Written on: November 1, 2023 by Alain D'haese
The European Green Deal is a top priority of the von der Leyen Commission, and one of its aims is to make the European Union (EU) climate neutral by 2050. To make this objective legally binding, the EU adopted the Regulation (EU) 2021/1119 in June 2021. This is also referred to as the European Climate Law, which sets an ambitious net greenhouse gas (GHG) emissions reduction target of at least -55% by 2030, compared to 1990 levels. The recently appointed Dutch Commissioner in charge of climate action, Wopke Hoekstra, is expected to propose an ambitious climate target for 2040 in the first quarter of 2024.
The “Fit for 55” package aims to translate the climate ambitions of the Green Deal into law. This package is a set of proposals to revise climate-, energy- and transport-related legislation and put in place new legislative initiatives to align EU laws with the EU’s climate goals.
I do not intend to cover the entire package, rather only two relevant pieces of legislation:
1. The EU Carbon Border Adjustment Mechanism (CBAM)
2. The EU Fluorinated Greenhouse Gases Regulation (F-gas Regulation)
As the EU raises its climate ambition, and as long as less stringent climate policies prevail in many non-EU countries, there is a risk of so-called “carbon leakage,” which occurs when companies based in the EU move carbon-intensive production abroad to countries where less stringent climate policies are in place than in the EU, or when EU products get replaced by more carbon-intensive imports.
The EU Carbon Border Adjustment Mechanism (CBAM) is the legal instrument used to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.
The CBAM Regulation (EU) 2023/956 entered into force on May 17, 2023, and came into effect on Oct. 1, 2023.
The gradual introduction of the CBAM is aligned with the phase-out of the allocation of free allowances under the EU Emissions Trading System (ETS) to support the decarbonization of EU industry.
By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, CBAM will ensure the carbon price of imports is equivalent to the carbon price of domestic production and that the EU climate objectives are not undermined. CBAM has been designed to be compatible with World Trade Organization (WTO) rules. It covers imports of covered goods from non-EU countries, except those participating in, or that are linked to, the EU Emissions Trading System (ETS)—currently Iceland, Norway, Liechtenstein, Switzerland and five other minor territories.
The new provisions initially affect goods imported from non-EU countries that are particularly carbon-intensive, namely specified goods within the cement, electricity, fertilizer, aluminum, iron, steel and hydrogen sectors, as well as some upstream and downstream products made mainly from iron, steel and aluminum. Both aluminum and tinplate steel aerosol containers are included in the list of goods, under Custom Codes 7310 and 7612.
After implementation of CBAM, the European Commission plans to extend the scope of application to all sectors subject to EU emissions trading by 2030.
In the transitional phase of CBAM implementation—from Oct. 1, 2023 to Dec. 3, 2025—affected companies are subject to a reporting obligation without financial obligation.
The European Commission has developed dedicated IT tools to help importers perform and report these calculations, as well as in-depth guidance, training materials and tutorials to support businesses when the transitional mechanism begins. While importers were asked to collect fourth quarter data as of Oct. 1, 2023, their first report will only have to be submitted by the end of January 2024. This first step alone is likely to pose challenges for many companies.
Once the permanent system enters into force on Jan. 1, 2026, importers will need to declare, each year, the quantity of goods imported into the EU in the preceding year and their embedded GHG. They will then surrender the corresponding number of CBAM certificates. The price of the certificates will be calculated depending on the weekly average auction price of EU ETS allowances expressed in €/tonne of CO2 emitted.
The phasing-out of free allocation under the EU ETS will take place in parallel with the phasing-in of CBAM in the period of 2026–2034.
Only registered declarants will be allowed to import CBAM goods. The customs authorities of the EU member states will monitor the movement of goods and deny the import of CBAM goods by non-registered declarants.
Therefore, from January 2026, prices of metal aerosol cans imported into the EU will inevitably increase. I encourage aerosol fillers in the EU who use imported metal aerosol cans to engage in dialogue with their supplier(s). Importers of metal aerosol cans should assess the necessary IT solutions for recording and determining carbon dioxide equivalent emissions and the related reporting workload.
The EU is taking regulatory action to control Fluorinated Greenhouse Gases (F-gases) as part of its policy to combat climate change.
Hydrofluorocarbons (HFCs) are by far the most relevant F-gas group from a climate perspective, although they are relatively short-lived. The other two prominent F-gas groups, perfluorocarbons (PFCs) and sulphur hexafluoride (SF6), can remain in the atmosphere for thousands of years.
The first F-gas Regulation was already adopted in 2006 and succeeded in stabilizing EU F-gas emissions at 2010 levels.
The second F-gas Regulation was adopted in 2014 with the aim to cut F-gas emissions by two-thirds by 2030 in the EU, compared to 2014 levels.
The European Parliament and Council recently reached a provisional agreement for a third F-gas Regulation.
The use of HFCs will be reduced by 95% by 2030 compared to 2015, going down to zero by 2050; this means there is no more phase-down but rather a total phase-out of HFCs by 2050.
From 2025, the HFC quota that the Commission allocates every year will be sold for €3 per tonne of CO2 equivalent.
Beyond the existing restrictions of F-gases in One-Component Foams (polyurethane), HFCs in aerosol dispensers for entertainment and decorative purposes, HFCs in signal horns and HFCs in technical aerosols, the deal introduces a new restriction on F-gases used in personal care products from Jan. 1, 2024. Pay attention to this tough deadline if your company still exports personal care aerosols from the U.S., very likely containing HFC-152a, to the EU. It also means that HFO-1234ze will also be prohibited in personal care aerosols. Finally, the existing restriction on HFCs in technical aerosols will be supplemented by a new restriction of all F-gases in technical aerosols, except when required to meet safety requirements or when used for medical applications, from Jan. 1, 2030. What is meant by “safety requirements” is legally defined in the text, but there is no definition of “technical aerosols” anymore.
For the first time, certain exports are prohibited, including the export of technical aerosols that contain F-gases with a GWP of 1,000 or more. Technical aerosols containing HFC-134a manufactured in the EU for export will need to stop production and eventually delocalize outside of the EU. Any aerosol products containing HFC-152a or HFO-1234ze manufactured in the EU may continue to be exported outside the EU.
Affected companies will need to embrace these changes without delay depending on their individual situation.
FEA will continue to facilitate the exchange of expertise on policy and industry issues. The next Global Aerosol Summit within the Aerosol & Dispensing Forum (ADF), Paris Packaging Week 2024, will be held Jan. 17–18 in Paris, France. This is a moment not to be missed. Such an interactive event, designed for the global aerosol industry, remains essential to maintain high-level expertise and experience for a thriving aerosol community. I’ll see you in Paris soon. SPRAY