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Innovative financing at a global level

06.04.2010 - In view of key global challenges with significant budgetary implications, this Commission staff working document assesses main options for innovative financing related to the financial sector, climate change and development.

The Commission Staff Working Document assesses the potential of innovative sources of financing in order to help structure the debate by narrowing down the range of options to the most promising ones.

>> SEC(2010) 409 final. 1 April 2010. Commission staff working document. Innovative financing at a global levelpdf(354 kB)
>> Press release IP/10/405. Commission services issue an analysis of the main innovative financing options Choose translations of the previous link 

At its meeting of October 2009, the European Council had invited the Commission to examine innovative financing at a global level. The European Parliament asked the Commission in March 2010 to assess the impact of a global financial transactions tax, also in comparison to other potential sources of revenues.

Innovative finance can make a significant contribution

The global economic and financial crisis has created important needs for fiscal consolidation in EU countries and around the world. In addition, resources must be found to meet key global challenges with significant budgetary implications in the areas of financial stability, climate change and development. While reductions in expenditure and improvements in existing tax systems should be the main response to these fiscal and global challenges, new non-traditional ways of raising public finance – 'innovative finance' - can make a significant contribution.

Coordination at a global level

Global coordination will be essential for a successful implementation of most instruments of innovative financing, which underlines the importance of participation by other relevant key players, many of them members of the G-20. Actions by the EU alone would be less effective but could be considered, particularly if there are good reasons to expect that an EU role of global leadership would be followed by other key countries.

Assessment shows potential for double dividend

The assessment shows that there are some instruments where a significant "double dividend" of both raising revenues and improving market efficiency and stability could be reaped. This concerns in particular a stability levy on financial intermediaries. It would correct some of the negative externalities that may result in the creation of excessive systemic risk, preferably as part of a coordinated international or EU initiative.

It also concerns the pricing of carbon emissions, in addition to the Emission Trading Scheme (ETS), through a better coordination at EU level of the application of carbon tax components in existing energy taxes.

For innovative financing for development, the proposed and existing instruments have some potential for further implementation and scaling up.