In the framework of Taxonomy Regulation 2020/852, the Technical Working Group (TWG) of the European Commission’s Platform on Sustainable Finance recently made its final recommendations on technical screening criteria (TSC) for certain economic activities in relation to four environmental objectives, including the transition to a circular economy (in the annex). The draft recommendations were published on August 2021 (please see Sustainability Outlook August 2021), and their finalisation was expected for November 2021.
The recommendations cover 103 diverse economic activities, including the manufacture of plastic packaging and food products and beverages. The TWG plans to continue the work on some activities, including in the field of forestry and bioenergy and recommend criteria for them in May.
The recommendations identify increasing the share of traceable bio-sourced and compostable materials, as well as reusable and recyclablematerials, as enablers of circular design and production, and recognise the role of “renewable feedstock” for those uses where plastics cannot be “substituted out” altogether.
The TWG recommends that the manufacture of plastic packaging goods should be “Taxonomy eligible” as contributing substantially to the transition to a circular economy if the packaging is designed for reuse and recycling in practice. Alternatively, it must be manufactured from at least 85% mechanically or chemically recycled, bio-based (or “biobased”, as the TWG says interchangeably), or carbon capture and utilisation (CCU) feedstock.
Plastic packaging manufactured from such feedstock must also be designed for recycling in practice. The recommendations provide a list of criteria. In particular, collection, sorting, and recycling must be proven to work or to be on track to work in practice and at scale. The recommendations define “in practice and at scale” as achieving a minimum recycling rate of 50% either in the Member State where the packaging is put on the market or in multiple regions that represent at least 100 million inhabitants. The recommendations do not generally treat biodegradability as recyclability. However, where the nature of the application justifies the use of biodegradable packaging due to an overall substantial contribution to the circular economy, for example in specific food packaging, the criteria for recycling apply equally to composting. In addition, home-compostability must be certified by relevant internationally recognised certification schemes or by complying with internationally recognised home-compostability testing norms. The recommendations list such schemes and norms.
Similarly, the manufacture of food products and beverages can make a substantial contribution to the transition to a circular economy. Alternatively to the primary food/beverage packaging being kept in the economy through reuse in practice, the primary, secondary, and tertiary food/beverage packaging material feedstock must be recycled or renewable, and the packaging must be designed for recycling in practice. In both cases, food loss and waste must be minimised.
At least 85% of the total packaging by weight must consist of material that is fully manufactured from mechanical or chemical recycling of post-consumer material (defined as in relevant standards). For chemical recycling technologies, the material conversion rate should be at least the rate of existing mechanical recycling technologies for that material. Alternatively, the material must derive from renewable feedstock, which is material that is composed of biomass from a source that is or can be continually replenished at a rate equal to or greater than the rate of depletion (unless the source is waste). Claims regarding the recycled and/or renewable content should be made using a batch-level mass balance method and in line with internationally recognised certification systems.
Such packaging must also be designed for recycling in practice, or, in the case of high likelihood of the packaging being nutrient-contaminated, home-compostable (while intended to be collected for industrial treatment). Food/beverage packaging is recyclable if its main packaging components, together representing at least 95% by weight, are recyclable, and if the remaining minor components are compatible with the recycling process and do not hinder the recyclability of the main components. The recommendations include further details on packaging components. Successful post-consumer collection, sorting, and recycling in practice and at scale, as well as home-compostability are determined similarly as for the manufacture of plastic packaging (please see above). However, packaging whose design allows only for recycling into applications that do not permit any further use-cycles for the same or a similar application (e.g. roads and textiles) cannot be considered recyclable. For example, the packaging may not contain additives and colours that contaminate sorting or recycling in practice in a harmful way (e.g. carbon black).
To determine that these economic activities do no significant harm (DNSH) to climate change mitigation, the lifecycle GHG emissions, including intended end-of-life treatment, of chemically recycled, bio-based, and CCU feedstock must be lower than that of the equivalent material in primary form manufactured from fossil fuel feedstock. The recommendations include further details on the calculation and verification of the GHG emissions. Regarding DNSH to the protection and restoration of biodiversity and ecosystems, renewable feedstock must comply with the sustainability requirements of the EU regulatory framework. In particular, any wood raw materials should be sourced from responsible forest management as defined by intergovernmental definition, and embedded and implemented in existing national forest and nature legislation or market-based voluntary systems, with additional due diligence for any high-risk sources as defined by the EU Timber Regulation 995/2010 (EUTR) and guided by the provisions of the Renewable Energy Directive 2018/2001.
The Commission is expected to consider these recommendations when drafting the corresponding delegated act. The Taxonomy Regulation tasks the Commission with adopting the delegated act before the end of 2022, to ensure its application from January 2023. Once the Commission adopts that act, European Parliament and Council may scrutiniseit for four months (extendable to a total of six) before it enters into force.
The Taxonomy Regulation provides that to establish the degree to which an investment in an economic activity is environmentally sustainable, that economic activity must: (1) contribute substantially to one or more of six environmental objectives: (i) climate change mitigation, (ii) climate change adaptation, (iii) sustainable use and protection of water and marine resources, (iv) transition to a circular economy, (v) pollution prevention and control, and (vi) protection and restoration of biodiversity and ecosystems; (2) not significantly harm any of these objectives (DNSH); (3) be carried out in compliance with minimum social safeguards; and (4) comply with technical screening criteria (TSC).
The Taxonomy TSC, when adopted, apply in the context of sustainable finance. The criteria can make products, such as packaging made from bio-based plastic, more attractive by lowering the cost of capital needed for their manufacture or use. However, product requirements and other (future) rules or policies may differ.
A first delegated act with TSC for the objectives of climate change mitigation and adaptation (the ‘Climate Delegated Act’) has applied since the beginning of the year. It provides TSC for over 90 economic activities. That delegated act addresses bioplastics for the economic activity “manufacture of plastics in its primary form”. To contribute substantially to climate change mitigation, plastic must be fully manufactured by mechanical recycling of plastic waste or, under certain conditions, by chemical recycling, or derived wholly or partially from renewable feedstock (i.e. biomass, industrial bio-waste or municipal bio-waste). Life-cycle GHG emissions of the manufactured plastic from renewable feedstock must be lower than those of the equivalent plastic manufactured from fossil fuel feedstock, verified by an independent third party, and calculated using the EU common methods (PEF/OEF) or relevant standards. Furthermore, the criteria for agricultural biomass and forest biomass laid down in the Renewable Energy Directive apply.
Environmental NGO ClientEarth announced in February that it has requested an internal review by the Commission of the possibility of bioplastics to be taxonomy-aligned, among other things. According to the NGO, the Commission failed to assess the environmental impacts of the life cycle of the manufacture of plastics in primary form derived from renewable feedstock, did not address properly the DNSH requirement in relation to a circular economy and to the sustainable useand protection of water and marine resources, considering that a main use of plastics is single-use packaging. If the Commission does not remedy the issues presented in the request within 16 weeks from receiving it, the NGO may challenge that decision before the Court of Justice of the EU.
Ken Huestebeck, Senior Associate, Squire Patton Boggs, Brussels
Josep Nicolas Bellot, Public Policy Specialist, Squire Patton Boggs, Brussels
Squire Patton Boggs
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