By Michael Green and Paul Davies

Following decision C(2017)7124 of the European Commission (EC), the EC has launched its Work Programme for 2018 (WP 2018). WP 2018 outlines plans for achieving the EC’s primary policy objectives during the next 12 months — with particular attention to environmental issues.

WP 2018 outlines four “Focus Areas” (FAs) that envisage major work across programme boundaries. The EC has allocated a significant budget in order to facilitate such work at a “sufficient scale, depth and breadth”. Two of the four FAs, which specifically relate to environmental considerations, are described below.

Climate Resilience

The EC has designated €3.343 billion to “building a low-carbon, climate resilient future”.

The overarching purpose of the climate-oriented FA, is to align research and innovation investments with the climate change targets of the Paris Agreement (PA) and the UN’s Sustainable Development Goals.

The EC intends to create “pathways of action” to meet the PA’s ambitious goals. In particular, according to the EC, the accuracy and reliability of greenhouse gas (GHG) emissions monitoring must improve so that signatories can assess their manmade GHG emissions. Notwithstanding the obvious need to reduce GHG emissions themselves, countries must conduct precise and verifiable monitoring so that they can sufficiently track progress in meeting their post-2020 climate actions under the PA, which are known as nationally determined contributions (NDCs). Without verifiable monitoring, NDCs and the broader GHG emissions reduction goals in the PA risk being unquantifiable and thus far harder to achieve.

The Circular Economy

The EC has designated €941 million to “connecting economic and environmental gains — the Circular Economy”.

WP 2018 addresses concerns related to adopting the EC’s Circular Economy package by prioritizing research that may help identify potential risks and regulatory challenges. As Latham has outlined, many of those difficulties relate to risks associated with the presence of dangerous substances in products and the possible side effects of their inclusion in the Circular Economy, including the potential for negative health effects.

The WP 2018 highlights that successfully implementing the EC’s ambitious Circular Economy package will require more than traditional research & development, or piecemeal integration of new technologies. In order to meet targets — including a 10% reduction in landfill use by 2030 — change must occur in both the primary and secondary sectors. For instance, changes to foster the sustainable extraction of primary raw materials, as well as improve the use of recycled waste as secondary raw materials will be required.

Further, research and innovation (R&I) must occur on a European scale in order to demonstrate the feasibility of, and to incentivise, turning end-of-life products into new resources. Efforts could include developing new economic incentives to bring greener products to the market and implementing financial rewards for companies that support reuse, recovery, and recycling schemes.

In particular, businesses in manufacturing sectors may be set to benefit from the transition to a circular economy. Change is already underway, with some companies opting to rent or lease goods to customers instead of selling them, effectively retaining ownership of the goods throughout their life. For example, a number of electric vehicle (EV) manufacturers lease the battery of the EV to owners for a monthly fee, rather than including it in the initial price of the EV. The result is that customers must return the goods, e.g. EV batteries, at the end of their lives to the sellers, who may recapture their value through reuse.

The EC’s emphasis on these environmental FAs reflects an ongoing commitment to improving sustainability across Member States. However, given that the European Parliament and the Council have yet to consider the WP 2018, whether and how these environmental FAs will translate into workable, successful solutions remains unclear.

This blog was prepared with the assistance of Tegan Creedy in the London office of Latham & Watkins.