.

By: Alexander Lehmann Topic: Banking and capital markets Date: October 18, 2021
Read article More by this author
 

External Publication

Global Economic Resilience: Building Forward Better

A roadmap for systemic economic reform calling for step-change in global economic governance to increase resilience and build forward better from economic shocks, prepared for the G7 Advisory Panel on Economic Resilience.

By: Thomas Wieser Topic: Global economy and trade, Macroeconomic policy Date: October 14, 2021
Read article
 

Opinion

Xi’s pledge on financing coal plants overseas misses point

China’s domestic installation of coal-fired power plants continues at great pace.

By: Alicia García-Herrero and Simone Tagliapietra Topic: Global economy and trade, Green economy Date: October 7, 2021
Read article More on this topic
 

Opinion

The only quick-fix to Europe’s energy price crisis is saving energy

The only thing Europe can quickly do to prevent a potentially difficult winter is to actively promote energy conservation in both the residential and industrial sectors.

By: Simone Tagliapietra and Georg Zachmann Topic: Green economy Date: October 7, 2021
Read article
 

Opinion

Will China use climate change as a bargaining chip?

Beijing shows signs of changing tactics ahead of the COP26 conference.

By: Alicia García-Herrero and Simone Tagliapietra Topic: Global economy and trade, Green economy Date: October 6, 2021
Read about event More on this topic
 

Past Event

Past Event

What is the link between biodiversity loss and financial instability?

Biodiversity loss impacts financial stability. How big is the risk of biodiversity loss for financial institutions?

Speakers: Sylvie Goulard, Romain Svartzman, Guntram B. Wolff and Michael Wilkins Topic: Banking and capital markets Date: October 5, 2021
Load more posts