News | 2018

I. EU to tax new tobacco products

tobaccoThe European Commission recently launched a public consultation on the excise duties applied to manufactured tobacco and the possible taxation of novel products. The consultation is intended to gather the views on options for a possible revision of the existing Council Directive 2011/64/EU. Currently, the Directive defines and classifies various tobacco products according to their characteristics and lays down the principles of taxation and relevant minimum rates and structure of excise duty.

As a part of the revision process, the question whether there is a need to propose a harmonised explicit category for e-cigarettes and heated tobacco products will be reconsidered, as these new products are currently not covered by the Directive. The Council has noted that in most Member States some of these non-categorised products, often being niche-products in the market, are not subject to an excise duty or any other specifically designed tax. In addition, the Council has already hinted that should the market share of such products show a tendency to increase, the ongoing efforts to develop an efficient taxation method would have to be intensified.

At the same time, the revision of the Council Directive 2011/64/EU has not been accepted without criticism, for not addressing a serious of concerns related to the additional burdens that the new tax entails.

II. EU to regulate drug precursors

European Strategies on Drugs focus on reducing the supply and demand of psychotropic substances. A key aspect of this control policy is the use of precursors chemicals. For this reason, the European Commission has initiated a public consultation for the evaluation of the EU drug regulation.

Drug precursors are essential for the economy and the industry, since most of these substances have a broad number of legitimate and important industrial applications in production of plastics, medicines, pesticides, etc. However, small quantities of precursors may be used for the illicit production of narcotic drugs or psychotropic substances. The regulations will be evaluated in the light of their objective, which is to set up a monitoring and control system in the trade of drug precursors to prevent their diversion from the legal supply chain into the illicit drug production.

Since the chemical substances falling under the scope of the drug precursors legislation are very commonly used in industrial processes, representatives of the chemical industry, chemical supply chain and the pharmaceutical industry are more than concerned about the resilience of their supply lines. Major players are already engaging in the discussions to ensure that there is a balanced decision following this consultation, which ensures their legitimate trade.

III. EU to assess industry water compliance

In parallel to the fitness check on the Water Framework Directive, the European Commission is conducting a separate evaluation of the Urban Waste Water Treatment Directive to assess its functioning over past decades. In the 25 years of the Directive’s existence many changes have occurred, amongst others the depletion of key resources, visible impacts of climate change and continued scientific and technological process. In addition, the ambition to create a European circular economy has taken concrete shape.

The main objective of the Directive is to protect the environment from the adverse effects of waste water discharges from urban areas and certain industrial sectors by setting requirements for the collection and treatment of urban waste water. The evaluation is assessing five criteria: effectiveness, coherence, efficiency, relevance and EU-added value.

However, stricter environmental regulations and higher compliance standards are likely to affect the biggest part of the heavy industry of the EU and abroad.

IV. EU pesticides policy under scrutiny

The debate on the EU pesticides regime is an old one. Not long ago, there was the discussion over the re-authorization of glyphosate. In this case, despite the presented evidence, the EU labelled glyphosate as safe and imposed no EU-wide restrictions.

This decision, however, has given momentum to supporters on both ends of the arguments to stir the debate with the aim of shaping the decision-makers views on pesticides. Those in favor of the phasing out of the substances have highlighted the EU’s commitments to protect health and environment. They are looking at several policy initiatives in order to ban pesticides for good in the EU.

Earlier this year, the European Parliament created a temporary committee on pesticides (PEST). PEST will play a decisive role in documenting and remedying the shortcomings of the EU pesticides regime. At the same time, France – which plans to phase out glyphosate domestically – is expected to take over from Germany as the lead country responsible for assessing herbicide’s safety. This could also influence whether the EU decides to continue to allow glyphosate on the European market.

V. EU to impose strict control on chemical companies

The European Commission has recently launched a consultation on the interface between chemicals and waste legislation. This consultation follows a recent communication, which identified several concerns in the current legal framework. Among them the lack of information on the presence of substances of concern in products and waste. In addition, it also mentioned as a shortcoming the missing information on waste containing substances that are no longer allowed in new products. Furthermore, the communication highlighted the difficulties in applying EU waste classification methodologies over hazardous or non-hazardous waste determination.

The launched consultation is expected to address these issues. In other words, the objective is to facilitate the cross-border circulation of secondary raw materials, so they can be traded easily across the EU and at the same time to substitute or at least reduce chemicals of concern, as well as improving the tracking of the chemicals in both products and waste. There are also calls to amend the existing legal framework with provisions for strict legally binding provisions for full transparency on chemicals in products and information sharing along the supply chain.

VI. EU to reduce greenhouse gas emissions

To fulfill the obligations deriving from the Paris Agreement, the EU is now working towards developing a long-term greenhouse gas emissions reduction strategy. This strategy will set the basis for future EU policy and initiatives that could affect business. The strategy should be ready before the end of 2018.

Currently, the EU is striving to implement policies to reduce greenhouse gas emissions by at least 40% in 2030. Other policy options are also being touted. Among them, net zero emissions by 2050, aiming on getting to zero net greenhouse gas emissions.

The strategy for long-term EU greenhouse gas emissions reductions will provide both challenges and opportunities. Risks from EU regulations will arise from the simple fact that some energy companies will need to make substantial changes to meet the new commitments. Some energy firms might even face the risk of losing value. Other manufacturing sectors will also have to make changes that could be costly to meet EU greenhouse gas emissions rules. That said, some of these risks can be mitigated, and with the right regulatory agenda, the policy obligations that may arise in the future can be transformed into opportunities.