What the European Green Deal means when exporting to the EU
The European Green Deal is the European Union’s plan to reach climate neutrality by 2050. For businesses, there will be new sustainability requirements which demand adjustments in their operations. This article is an overview of what this could mean for you if you want to export to the EU.
The European Green Deal is an ongoing political and legislative process and all implications are not clear yet. However, for your business, it is useful to get familiar with its main ideas to identify parts that might affect you. 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.
- Requirements for sustainable products that are more durable, reusable, repairable, recyclable and energy-efficient.
- Sustainable foods have to meet new common definitions, general principles, requirements, certification, and labelling schemes.
- Preserving biodiversity calls for organic farming, reducing use of chemical pesticides, restoring soil and reducing the loss of nutrients from fertilisers.
The overall target is climate neutrality – Fit for 55 and the Carbon Border Adjustment Mechanism
The main 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 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.
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.
CBAM explained by the European Commission
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 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 and 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.
Circular economy action plan (europa.eu)
Sustainable food the norm in the EU – the Farm to Fork Strategy
The EU wants to make its food system a global standard. The framework for this is the Farm to Fork Strategy. Common definitions, general principles, requirements, certification, and labelling schemes will make sustainable food a norm for all products placed on the EU market.
To keep your business up to date in this area you need to follow the development of the legal framework for sustainable food.
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)
Deforestation-free products
The EU Forest Strategy for 2030 proposes 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, soy, natural rubber 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 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 companies in the EU.
The reporting requirements on EU companies will have implications for suppliers as well. This means that more producers will have to provide more information and this might affect your business.
EU taxonomy for sustainable activities (europa.eu)
Dive deeper:
Highlights and timeline for implementation of the different stages of the Green Deal on the European Commission website