The future of EU funding: The new budget proposal for 2028–2034

On 16 July 2025, the European Commission released its proposal for the next Multiannual Financial Framework (MFF), setting the EU budget for 2028–2034 at EUR 2 trillion. While the budget continues to support cohesion, agriculture and social inclusion, a key development for the ESG tax and legal community is the reinforced focus on strategic investments and the financing of these initiatives through new own resources.

The Commission proposes the creation of a European Competitiveness Fund, which will act as a central instrument to boost investment in sectors deemed essential for Europe’s long-term competitiveness and resilience. While not the largest component of the MFF, it is particularly relevant due to its focus on accelerating the clean transition, decarbonization and innovation.

Designed to streamline access to funding, the Fund will unify rules and serve as a single point of entry for applicants. It will complement existing mechanisms such as Horizon Europe, the Innovation Fund and the Connecting Europe Facility, and work in tandem with the newly announced Industrial Decarbonisation Bank. Together, these instruments aim to:

• Support large-scale deployment of clean technologies.
• Reduce investment fragmentation across member states.
• De-risk private capital mobilization in sectors such as renewables, sustainable transport, circular economy and industrial decarbonization.

The Fund is positioned as a structural enabler of the EU’s green industrial policy, aligning financial instruments with climate targets and ensuring that public spending supports long-term strategic autonomy and environmental performance.

To repay the EUR 800 billion borrowed for NextGenerationEU and to finance new priorities while keeping national contributions stable, the Commission proposes a mix of existing and additional EU-level revenue sources. These proposals build on earlier initiatives from 2021 and 2023, with a renewed emphasis on aligning revenue with environmental and economic objectives.

In a first step, the Commission confirms two previously proposed resources:

• ETS-based own resource: A contribution based on 30 percent of revenues from the existing EU Emissions Trading System (ETS1). This is expected to raise approximately EUR 9.6 billion annually. The proposal no longer includes a share from ETS2 revenues.
• CBAM-based own resource: A contribution based on 75 percent of revenues from the sale of certificates under the Carbon Border Adjustment Mechanism, estimated to generate EUR 1.4 billion annually.

In addition, the Commission proposes three new resources:

• Corporate resource for Europe (CORE): A lump-sum contribution based on the turnover of companies operating in the EU. It would apply to EU companies and EU-based permanent establishments of non-EU companies with turnover above EUR 100 million, with amounts calculated through a progressive bracket system. Contributions will vary from EUR 100,000 to EUR 750,000 per year, depending on the net turnover of companies in scope. The estimated annual revenue is EUR 6.8 billion.
• E-waste own resource: A levy of EUR 2 per kilogram on uncollected waste electrical and electronic equipment (WEEE), calculated as the difference between the average weight of products placed on the market in the preceding three years and the amount collected in the current year. This is expected to yield EUR 15 billion annually and explicitly supports circular economy and waste reduction goals.
• Tobacco excise duty own resource: A contribution of 15 percent of the revenues generated from the minimum excise duty on manufactured tobacco and related products, expected to generate EUR 11.2 billion annually.

The Commission also proposes an adjustment to the plastic own resource: the current rate of EUR 0.80 per kilogram of non-recycled plastic packaging waste will be indexed to inflation, preserving its real value over time.

All proposed new own resources require unanimous approval by member states in the Council. If adopted, the changes would apply from 1 January 2028, while the CORE levy would take effect on 1 January of the first calendar year following the Council decision’s entry into force.

These proposals mark a significant shift in how the EU funds its policy goals and will have far-reaching implications for companies operating in Europe. While new instruments, such as the Competitiveness Fund, offer expanded funding opportunities, the introduction of new EU-level taxes and levies will require careful monitoring and compliance planning.

For a more detailed technical analysis of the new own resources, please refer to the latest EURO Tax Flash from the KPMG EU Tax Centre or contact Ruth Guerra or Weronika Żurawska.