Preparing for 4 New EU Environmental Regulations in 2024

The European Union is well on its way to implementing a series of pivotal environmental regulations that cover everything from water quality to carbon emissions and biodiversity preservation. For businesses operating from within or exporting to the EU market, understanding and preparing for these changes is important to ensure continued compliance. 

This post will offer a high-level view of each of these regulations, providing key insights and actionable tips to ensure your business is prepared to meet these new standards.

The Carbon Border Adjustment Mechanism

The European Union's Carbon Border Adjustment Mechanism (CBAM) is designed to prevent carbon leakage by imposing a carbon price on imports of certain goods from outside the EU. This will ensure that ambitious climate efforts within the EU do not simply result in the relocation of carbon-intensive production to countries with less stringent emissions standards. "Carbon leakage" refers to the situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints.

CBAM requires importers to purchase carbon certificates or pay a carbon price that is equivalent to the carbon price imposed to EU producers under the Emission Trading System (ETS). . The carbon price is based on the embedded emissions associated with the production of the imported product. 

Since the system focuses on preventing "carbon leakage," importers can qualify for deductions by showing proof of having already paid a carbon price in other jurisdictions.
 

Materials covered under CBAM 

The mechanism initially targets a specific set of goods known for their carbon-intensive production processes. 

These include:

• Iron and steel
• Cement
• Fertilizer
• Aluminum
• Electricity
• Hydrogen

Key dates and CBAM implementation timeline

The CBAM is being phased in gradually to allow businesses and trading partners time to adjust. A transitional phase, started on October 1, 2023, involves reporting requirements without financial adjustment. Full implementation is expected by 2026, at which point importers will begin paying for the carbon content of their imports.

For businesses to stay ahead of these changes, it is advised to start developing data gathering processes, assessing the carbon footprint of their supply chains and exploring ways to reduce emissions. 

CBAM reporting requirements

Companies covered by CBAM will initially only be required to report their GHG emissions and will have some flexibility in reporting. Through the close of 2024, there are three options for calculating the embedded emissions: 

1. Utilizing the newly established EU methodology, which either rely on a calculation-based approach or a measurement-based approach. 
2. Employing an alternative method approved by the EU (available until December 31, 2024). 
3. Relying on default reference values for reporting (available until July 2024).

Starting from January 1, 2025, the reporting process will become more streamlined. At this point, the EU's specific methodology will be the single accepted reporting standard. 

Starting from January 1, 2026, the mechanism will enter in full force, requiring companies to purchase and surrender carbon certificates. 

Potential impact on businesses and industries

EU manufacturers may see a more level playing field as CBAM disincentivizes the import of cheaper, carbon-intensive goods.

All businesses, particularly those exporting carbon-intensive products to the EU market, should focus ensuring that necessary data gathering processes are in place, reducing their carbon emissions, re-evaluating and adjusting their supply chains to meet EU standards, and enhancing transparency in reporting their carbon data. 

Adapting to these new requirements is crucial for ensuring continued market access leveraging opportunities within the EU market and avoiding heavy taxation as a result of lacking efforts in the adoption of decarbonization strategies.

“The introduction of CBAM marks a crucial advancement in the global sustainability transition and climate change mitigation efforts.  Even if it entails significant administrative and technical challenges, it is vital to establish transparent and robust systems for monitoring, reporting, and verification to effectively address climate mitigation objectives. CBAM will not only encourage domestic production within the EU but also impose measures to reduce emissions by third-country exporters, thereby fostering a more sustainable global economic landscape. I anticipate significant growth for CBAM and welcome the inclusion of a wider range of goods in the future.” Julia Ekander, Sustainability Consultant, DGE Sweden / DGE Group

The Drinking Water Directive

The Drinking Water Directive (DWD) is aimed at safeguarding public health through enhanced water quality standards. Adopted in December 2020 and fully implemented as of January 2023, this directive sets a new precedent for the access to and quality of water intended for human consumption. 

How the directive aims to improve public health and water quality

The directive is ambitious, expanding its scope to ensure that all water, whether in its original state or after treatment, intended for drinking, cooking, food preparation, or other domestic uses, meets stringent safety standards. 

Here are the key goals of this directive:

• Updated water quality standards that align with or surpass World Health Organization recommendations, ensuring even cleaner tap water for all.
• A focus on pollutants such as endocrine disruptors, PFAs, and microplastics, with preventive measures aimed at pollution reduction at the source.
• The introduction of a Drinking Water Watch List, mandating closer monitoring for endocrine-disrupting compounds across the EU.

Steps businesses need to take to comply

Compliance with the DWD demands proactive measures from businesses, especially those involved in water supply and treatment, food industry, and manufacturing of products that come into contact with drinking water. 

Here’s what businesses need to consider:

• Ensure that water used in operations, especially for manufacturing and food preparation, meets the revised directive's standards.
• From December 31, 2026, materials and products that come into contact with drinking water must comply with new EU hygiene standards to prevent microbial growth and substance leaching.
• Products meeting these standards will be eligible for an EU declaration of conformity, allowing unrestricted sales across the EU.

Businesses must also stay informed about the directive's reporting requirements, which include annual updates on water quality and six-yearly updates on risk assessments and measures to improve water access. 

Biodiversity Strategy for 2030

The European Union's Biodiversity Strategy for 2030 is an effort to reverse the alarming trends of biodiversity loss and ecosystem degradation. As part of the European Green Deal, this strategy is part of an ongoing global conversation around safeguarding biodiversity. At the same time, it aims to build our societies’ resilience to direct and indirect impacts of climate change (es. forest fires, food insecurity, disease outbreaks). 

Key targets and initiatives outlined in the strategy

The strategy sets ambitious targets to safeguard and revitalize the EU's biodiversity by 2030:

• Expansion of the EU-wide network of protected areas (i.e. Natura 2000) with a focus on areas of significant biodiversity and climate value.
• Introduction of the EU nature restoration plan aimed at revitalizing degraded ecosystems, especially those crucial for carbon capture and disaster risk reduction.
• Implementation of the EU's first Nature Restoration Law, setting binding targets for the restoration of specific habitats and species.
• Mobilization of funds and establishment of a robust governance framework.

The role of business in supporting biodiversity

While the Biodiversity Strategy does not set out specific compliance mechanisms for businesses in the same way as direct regulation, it sets a clear direction for future policies and legislation that could impact business operations. 

Businesses should stay informed about the development and implementation of related laws and guidelines that may arise from the strategy, as these could directly or indirectly impose new compliance and monitoring requirements.

Packaging Reduction Regulation

The European Union is taking significant strides toward drastically reducing packaging waste with the new Packaging and Packaging Waste Regulation. This new policy also hopes to enhance recycling rates and promote a shift toward more sustainable packaging solutions. 

Impact on packaging design, materials, and production processes

The regulation will significantly influence the packaging industry:

• Increased requirements for packaging to be recyclable, with the Commission setting clear criteria defining what constitutes “designed for recycling” and “recyclable at scale.”
• A ban on “forever chemicals” in food packaging and restrictions on very light-weight plastic carrier bags.
• Encouragement for the use of bio-based plastics and the assessment of sustainability criteria.

Impact for businesses operating outside of the EU

Companies that package materials outside of the EU will need to comply with the new Packaging Reduction Regulation in order to sell their products within the EU. This regulation applies to all packaging that enters the EU market, regardless of where it is manufactured or packaged. 

The aim is to ensure that all products sold within the EU meet the same environmental standards, contributing to the reduction of packaging waste and the promotion of recycling.

Key dates and compliance strategies for companies

Specific deadlines will be set for compliance with different aspects of the regulation, such as reduction targets for packaging waste, requirements for recycled content in packaging, and bans on certain materials and chemicals. 

• The regulation proposes specific waste reduction targets for plastic packaging (10% by 2030, 15% by 2035 and 20% by 2040).
• By the end of 2025, the European Commission is expected to assess the possibility of setting targets and sustainability criteria for bio-based plastics. This could lead to new requirements for businesses.
• EU countries are expected to ensure that 90% of materials contained in packaging are collected separately by 2029, which will affect how businesses design and dispose of packaging.

The regulation will also clarify requirements for reusable and refillable packaging, including criteria such as the minimum number of times packaging should be reused. Businesses in sectors like beverages and take-away food will need to adapt to these requirements, likely before the end of the decade.

Businesses should closely monitor the progress of this regulation through official EU channels and prepare for these changes by reviewing and adjusting their packaging strategies accordingly. Early preparation and adaptation can help ensure compliance and minimize disruption to business operations.

Learn how our Sustainability Consulting can help you stay compliant with new regulations.

Thanks to our Associate author contributors with local expertise on these regulations: Julia Ekander, DGE Sweden / DGE Group; Mattia Colombo, Valentina Vieri, and Paola Camisani HPC Italy

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