Explanatory Memorandum to COM(2022)151 - Substances that deplete the ozone layer

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier COM(2022)151 - Substances that deplete the ozone layer.
source COM(2022)151 EN
date 05-04-2022


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

Problem definition and objectives

The European Green Deal launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. In response to the urgency for climate action, the EU increased its climate ambition through Regulation (EU) No 2021/1119 (the European Climate Law)1, which was adopted in 2021. The climate law establishes a binding net GHG reduction target of at least 55% by 2030 compared to 1990 and EU climate neutrality at the latest by 2050. The EU has also enhanced its initial Nationally Determined Contribution under the Paris Agreement on Climate Change from at least 40% greenhouse gas emissions reductions by 2030, to at least 55% net greenhouse gas emissions reductions. Achieving those objectives, and having a chance to keep global average temperature within 1.5°C, requires reinforcing all instruments relevant for the decarbonisation of EU’s economy;

Ozone depleting substances (ODS) are human-made chemicals that, after emission, frequently reach the upper atmosphere and damage the stratospheric ozone layer which protects the earth’s surface from dangerous UV radiation from the sun. This damage results in the so-called ‘ozone hole’ with significant adverse impacts on our health and the biosphere and which in turn entail high financial costs. Moreover, ODS are also strong greenhouse gases with high global warming potentials.

Due to global action taken against ozone depletion through the adoption of the Montreal Protocol on Substances that Deplete the Ozone Layer in 1987 (hereafter: the Protocol), the ozone hole is on the way to recovery, provided that compliance with existing measures is ensured and any new challenges are swiftly addressed. Furthermore, significant climate-related benefits have been achieved, e.g. for the period 1988 to 2010 these benefits were 5-6 times higher than those achieved during the Kyoto Protocol’s first commitment period 2008-2012.2 In 2019 researchers estimated that the Protocol had avoided as much as 1.1 °C warming over parts of the Arctic.3

Thus, it is essential that the EU avoids any backsliding and ensures that its ODS policy is aligned with the objectives in the European Green Deal, the Protocol and the Paris Agreement.

Regulation (EC) No 1005/2009 on substances that deplete the ozone layer (ODS Regulation) is the main instrument targeting ODS in the EU. Its general objective is to prevent ODS emissions and safeguard compliance with the Protocol. The ODS Regulation was submitted for a ‘REFIT’ evaluation,4 which concluded that while the Regulation was generally fit for purpose it could be better aligned with the European Green Deal and its design could be slightly improved.

2.

In this context, the proposal aims to replace the ODS Regulation, while maintaining a strict level of control, notably to:


1. Align the measures with the European Green Deal by mandating additional emission reductions that are feasible at proportionate costs.

2. Ensure a more comprehensive monitoring of ODS including of substances that are not (yet) controlled.

3. Simplify and improve the efficiency of existing rules to reduce the administrative costs.

4. Improve clarity and coherence with other rules.

Background

In response to ozone depletion and to the 'ozone hole’ discovered in the 1980s, the international community agreed to take measures under the 1985 Vienna Convention for the Protection of the Ozone Layer. The Convention’s Protocol and established a global phase-out schedule for production and consumption of nearly 100 ozone depleting substances. The Protocol and subsequent decisions of its 197 Parties have created a global legal framework for controlling ODS.

The EU and its Member States are Parties to the Protocol and are bound to the phase-out schedules for the different groups of ODS. All phase-out dates for developed countries are now in the past.

Consequently, the ODS Regulation generally prohibits production, trade and use of ODS while exempting a few specified uses. Many ODS were phased-out in the Union years ahead of the global schedule agreed under the Protocol. The ODS Regulation also goes beyond the Protocol by limiting trade and use of products and equipment with ODS. Finally, the ODS Regulation covers, in Annex I, the ODS that are controlled under the Protocol and in Annex II so-called ‘new substances’ that are not (yet) controlled by the Protocol.

The ODS Regulation is complemented by Commission Decision (EU) 2010/372 on the use of controlled substances as process agents, Commission Regulation (EU) No 1088/2013 on import and export licences of products and equipment containing or relying on halons for critical uses in aircraft and Commission Regulation (EU) No 291/2011 on essential uses of controlled substances other than hydrochlorofluorocarbons for laboratory and analytical purposes.

• Consistency with existing policy provisions in the policy area

The proposed Regulation (as well as the current ODS Regulation) has many similarities with Regulation (EU) No 517/2014 on fluorinated greenhouse gases5 (F-gas Regulation), which is being revised in parallel. These two Regulations must jointly ensure that the Union complies with its obligations relating ODS and HFCs under the Protocol. While the two reviews do not directly impact each other, they do affect similar stakeholders and sectors, as well as similar activities (trade, equipment use etc.) and they use similar control measures, including a trade licencing system as required by the Protocol. Both industry and authorities have therefore called for their relevant rules to be closely aligned (e.g. regarding custom controls, leakage rules, definitions etc.).

• Consistency with other Union policies

Regulation (EU) No 2021/1119 sets out a binding objective of climate neutrality in the Union by 2050 in pursuit of the long-term temperature goal of the Paris Agreement. In order to reach the climate-neutrality objective, the European Climate Law also sets the binding EU 2030 climate target of at least 55 % net greenhouse gas emissions reductions compared to 1990 levels. Both the 2030 and 2050 targets require alignment of all relevant EU policies. While the climate relevance of ODS emissions is not counted towards these targets, any action to prevent and further reduce ODS emissions results in additional savings that can contribute to reaching the temperature goal under the Paris Agreement.

Furthermore, there are also close links to waste6 and chemical7 policies, as well as customs and market surveillance legislation. The current review seeks to achieve more clarity by aligning more closely with these pieces of legislation. Directive 2010/75/EU on industrial emissions (IED) and Regulation (EC) No 166/2006 concerning the establishment of a European Pollutant Release and Transfer Register (E-PRTR) are also currently under review.

The latter monitors emissions of ODS, but more granularity on these data would be useful to complement the reporting data collected under the Regulation. Under the IED, emission limit values are set by the competent authority and should not exceed emission levels associated with best available technologies (BAT). A more systematic consideration of ODS as a key environmental parameter in the development of BAT reference documents (BREFs) would be useful with regards to controlling industrial emissions. Given the relevance of end-of-life emissions from insulation foams containing ODS, there are strong synergies with objectives of the circular economy and EU waste policies. The targeted 2023 revision of the Waste Framework Directive on which the impact assessment work has begun is a good opportunity to reinforce these links to the ODS Regulation.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

This proposal is based on Article 192(1) of the Treaty on the Functioning of the European Union, in line with the objective to preserve, protect and improve the quality of the environment; protect human health; and to promote measures at international level to deal with climate change.

• Subsidiarity

3.

The proposal complements EU legislation that has existed at EU level since 2000 and it clearly complies with the subsidiarity principle for the following reasons:


Firstly, protecting the climate system is a cross-border issue. Individual member states cannot solve the problems alone. The scale of the problem demands EU‑wide action as well as action worldwide.

The ODS Regulation prohibits the production, placing on the market and further supply, import, export and use of controlled substances and products and equipment using those substances. It is therefore relevant to the functioning of the internal market. For the functioning of the EU internal market and the free movement of goods, it is highly preferably if such measures are taken at EU level.

The Protocol considers the EU as a regional economic integration organisation (REIO) and the EU must therefore comply with the Protocol’s obligations at Union level (e.g. reporting, licensing system, consumption phase-down). This requires relevant legislation at the same level; it would be very difficult if not infeasible to achieve compliance through 27 different national systems.

• Proportionality

The proposal complies with the proportionality principle. The measures are based on a thorough assessment of their cost-effectiveness.

In general terms, the proposal mainly improves certain aspects of the ODS Regulation. Where further restrictions are proposed (i.e. recovery obligations) the proposal ensures that technically and economically feasible alternatives are available. If under particular circumstances this is not the case, it allows derogations to be granted.

Modifications on reporting are minor and should not entail any significant costs on undertakings. On the other hand certain modifications result in costs savings and prevent unnecessary administrative burden for undertakings and national competent authorities (for example removal of the quota allocation system).

No detailed provisions are proposed in areas where the objectives might be better achieved by action in other policy areas, for example by legislation on waste or labelling. This is to avoid overlaps that might lead to the unclear allocation of responsibilities, creating an additional burden for public authorities and companies.

• Choice of the instrument

The legal instrument chosen is a Regulation since the proposal aims to replace and improve the ODS Regulation while maintaining its general structure on control measures (prohibitions, exemptions and derogations, reporting). The ODS Regulation has proven to be effective and fit for purpose. Since the proposal includes several adaptations as well as amendments to the structure of the ODS Regulation, the ODS Regulation should be repealed and replaced with a new Regulation to ensure legal clarity. Any major changes (i.e. repeal, or turning it into a Directive) would unduly burden Member States and create additional uncertainty for the undertakings active in this sector.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

On 26 November 2019, the Commission published its evaluation report8 on the implementation of the ODS Regulation in line with the Better regulation requirements. The Regulatory Scrutiny Board acknowledged that the evaluation findings were well substantiated but advised to better describe (i) the contribution of the current Regulation on top of previous achievements, (ii) the EU’s global role in this area and (iii) the need for continued high ambition, in particular as related to climate action. The Board also suggested to make the text more reader-friendly to the non-expert. With these suggestions in mind, the evaluation text was re-written in the relevant parts.

The evaluation found that the ODS Regulation ensures compliance with the Protocol and positively influences third countries to do likewise. It has safeguarded a high environmental ambition by eliminating the vast majority of past ODS uses, while also ensuring a level playing field for concerned industries and undertakings among Member States. Thus, the evaluation concluded that most of the obligations and measures of the current Regulation are fit for purpose and should therefore remain in place.

However, the evaluation further recognises that its measures are not fully aligned with the European Green Deal and that further emission reductions would be possible at proportionate costs. In particular, a significant amount of ozone layer and climate relevant emissions could be saved at relatively low costs if ODS in certain building materials that contain foams blown with ODS, were being systematically recovered and destroyed or reused. In addition, some measures could be more efficient or even abolished, as they have effectively become obsolete in the present situation, where ODS uses have become generally prohibited. This would allow avoiding partially redundant administrative costs. In addition, certain gaps in the monitoring were observed. Finally, some of the rules were found to be slightly incoherent with other EU legislation. This includes, inter alia, customs legislation and border checking obligations. Similarly, there is some scope for simplification, improvement and clarifications as regards the coherence of the Regulation.

• Stakeholder consultations

The Commission carried out a broad consultation with stakeholders, including a public online consultation from 13 July 2020 to 9 November 20209. A targeted stakeholder consultation involving 42 stakeholders was also organised, tailored to ODS businesses, NGOs and competent authorities. Finally, an online stakeholder workshop was held on 26 February 2021 to present the preliminary results of the impact assessment and ask for stakeholder input on existing data gaps 66 stakeholders participated.

Contents

1.

Overall, stakeholders agreed that the ODS Regulation remains a successful tool to address ozone depletion and it is important to safeguard the progress made.


Almost all respondents in the public consultation agreed that there is a need for further reduction of emissions from foams at their end of life. Member States authorities and business confirmed the considerable positive environmental impact of such an option. Some Member State authorities raised concerns regarding the costs for the proper treatment of the waste.

Moreover, the simplification of the licencing system in light of the European Single Window Environment for Customs10 as well as strengthening measures for the prevention of illegal activities were overall considered as important objectives by stakeholders. All businesses (including any laboratory users that responded) and public authorities agreed on the option to simplify registration for laboratory use. Furthermore, all industry respondents and most public authorities found it important to abolish the quota system. In addition, the aviation industry highlighted the infeasibility of one halon prohibition, which was confirmed by authorities.

All non-business stakeholder groups in the public consultation placed high importance on additional reporting measures, whereas businesses were divided on this issue.

Many of the suggestions to ensure better coherence and clarification were provided by stakeholders in the context of the evaluation and in the context of the consultation activities for this review. Two thirds of the respondents to the public consultation highlighted the importance of ensuring a clearer and more accessible legal text of the Regulation.

The consultations therefore were fully considered in developing the proposal, in particular regarding the design of the policy measures considered and their potential impacts.

• Collection and use of expertise

The Commission has gathered extensive technical advice from a number of expert studies11 including a comprehensive preparatory study for the review of the Regulation. The industry sector, Member States authorities and civil society were asked to provide input and technical support for the preparation of the study.

• Impact assessment

The Commission carried out an impact assessment. Three policy options, covering different policy measures, were examined in terms of their effectiveness in achieving the objectives sought as well as their environmental, economic and social impacts. For each review objective, a series of measures were identified. The measures, which are complementary and not mutually exclusive, were grouped into three policy options on the basis of their expected (abatement) costs:

- Option 1: includes measures resulting in cost savings or very low costs only. It focuses mainly on simplifications and better coherence and clarifications, but includes also one additional very cost-efficient measure to reduce emissions, requiring recovery of ODS-containing foams in metal-faced panels.

- Option 2 (the preferred option): the same as Option 1, but also includes additional measures that are expected to generate some costs, notably measures targeting emission reductions, e.g. by enlarging the scope of ODS containing foams for which recovery is required, as well as more comprehensive monitoring and control.

- Option 3 includes all measures assessed including those with high (abatement) costs.

The baseline, against which policy options were assessed, assumes that the ODS Regulation and implementing acts are fully implemented without any changes. Option 1, is the low-cost option. It would save a relevant amount of emissions compared to baseline and achieve costs savings for business and authorities. Option 2 almost doubles the additional emission savings at moderate abatement costs. The additional costs largely relate to foam recovery for building owners. These costs will, however, be spread over many years and a high number of persons/entities. The overall emission savings of Option 3 are only very marginally higher than Option 2, while the additional measures included in Option 3 would likely lead to very high costs to undertakings and may have considerable detrimental effects on employment. All changes related to better coherence and clarity are included in all three options.

On the basis of the assessment it is concluded that Option 2 includes the preferred package of measures. It achieves significantly more emission savings than Option 1 and is therefore more coherent with the European Green Deal. Moreover, the abatement costs for Option 2 are very reasonable compared to the forecasted costs in the EU long-term strategy needed to reach climate neutrality. On the other hand, Option 3 would add considerable costs at only incremental savings and potential environmental benefits would be uncertain.

4.

The preferred option is thus characterised as follows:


- The main measure to avoid further emissions is an explicit requirement to recover certain types of ODS foams12 from construction and demolition waste and destroy or reuse the ODS contained therein; it is estimated to save about 180 million CO2 equivalents until 2050;

- It will be prohibited to destroy halons in order to preserve non-virgin stocks for exempted critical uses and thereby, prevent that a restart of new halon production for such uses would become necessary;

- All measures meant to reduce the burden on companies and authorities and/or improving the controls in place are included;

- All measures to improve monitoring are included;

- All measures to improve coherence and clarifications are included.

The initiative contributes to the Sustainable Development Goals, most prominently to “fight climate change”, but also “health and well-being”, “life on land” and “sustainable production and consumption”. It responds to the “digital by default” principle by modernising the licensing system and exploiting fully the opportunities of the Single Environment for Customs initiative by electronically linking custom offices on the Member States to the EC-central ODS licensing system. It is also fully in line with the “do no significant harm” principle as it will further strengthen the controls on ODS and reduce ozone- and climate-relevant emissions.

The Regulatory Scrutiny Board gave a positive opinion but recommended to provide more clarity on the description of the measures and their assessed impacts. The impact assessment was updated to address these issues, in particular regarding the main emission savings measure of insulation foam recovery and destruction.

• Regulatory fitness and simplification

A significant focus of the proposal is on increasing efficiency of the existing measures, rather than creating new ones, given that this is a regulation that has already been evolving over three decades in response to obligations under the Protocol, new developments and changes in technologies.

The proposal is expected to deliver a number of simplification benefits to business. In particular, the abolishment of the registration requirements for laboratory uses will result in cost savings for companies as it will decrease the administrative burden on the 2,211 laboratories registered in 2020, often SMEs. Moreover, abolishing the annual quota allocation system also reduces administrative costs for undertakings that have to apply for such quota on a yearly basis. Finally, business applying for longer-term licences instead of per-shipment licences will reduce administrative costs.

The registration and issuing of licenses referred to in this proposal will be implemented through the existing ODS licensing system. An adaptation is required for its interconnection with the national customs authorities systems via the EU Single Window Environment for Customs. Through this interconnection, the validity of licences will be automatically checked at customs for every single shipment. Until the latter electronic system is operable in all Member States, the current licensing system will continue.

In total, the cost savings achievable are up to €180,000 per year for industry (plus non-recurrent savings of €36.000), and 254 person days per year for authorities in addition to a non-recurrent saving of 440 person days and yearly IT costs savings of €31,500.

• Fundamental rights

The proposed rules of this initiative ensure the full respect of the rights and principles set out in the Charter of Fundamental Rights of the European Union.

4. BUDGETARY IMPLICATIONS

The proposal has no incremental implications to the budget of the European Union.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

Future monitoring and evaluation of the ODS Regulation can rely on companies’ reporting data that is collected and aggregated by the European Environment Agency each year. In addition, Member States reporting pursuant to Art. 26 allows to (i) monitor the availability of halon stocks to satisfy the remaining critical uses, and to (ii) report on illegal trade activities which may give an indication of the success of aligning with custom rules and improving controls, including through modernising the licensing system. Efficiency improvements will be monitored by the amount of resources still needed for the implementation of the system on the Commission side, as well as the numbers of (traders) licenses that companies would still require.

The enforcement of the recovery of foam banks would be in the hands of the Member State authorities. There are synergies with national waste regulations that may already monitor the presence of hazardous substances such as ODS in demolition wastes, that would allow to better ensure that ODS are indeed recovered for destruction.

The Commission will monitor the implementation of the proposed measures. In this context, the Commission will cooperate closely with national authorities e.g. the national experts on ozone depleting substances, customs authorities and market surveillance authorities. The committee referred to in the proposal will assist the Commission in its work and will discuss questions on the harmonised implementation of the proposed rules where appropriate. The development of the relevant case-law of the Court of Justice of the European Union will also be monitored.

The impacts of the Regulation should be evaluated regularly; the first report should be published by 2033. In this context, an expert study would be needed to estimate the progress made on foam banks. The evaluation should also examine the developments in administrative costs.

• Detailed explanation of the specific provisions of the proposal

The proposal maintains the current control system envisaged under the ODS Regulation, namely the general prohibitions on production, use and trade of ODS and products and equipment using ODS, and the applicable exemptions on a few uses where alternatives are not yet available (feedstock, process agents, essential analytical and laboratory uses). Following the phase-out of ODS for almost all uses, certain rules have not been retained since they are no longer necessary: this concerns in particular the system of allocating quota for the import and use of exempted substances and the registration requirement for ODS laboratory and analytical uses. Moreover, the proposal ensures the necessary alignments with more recent EU legislation, in particular Regulation (EU) No 517/2014 on fluorinated greenhouse gases and the Commission proposal reviewing that Regulation (in terms of definitions, provisions on penalties and controls by customs authorities). Regulation (EU) No 952/2013 laying down the Union Customs Code, as well as with decisions of the Parties to the Protocol.

Obsolete exemptions to prohibitions have been removed for legal clarity purposes and to avoid illegal trade. The structure of the ODS Regulation has been slightly amended to increase coherence.

Chapter I

The proposal lays out the subject matter, scope and applicable definitions of the Regulation. A number of definitions set out in the ODS Regulation have been deleted for reasons of legal clarity or because they became obsolete.

Chapter II

The proposal sets out the general prohibitions on the production, import, placing on the market, use, and trade of ODS.

Chapter III

The proposal sets out the exemptions from the prohibitions stated under Chapter I (Article 6-14) and includes conditions for those exemptions (Article 15).

To ensure consistency with Regulation (EU) No 517/2014, importers and producers must provide evidence of destruction or recovery for subsequent use of trifluoromethane produced as a by-product in the production of ODS. The proposal also clarifies that, in general, the entry in the territory of non-refillable containers is prohibited, thus under any customs procedures.

Chapter IV

The proposal modernises the licensing system set out in the ODS Regulation to take into account its interconnection with the European Single Window Environment for Customs, which will allow for automatic customs controls per shipment. In this setup, importers and exporters of ozone depleting substances and products using such substances will only need to apply for ‘traders’ licenses, instead of per shipment licenses, since the European Single Window Environment for Customs, envisaged under the Commission proposal adopted on 28 October 2020, enables real-time checks on each shipment automatically. The proposal also clarifies the role of customs authorities and, where relevant, of market surveillance authorities, in implementing the prohibitions and restrictions set out in the proposed Regulation and strengthens their powers to prevent illegal trade of ODS. The obligations of economic operators have also been clarified and adapted in view of enabling the correct operation of the European Single Window Environment for Customs.13

As required under the Protocol, the proposal retains the trade ban with non-Parties to that Protocol.

Chapter V

To ensure the maximum emissions savings, at proportionate costs, it is proposed to make the recovery of ODS contained in certain types of foams used as isolation materials in building, from construction and demolition waste obligatory, as well as the destruction of the ODS contained therein via approved technologies (or, alternatively, reuse of the foam). The destruction of halons is prohibited under the proposal to ensure that, where possible, it is recovered and re-used thereby preventing the need for future production of halon for critical uses. The leakage obligations set out the ODS Regulation have been simplified taking into account the prohibition to use ODS to refill products and equipment except for the use of halons in fire protection systems for critical uses.

Chapter VI

The proposal introduces reporting obligations for Member States and for undertakings (the latter is an obligation under the Protocol). In order to complete monitoring, the reporting obligations for undertakings of ‘new substances’ in Annex II have been aligned with those applicable for substances in Annex I. Reporting obligations have also been extended in relation to emissions and sales in the Union. The proposal also adds three new substances to ensure proper monitoring of their production, trade and use. The global warming potential of ODS has also been added to the annexes in order to increase awareness of the climate impacts of ODS.

Chapter VII

The proposal specifies the cases where exchange of information and cooperation with competent authorities within a Member State, as well as amongst Member States and with competent authorities of third countries is required.

The proposal also establishes the obligation for competent authorities to check on the compliance of undertakings with the Regulation on a risk basis and where concrete evidence are available.

Chapter VIII

Finally, the proposal establishes that the level and type of administrative penalties for infringements of the Regulation must be effective, dissuasive and proportionate and shall also take into account relevant criteria (such as the nature and gravity of the infringement). In particular, it proposes an administrative fine to be imposed in cases of illegal production, use or trade of ODS or of the products and equipment covered under this Regulation. The proposed provisions are aligned, and compliment the Commission Proposal for a Directive of the European Parliament and of the Council on the protection of the environment through criminal penalties adopted on 15 December 202114.