Paul Sheridan and Olivia Quaid of CMS Cameron McKenna LLP explain the European Commission's new Resource Efficiency Roadmap on real estate market prices.
In 2011 the European Commission-produced “Roadmap to a Resource Efficient Europe” (COM(2011) 571/3) (the “Resource Efficiency Roadmap”). This identified areas requiring legal and economic transformational change to enable resource efficiency. The overarching milestone of the Resource Efficiency Roadmap is that, by 2050, “all resources are sustainably managed, from raw materials to energy, water, air, land and soil. Climate change milestones have been reached, while biodiversity and the ecosystem services it underpins have been protected, valued and substantially restored.”
On 24 May 2012 the European Parliament passed a resolution (2011/2068(INI)) (the “Resolution”) endorsing the Resource Efficiency Roadmap and calling for further action. In so doing, the European Parliament identified priority actions. Interestingly it also clearly emphasised the concept (which has been around for several years but is lately attracting increased support) of decoupling economic growth from resource consumption. This parliament stated that, in order to stimulate resource efficiency, “market prices need to fully reflect the degree of resource scarcity as well as all costs entailed in the production process”. Consistent with other recent environment law and policy in the EU in various sectors across the Union, the Resolution calls for the implementation of (1) life-cycle accounting and (2) “internalisation of the externalities” (ie, the monetisation and internalisation of external environment costs into the costs of product and services).
The main points arising from the Resolution are covered below. They are significant as they indicate the proposed focus of mechanisms which will be developed through various means. The proposed changes will affect all sectors but will be harder-hitting for some.
Six actions have been identified as priority actions:
• The establishment of a joint taskforce in relation to food and drink, housing and mobility, to develop action plans with clear resource reduction in mind. Food waste is a notable issue.
• The removal of obstacles to recycling and reuse and accelerating demand for, and availability of, recycled waste materials and by-products. Measures might include further clarity on “end of waste criteria” and economic incentives such as reduced VAT/sales tax for secondary materials.
• Investment in research and technological innovation, including an online “best practice” data bank for resource efficiency.
• Agreement by 2013 on “clear, robust and measurable indicators for economic activity that take account of climate change, biodiversity and resource efficiency from a life cycle perspective”. In particular, resource-use indicators footprinting land, water, material and carbon are to be brought into play. These indicators are to be used as a starting point for setting targets and framing legislation to encourage resource efficiency.
• Extension of the scope of the Eco-design Directive to non-energy-related products and the introduction of additional eco-design requirements.
• The integration of resource efficiency into all other policies including overarching economic governance policies.
In addition a number of calls are made by the European Parliament to member states and/or the European Commission for specific legislative and policy developments, such as the following proposals:
• By the end of 2012 a new sustainable consumption and production policy framework to identify products or services which contribute most to the consumption of water, lands, material and carbon.
• The development of an SME-friendly standard for use of resources.
• The full integration of resource efficiency objectives into economic policy coordination.
• Incentives that encourage companies and public bodies to measure, benchmark and improve on all footprints, extend the producer responsibility principle and remove barriers to resource efficiency.
• A shift towards environment taxation and by 2014 concrete plans for removing environment harmful subsidies by 2020 (including subsidies that incentivise inefficient use of renewable resources).
• Stronger requirements for Green Public Procurement for products and services that have significant environment impacts and contribute most to water, land, carbon and materials consumption.
• The extension of environmental information requirements to cover conventional mass consumer goods and a harmonised European method for calculating footprints.
• The effect of taxes on resources and virgin raw materials.
FOCUS ON WASTE
Unsurprisingly, there is a stress on continuing the transformation of how waste is considered and valued, ie, moving the concept from waste to resource. In particular, among the measures that are to be considered are:
• Greater enforcement of EU waste law, EU funding to prioritise activities higher up the waste hierarchy (eg, recycling/reuse plants over waste disposal) and improving related data on waste management.
• Reducing residual waste to zero via a number of routes. These include proposals to be made by 2014 to gradually phase out landfill of waste at the EU level and to phase out incineration of recyclable and compostable waste by 2020. Landfill taxation is a clear consideration in this regard.
• Policies being driven by the European Commission that favour reuse of waste over energy recovery from waste (taking into account greenhouse gas mitigation potential).
• Consideration of using existing landfills as raw material depots. Research will be required, including research into the mining of waste from landfills.
• Greater innovation in environmentally friendly material exploration and extraction, waste treatment and recycling. Perhaps also using tax credits to reduce resource use, which could benefit innovation and development.
INNOVATION AND TECHNOLOGY
While resource security and reduced environment impact is key, as part of the text adopted, the European Parliament emphasises that the “first mover” in resource efficiency can capture growing markets and notes that the EU holds roughly one-third of the world market for environment technologies.
On 5 June 2012 a high-level panel on resource efficiency, the European Resource Efficiency Platform (EREP), was launched to provide advice to the European Commission to progress the implementation of the mechanisms required to achieve the milestones in the Resource Efficiency Roadmap. The three areas of focus have been named as (i) circular economy/greening the economy; (ii) setting objectives; and (iii) measuring progress and framework conditions for investments in resource efficiency. The aim is to produce an interim report for the next plenary meeting (December 2012) and a final report for the spring meeting (March 2013). EREP documentation identifies that it is envisaged that by mid-2013 EREP should issue a first set of recommendations on “low hanging fruits” that could feed into policy proposals in 2013–2014. A second set of recommendations is intended to be made later on important issues in the medium term.
Of course the Resolution and Roadmap are not law and the legislative instruments necessary to bring the proposals into being will take some time. However, for industry, business and investment communities it would be a mistake to view these proposals in isolation (there is a tremendous volume of associated law and practice already being implemented in the EU along these conceptual lines in various sectors). There is a very palpable change occurring in the EU towards sustainability and putting in place measures to make the EU economy more resilient to the various security-of-supply issues. Also, for those who are involved in long-term investments and in assets of longevity, these proposals provide very clear signals of intent, which will impact heavily on how business is to be done over the longer term. If evidence is needed of the powerful impact that EU environment-related legislation can have on the economic shaping of business sectors and investment, we need look no further than the fundamental changes that have been brought to bear on the water, waste and power sectors.
The Resource Efficiency Roadmap may be found at //ec.europa.eu/environment/resource_efficiency/pdf/com2011_571.pdf.
The European Parliament’s resolution is available at europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2012-223.