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A New Circular Economy Action Plan for a Cleaner and More Competitive Europe

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What is the new EU Circular Economy Action Plan?

The new Action Plan announces initiatives for the entire life cycle of products, from design and manufacturing to consumption, repair, reuse, recycling, and bringing resources back into the economy. It introduces legislative and non-legislative measures and targets areas where action at the EU level brings added value. The Action Plan is at the core of the European Green Deal, the EU roadmap towards climate-neutrality. Half of total greenhouse gas emissions come from resource extraction and processing. It is not possible to achieve the climate-neutrality target by 2050 without transitioning to a fully circular economy.

The aim of the Action Plan is to reduce the EU’s consumption footprint and double the EU’s circular material use rate in the coming decade, while boosting economic growth. This will be done in full cooperation with stakeholders and business. Applying ambitious circular economy measures in Europe can increase EU’s GDP by an additional 0.5% by 2030 and create around 700,000 new jobs.

What measures are foreseen for products?

At present, many products break down too quickly, cannot be reused, repaired or recycled, or can only be used once. This linear pattern of production and consumption (“take-make-use-dispose”) does not give producers an incentive to make more sustainable products. The Sustainable Product Policy Framework aims to change this situation with actions to make green products become the norm. The rules will also aim to reward manufacturers of products based on their sustainability performance and link high performance levels to incentives.

A new Sustainable Product Policy Framework includes three main building blocks – actions on product design, on empowering consumers and on more sustainable production processes.

What measures do you foresee on design?

The Commission will launch a sustainable product legislative initiative. This initiative will have at its core a proposal to widen the Ecodesign Directive beyond energy-related products. The approach is to make the Ecodesign framework applicable to the broadest possible range of products and make it deliver on circularity.

As part of this legislative initiative, and, where appropriate, through other instruments, the Commission will consider establishing sustainability principles. The new rules will in particular address the need to improve product durability, reusability, upgradability and reparability, addressing the presence of hazardous chemicals in products and increasing the recycled content in products. We will also aim at restricting single-use and countering premature obsolescence. Introducing a ban on the destruction of unsold durable goods will also be part of the measures.

The Commission will launch a European Circular Dataspace to mobilise the potential of digitalisation of product information, introducing for example digital product passports.

What actions are foreseen for consumers and public buyers?

The Commission will work towards strengthening the reparability of products. The aim is to embed a “right to repair” in the EU consumer and product policies by 2021.

The Plan foresees also actions to give consumers more reliable information about products at the point of sale, including on their lifespan and other environmental performance. The Commission will propose that companies substantiate their environmental claims by using Environmental Footprint methodologies. Stricter rules will be proposed to reduce greenwashing and practices such as planned obsolescence.

New measures will increase the uptake of green public procurement, such as introducing minimum mandatory green criteria or targets for public procurement.

How will the transition to a circular economy benefit our economy and contribute to reach the target of climate-neutrality by 2050?

Between 1970 and 2017, the global extraction and processing of materials, such as biomass, fossil fuels, metals and minerals tripled – and it continues to grow, causing greenhouse gas emissions, biodiversity loss and water stress.

The circular economy model where value and resources are maintained in the economy for as long as possible and waste generation is minimised, reduces pressures on natural resources.

The circular economy can make a decisive contribution to the decarbonisation of our economy. In the past few years only, several studies have shown the substantial potential of circularity as a tool for climate mitigation.

The Commission will step up the synergies between achieving circularity and climate neutrality. All actions in the Action Plan will contribute to reducing both EU’s carbon and material footprint. In parallel, the Commission will work with Member State to promote circularity in future revisions of the National Energy and Climate Plans (NECP) and in other climate policies.

What does the Plan propose for:

electronics and ICT

The Action Plan proposes setting up a ‘Circular Electronics Initiative’ to promote longer product lifetimes through reusability and reparability as well as upgradeability of components and software to avoid premature obsolescence.

The sector will be a priority area for implementing the ‘right to repair’. The Commission is aiming to adopt new regulatory measures for mobile phones, tablets and laptops under the Ecodesign Directive, as well as new regulatory measures on chargers for mobile phones and similar devices. An EU-wide take back scheme to return or sell back old mobile phones, tablets and chargers will also be considered.

textiles

The Action Plan announces a comprehensive policy framework that will aim to strengthen industrial competitiveness and innovation, boosting the EU market for sustainable and circular textiles, including the market for textile reuse, and driving new business models. 

Textiles are the fourth highest-pressure category for the use of primary raw materials and water, and fifth for greenhouse gas emissions. This future strategy will boost the market for sustainable and circular textiles, including the market for textile reuse. It will support new consumption patterns and business models. The Commission will also provide guidance on separate collection of textile waste, which Member States have to ensure by 2025.

The Commission will work with the industry and market actors to identify bottlenecks in circularity for textiles and stimulate market innovation.

plastics

The Action Plan builds on the 2018 Plastics strategy, and focuses on increasing recycled plastic content. Mandatory requirements on recycled content will be suggested in areas such as packaging, construction materials and vehicles.

The Action Plan addresses also challenges related to microplastics and sourcing and use of bio-based plastics bio-based and biodegradable plastics. On microplastics, the Commission will restrict the intentional adding of microplastics. It will also work on their unintentional release, further developing and harmonising measurement methods, pursuing labelling, certification and regulatory measures, and consider measures to increase the capture of microplastics in wastewater.

construction and buildings

The building sector consumes about 50% of all extracted material and is responsible for more than 35% of the Union’s total waste generation.

The Commission will adopt a new comprehensive Strategy for a Sustainable Built Environment to promote circularity principles throughout the whole lifecycle of buildings. The Commission will propose to revise the Construction Product Regulation, which may include recycled content requirements for certain construction products.

packaging

The amount of materials used for packaging is continuously growing and in 2017 packaging waste in Europe reached 173 kg per inhabitant – the highest level ever.

The Commission will propose measures to ensure that the increase in the generation of packaging waste is reversed as a matter of priority, including by setting targets and other waste prevention measures.

The Commission’s aim is to make all packaging placed on the EU market reusable or recyclable in an economically viable way by 2030. The Commission will propose to reinforce the mandatory essential requirements for all packaging placed on the EU market.

batteries and vehicles

The Commission will propose a new regulatory framework for batteries. It will include measures to improve the collection and recycling rates of all batteries and ensure the recovery of valuable materials, sustainability requirements for batteries, the level of recycled content in new batteries, and the provision of information to consumers.

The Commission will propose the revision of the rules on end-of-life vehicles in order to improve recycling efficiency, as well as rules to address the sustainable tretatement of waste oils

 food

An estimated 20% of the total food produced is lost or wasted in the EU. The Commission will propose a target on food waste reduction as part of the EU Farm-to-Fork Strategy. That Strategy will address the entire food value chain to ensure the sustainability of the sector – strengthening efforts to tackle climate change, protect the environment and preserve biodiversity.

The Commission will launch analytical work to determine the scope of a legislative initiative on reuse to replace single-use food packaging, tableware and cutlery by reusable products in food services.

What measures are foreseen on waste?

Preventing waste from being created in the first place is key. Once waste has been created, it needs to be transformed into high-quality resources.

The Commission will put forward waste reduction targets for more complex streams, and enhance the implementation of the recently adopted requirements for Extended Producer Responsibility schemes, amongst other actions.

The Commission will continue modernising EU waste laws. Rules on waste shipments facilitating recycling or re-use within the EU will be reviewed. This will also aim to restrict exports of waste that cause negative environmental and health impacts in third countries by focusing on countries of destination, problematic waste streams and operations.

The Commission will also consider how to help citizens to sort their waste though an EU-wide harmonised model for separate collection of waste and labelling.

How does the Plan support innovation and investments?

Many EU funds will be mobilised to support the transition to a circular economy – from the EU Cohesion funds, the European Regional Development Fund and the LIFE programme to  spending under the social, research and innovation programmes. 

The Action Plan also includes actions to mobilise private financing in support of the circular economy through EU financial instruments such as InvestEU.

How will the circular economy be promoted at international level?

The Action Plan proposes the launch of a Global Circular Economy Alliance to explore the definition of a ‘Safe Operating Space’, kick-starting a discussion on a possible international agreement on the management of natural resources. Moreover, the Commission will lead efforts at the international level to reach a global agreement on plastics, and promote the uptake of the EU’s circular economy approach on plastics.

The EU will continue to advocate for the circular economy in its free-trade agreements, its bilateral, regional and multilateral policy dialogues and its international and multilateral environmental agreements – for example via Circular Economy Missions to partner countries. The Commission will step up cooperation with other regions, such as Africa.

How will the transition towards a circular economy be monitored?

In 2021, the Commission will update the existing monitoring framework with indicators related to the current action plan and reflecting the interlinkages between circularity, climate neutrality and the zero pollution ambition. Indicators on resource use, including our consumption and material footprints will also be further developed. The Commission will also reinforce the monitoring of circular economy national plans and other national circular economy measures, including under the efforts to refocus the European Semester process towards integrating a stronger sustainability dimension.

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Commission proposes draft mandate for negotiations on Gibraltar

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The European Commission has today adopted a Recommendation for a Council decision authorising the opening of negotiations for an EU-UK agreement on Gibraltar. The Commission also presented its proposal for negotiating guidelines.

It is now for the Council to adopt this draft mandate, after which the Commission can begin formal negotiations with the United Kingdom.

Vice-President Maroš Šefčovič, the EU’s co-chair of the Joint Committee and Partnership Council, said: “By putting forward this draft mandate, we are honouring the political commitment we made to Spain to start the negotiations of a separate agreement between the EU and the UK on Gibraltar. This is a detailed mandate, which aims to have a positive impact for those living and working on either side of the border between Spain and Gibraltar, while protecting the integrity of the Schengen Area and the Single Market.”

Gibraltar was not included in the scope of the EU-UK Trade and Cooperation Agreement agreed between the EU and UK at the end of 2020. The Commission committed to begin the negotiation of a separate agreement on Gibraltar, should Spain request so. That is why the Commission is now recommending that the Council authorises the launch of specific negotiations on Gibraltar.

Draft mandate

Today’s Recommendation builds upon the political understanding reached between Spain and the UK on 31 December last year. It is without prejudice to the issues of sovereignty and jurisdiction, and focuses on cooperation in the region.

The proposed negotiating directives put forward solutions to remove physical checks and controls on persons and goods at the land border between Spain and Gibraltar, while ensuring the integrity of the Schengen area and the Single Market. The proposals include rules establishing responsibility for asylum, returns, visas, residence permits, and operational police cooperation and information exchange.

Other measures are included in different areas, such as land and air transport, the rights of cross border workers, the environment, financial support, and establishing a level playing field. It envisages a robust governance mechanism, including a review of the implementation of the agreement after four years, the possibility for both parties to terminate the agreement at any time and the possibility of unilateral suspension of the application of the agreement under certain circumstances.

Spain, as the neighbouring Schengen Member State and as the Member State to be entrusted with the application and implementation of certain provisions of the future agreement, will be particularly affected by the agreement. The Commission will therefore maintain close contacts with the Spanish authorities throughout the negotiations and afterwards, taking their views duly into account.

With regard to external border control, in circumstances requiring increased technical and operational support, any Member State, including Spain, may request Frontex assistance in implementing its obligations. The Commission acknowledges that Spain has already expressed its full intention to ask Frontex for assistance.

Background

The UK-EU Trade and Cooperation Agreement excluded Gibraltar from its territorial scope (Article 774(3)). On 31 December 2020, the Commission received a note of the proposed framework for a UK-EU legal instrument setting out Gibraltar’s future relationship with the EU. The relevant services in the Commission have examined this in close consultation with Spain. Building upon the proposed framework and in line with Union rules and interests, the Commission has today adopted a Recommendation for a Council decision authorising the opening of negotiations for an EU-UK agreement on Gibraltar and presented its proposal for negotiating guidelines.

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Commission overhauls anti-money laundering and countering the financing of terrorism rules

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The European Commission has today presented an ambitious package of legislative proposals to strengthen the EU’s anti-money laundering and countering terrorism financing (AML/CFT) rules. The package also includes the proposal for the creation of a new EU authority to fight money laundering. This package is part of the Commission’s commitment to protect EU citizens and the EU’s financial system from money laundering and terrorist financing. The aim of this package is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system. As recalled in the EU’s Security Union Strategy for 2020-2025, enhancing the EU’s framework for anti-money laundering and countering terrorist financing will also help to protect Europeans from terrorism and organised crime.

Today’s measures greatly enhance the existing EU framework by taking into account new and emerging challenges linked to technological innovation. These include virtual currencies, more integrated financial flows in the Single Market and the global nature of terrorist organisations. These proposals will help to create a much more consistent framework to ease compliance for operators subject to AML/CFT rules, especially for those active cross-border.

Today’s package consists of four legislative proposals:

Members of the College said:

Valdis Dombrovskis, Executive Vice-President for an Economy that works for people, said: “Every fresh money laundering scandal is one scandal too many – and a wake-up call that our work to close the gaps in our financial system is not yet done. We have made huge strides in recent years and our EU AML rules are now among the toughest in the world. But they now need to be applied consistently and closely supervised to make sure they really bite. This is why we are today taking these bold steps to close the door on money laundering and stop criminals from lining their pockets with ill-gotten gains.”

Mairead McGuinness, Commissioner responsible for financial services, financial stability and Capital Markets Union said: “Money laundering poses aclear and present threat to citizens, democratic institutions, and the financial system. The scale of the problem cannot be underestimated and the loopholes that criminals can exploit need to be closed. Today’s package significantly ramps up our efforts to stop dirty money being washed through the financial system. We are increasing coordination and cooperation between authorities in member states, and creating a new EU AML authority. These measures will help us protect the integrity of the financial system and the single market.”

A new EU AML Authority (AMLA)

At the heart of today’s legislative package is the creation of a new EU Authority which will transform AML/CFT supervision in the EU and enhance cooperation among Financial Intelligence Units (FIUs). The new EU-level Anti-Money Laundering Authority (AMLA) will be the central authority coordinating national authorities to ensure the private sector correctly and consistently applies EU rules. AMLA will also support FIUs to improve their analytical capacity around illicit flows and make financial intelligence a key source for law enforcement agencies.

In particular, AMLA will:

  • establish a single integrated system of AML/CFT supervision across the EU, based on common supervisory methods and convergence of high supervisory standards;
  • directly supervise some of the riskiest financial institutions that operate in a large number of Member States or require immediate action to address imminent risks;
  • monitor and coordinate national supervisors responsible for other financial entities, as well as coordinate supervisors of non-financial entities;
  • support cooperation among national Financial Intelligence Units and facilitate coordination and joint analyses between them, to better detect illicit financial flows of a cross-border nature.

A Single EU Rulebook for AML/CFT

The Single EU Rulebook for AML/CFT will harmonise AML/CFT rules across the EU, including, for example, more detailed rules on Customer Due Diligence, Beneficial Ownership and the powers and task of supervisors and Financial Intelligence Units (FIUs). Existing national registers of bank accounts will be connected, providing faster access for FIUs to information on bank accounts and safe deposit boxes. The Commission will also provide law enforcement authorities with access to this system, speeding up financial investigations and the recovery of criminal assets in cross-border cases. Access to financial information will be subject to robust safeguards in Directive (EU) 2019/1153 on exchange of financial information.

Full application of the EU AML/CFT rules to the crypto sector

At present, only certain categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. Today’s amendments will ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.

EU-wide limit of €10,000 on large cash payments

Large cash payments are an easy way for criminals to launder money, since it is very difficult to detect transactions. That is why the Commission has today proposed an EU-wide limit of €10,000 on large cash payments. This EU-wide limit is high enough not to put into question the euro as legal tender and recognises the vital role of cash. Limits already exist in about two-thirds of Member States, but amounts vary. National limits under €10,000 can remain in place. Limiting large cash payments makes it harder for criminals to launder dirty money. In addition, providing anonymous crypto-asset wallets will be prohibited, just as anonymous bank accounts are already prohibited by EU AML/CFT rules.

Third countries

Money laundering is a global phenomenon that requires strong international cooperation. The Commission already works closely with its international partners to combat the circulation of dirty money around the globe. The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, issues recommendations to countries. A country that is listed by FATF will also be listed by the EU. There will be two EU lists, a “black-list” and a “grey-list, reflecting the FATF listing. Following the listing, the EU will apply measures proportionate to the risks posed by the country. The EU will also be able to list countries which are not listed by FATF, but which pose a threat to the EU’s financial system based on an autonomous assessment.

The diversity of the tools that the Commission and AMLA can use will allow the EU to keep pace with a fast-moving and complex international environment with rapidly evolving risks.

Next steps

The legislative package will now be discussed by the European Parliament and Council. The Commission looks forward to a speedy legislative process. The future AML Authority should be operational in 2024 and will start its work of direct supervision slightly later, once the Directive has been transposed and the new regulatory framework starts to apply.

Background

The complex issue of tackling dirty money flows is not new. The fight against money laundering and terrorist financing is vital for financial stability and security in Europe. Legislative gaps in one Member State have an impact on the EU as a whole. That is why EU rules must be implemented and supervised efficiently and consistently to combat crime and protect our financial system. Ensuring the efficiency and consistency of the EU AML framework is of the utmost importance. Today’s legislative package implements the commitments in our Action Plan for a comprehensive Union policy on preventing money laundering and terrorism financing which was adopted by the Commission on 7 May 2020.

The EU framework against money laundering also includes the regulation on the mutual recognition of freezing and confiscation orders, the directive on combating money laundering by criminal law, the directive laying down rules on the use of financial and other information to combat serious crimesthe European Public Prosecutor’s Office, and the European system of financial supervision.

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New EU guidance helps companies to combat forced labour in supply chains

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The Commission and the European External Action Service (EEAS) have published today a Guidance on due diligence to help EU companies to address the risk of forced labour in their operations and supply chains, in line with international standards. The Guidance will enhance companies’ capacity to eradicate forced labour from their value chains by providing concrete, practical advice on how to identify, prevent, mitigate and address its risk.

Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “There is no room in the world for forced labour. The Commission is committed to wiping this blight out as part of our broader work to defend human rights. This is why we put strengthening the resilience and sustainability of EU supply chains at the core of our recent trade strategy. Businesses are key to making this happen, because they can make all the difference by acting responsibly. With today’s Guidance, we are supporting EU companies in these efforts. We will ramp up our due diligence work with our upcoming legislation on Sustainable Corporate Governance.”

High Representative/Vice-President Josep Borrell said: “Forced labour is not only a serious violation of human rights but also a leading cause of poverty and an obstacle to economic development. The European Union is a global leader on responsible business conduct and business and human rights. The Guidance we publish today translates our commitment into concrete action. It will help EU companies to ensure their activities do not contribute to forced labour practices in any sector, region or country.”

The Guidance explains the practical aspects of due diligence and provides an overview of EU and international instruments on responsible business conduct that are relevant for combatting forced labour. The EU has already put in place mandatory standards in some sectors and actively promotes the effective implementation of international standards on responsible business conduct.

Promoting responsible and sustainable value chains is one of the pillars of the recent EU trade strategy. The Guidance delivers on the strategy by helping EU businesses already take the appropriate measures, bridging the time until legislation on Sustainable Corporate Governance is in place. This upcoming legislation should introduce a mandatory due diligence duty requiring EU companies to identify, prevent, mitigate and account for sustainability impacts in their operations and supply chains. Subject to the upcoming impact assessment, this will include effective action and enforcement mechanisms to ensure that forced labour does not find a place in the value chains of EU companies.

EU trade policy already contributes to the abolishment of forced labour through its various instruments. EU trade agreements are unique in including binding commitments to ratify and effectively implement all fundamental ILO Conventions, including those on forced labour. Those conventions include an obligation to suppress the use of forced or compulsory labour in all its forms. This commitment extends to the countries benefitting from the special incentive arrangement for sustainable development and good governance (GSP+) under the EU’s General Scheme of Preferences (GSP). All 71 beneficiary countries of the General Scheme of Preferences are obliged to not commit serious and systematic violations of the principles of the fundamental ILO Conventions.

The Guidance also delivers on a number of the priorities of the EU Action Plan on Human Rights and Democracy 2020-2024 in the area of business and human rights. Those priorities include the eradication of forced labour and the promotion of internationally recognised due diligence standards.

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