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Carbon Pricing, Next Generation EU and the Role of Cities. A Federal Structure for European Taxation

Alberto Majocchi
February 2021

The pursuit of the goal of carbon neutrality requires the introduction of a carbon pricing policy applied to all sectors, that also provides for a minimum price for fossil fuels and a border tax adjustment on imported goods.Following the decision of the European Council to issue bonds guaranteed by the European budget, to finance the Next Generation EU, the recent inter-institutional agreement on multiannual budget provides for a precise sequence of deadlines for the progressive introduction – according to a predefined schedule – of new own resources. It is indeed a crucial step towards the acknowledgement of a fiscal capacity of the Union.In the implementation of the Next Generation EU, the use of a relevant share of the available resources requires an intervention by the cities. In order to support the investments that have to be made at the local level, reforms of the taxation structure need to be initiated, in a fiscal federalism perspective, that provides for coordination between different government levels, with the definition of decision-making mechanisms for the allocation of resources, within the framework of a reform of federal institutions.

Keywords: carbon pricing, Next Generation EU, cities, federal structure, European taxation.

Alberto Majocchi is Emeritus Professor of Public Finance, University of Pavia, and Vice-President of the Centro Studi sul Federalismo, Turin

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