What the European Green Deal means when exporting to the EU
The European Green Deal is a comprehensive plan to reach climate neutrality. It is also a strategy for growth. For businesses, there will be new sustainability requirements which demand adjustments in their production. The strategy will also provide new possibilities for business both within and outside the EU. This article is an overview of the areas that could be of interest if you are an exporter to the EU.
An increased demand from the EU for new technologies and products will create opportunities for export to the EU. While the EU countries may struggle with transitioning from old and unsustainable production methods, a specific advantage for developing economies can be the possibility to kick-start its green economy by maintaining and expanding sustainable practices already in place. While lack of knowledge, technology and costs of adjustments may be initial challenges for businesses, the ultimate profits of being part of the green transition, finding business opportunities and being more resource-efficient can outweigh them.
The European Green Deal is an ongoing political and legislative process and it is not yet clear what concrete actions and legislation it will lead to. However, for your business, it is useful to get familiar with its main ideas in order to identify parts that might affect your business. Some concrete examples affecting export to the EU:
- Carbon price on imported goods to the EU starting off with cement, iron and steel, aluminium, fertilizer, and electricity. Starting from 2022, fully in place 2026.
- Requirements for sustainable products that are more durable, reusable, repairable, recyclable and energy-efficient. Ongoing and several new initiatives from 2022.
- Sustainable foods have to meet new common definitions, general principles, requirements, certification, and labelling schemes. Ongoing revisions and a new legislative framework to be proposed in 2023.
- Preserving biodiversity calls for organic farming, reducing use of chemical pesticides, restoring soil and reducing the loss of nutrients from fertilisers. Several ongoing initiatives. Proposed deforestation rules in 2021.
- Documentation on sustainability in production must meet new EU taxonomy rules. Starting from 2022.
The overall target is climate neutrality
The overarching target of the EU’s climate ambition is climate neutrality in 2050. For this, a Climate Law is in place to ensure that all EU policies contribute to the climate neutrality objective. The law was followed in July 2021 by the “Fit for 55 Package”. The 55 stands for the target of 55% reduction of greenhouse gas emissions by 2030. The package contains legislative tools to deliver this in the fields of climate, energy, land use, transport and taxation.
Of particular interest is the proposed new Carbon Border Adjustment Mechanism (CBAM). The mechanism will put a carbon price on imported goods in order to ensure that the European emission reductions contribute to emissions decline also globally.
In practice, this means that EU importers will be required to buy certificates, declare the emissions embedded in the imported products and then give up certificates corresponding to this. If they can provide verified information from producers outside the EU that a carbon price has already been paid during the production, this can be deducted from the final bill.
To begin with, the CBAM will focus on goods, such as cement, iron and steel, aluminium, fertilizer, and electricity. The system will be introduced gradually until the end of 2025 and then be fully in place by 2026.
As an exporter from outside the EU it is a good idea to keep an eye on the effects of the CBAM and its possible extension to other products,
Carbon Border Adjustment Mechanism: Questions and Answers (europa.eu)
Sustainable products the norm in the EU – the Circular Economy Action Plan
The circular economy aims to maintain the value of products, materials, and resources for as long as possible by returning them into the product cycle at the end of their use. This will require products that are more durable, reusable, repairable, recyclable and energy-efficient.
The Circular Economy Action Plan, launched in 2020, aims to make sustainable products the norm in the EU. One of its most important features is the “sustainable products policy” which will lead to a legal framework where all products produced or imported to the EU fulfils sustainability standards.
Focus will initially be on resource-intensive sectors where the potential for circularity is high, such as electronics and ICT, batteries, vehicles, packaging, plastics, textiles, construction and buildings, food, water and nutrients. For each of these sectors there will be specific legislation or other action to ensure circularity.
Many of the initiatives within the sustainable products policy are awaited in the near future, and you will need to keep an eye on this area to know if and how they affect your business.
Circular economy action plan (europa.eu)
Sustainable food the norm in the EU – the Farm to Fork Strategy
European food is known for being safe, nutritious and of high quality, and the EU wants to make its food system a global standard. The framework for this is the Farm to Fork Strategy. It covers the whole food chain and will address the responsibility of all its actors.
A legal framework for the sustainable food system is to be launched in 2023. Common definitions, general principles, requirements, certification, and labelling schemes will make sustainable food a norm for all products placed on the EU market. Possible actions listed below.
Concerning food production
- Introduction of carbon sequestration for farmers; which means that farmers will be rewarded for practices that remove carbon dioxide from the atmosphere
- Promotion of alternatives to chemical pesticides and nutrient pollution
- Reduction of sales of antimicrobials for framed animals
- Revision of animal welfare legislation
- Reinforced vigilance on plant imports
- Further promotion of organic farming and eco-schemes and funding to agro-ecology and agro-forestry
- Supporting of farmed fish and algae industry
Concerning food processing
- An EU Code of Conduct for Responsible Business and Marketing Practice has been developed
- The requirement to integrate sustainability into corporate strategies will be improved
- Sustainable packaging solutions will be supported
- Marketing standards will be revised
Concerning consumers
- Harmonised mandatory front-of-pack nutrition labelling will be proposed and ways to harmonise voluntary green claims will be examined
- New ways to provide consumer information, including digital ways will be explored
- When it comes to food loss and waste, EU rules on ‘use by’ and ‘best before’ will be revised.
To keep your business up to date in this area you need to follow the development of the legal framework for sustainable food, expected in 2023.
Farm to Fork strategy (europa.eu)
Biodiversity is a crucial prerequisite – the Biodiversity Strategy for 2030
The Biodiversity Strategy for 2030 is a long-term plan to protect nature and reverse the degradation of ecosystems.
The restoration plan relates to the Farm to Fork Strategy and states that farmers play a vital role in preserving biodiversity. Both strategies aim for sustainable practices, such as organic farming, agro-ecology and agro-forestry. Another link is the common aim of reducing the use of chemical pesticides, restoring soil and reducing the loss of nutrients from fertilisers. The plan also includes commitments on sustainable fishing.
Biodiversity strategy for 2030 (europa.eu)
Cattle, cocoa, coffee, oil palm, soya, and wood need to be deforestation-free
An example of protecting and restoring biodiversity is the 2021 EU Forest Strategy that proposes new rules to avoid products associated with deforestation or forest degradation to be placed on the EU market. This deforestation-free criteria concern certain commodities (cattle, cocoa, coffee, oil palm, soya, and wood) and relevant derived goods if they contain, have been fed with, or been made using those commodities. These goods will have access to the EU market only if it can be proven that they have not contributed to deforestation.
Forest strategy (europa.eu)
Sustainable financing by common classification and transparency
The new Corporate Sustainability Reporting Directive, aims to ensure that companies report reliable and comparable sustainability information to investors, according to an EU Taxonomy delegated act, which classifies activities that best contribute to sustainability.
Companies covered by the Corporate Sustainability Reporting Directive are also required to report according to the taxonomy rules and it will be mandatory for many European companies.
The new reporting requirements on European companies will have implications also for suppliers as the overall need for transparency and information increases. This means that more producers will have to provide more information and this might affect your business. Hence, it is necessary to keep an eye on the taxonomy requirements. They will be implemented gradually, starting from 2022.
EU taxonomy for sustainable activities (europa.eu)