Informal Meeting of EU Environment Ministers Background document Session Green growth: greening the European Semester and the EU 2020 Strategy

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1 Informal Meeting of EU Environment Ministers Background document Session Green growth: greening the European Semester and the EU 2020 Strategy 1) Introduction Milan, 16July The European Semester and the forthcoming mid-term review of the Europe 2020 Strategy for sustainable, smart and inclusive growth present important opportunities to strengthen the environmental dimension of the Strategy and its governance processes. Besides being a legal requirement under art. 11 of the TFEU, stronger integration of environment and economic policy together with concrete actions on resource efficiency and low-carbon economy can deliver more growth and job opportunities and higher quality of life for the citizens of the EU. The debate on Greening the European Semester in the Environment Council started already in 2011 which since then has annually contributed to the conclusions of the Spring European Council. Taking stock of the Annual Growth Surveys (AGSs) presented by the European Commission, the Environment Council has repeatedly underlined the importance of the shift towards a resource efficient and low-carbon economy for the pursuit of sustainable growth and has highlighted the need to introduce more environmental and climate action priorities in the AGS. The Council highlighted the potential of actions in a number of areas, in particular waste and water management, uptake and innovation in the field of low-carbon technologies, promoting resource efficiency in SMEs, fostering eco-design and eco-innovation, improving the efficiency of buildings, shifting to environmental taxation, phasing out environmentally harmful subsidies, and reducing energy dependency as well as greening public procurement and EU funds spending. Measures in some of these areas have been reflected in National Reform Programmes and Country Specific Recommendations for several Member States, while coordination and exchange of best practices at European level has been improved. However, the objective of the Europe 2020 Strategy to decouple economic growth from resource use and its environmental impacts is not likely to be achieved unless efforts to promote the transition to a resource efficient and circular economy are stepped up. Continued progress towards a low-carbon economy should also be ensured. The mid-term review of the Europe 2020 Strategy gives a unique possibility to integrate in a stronger and more consistent way environmental and economic objectives in the context of resource efficiency. In the Communication on "Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth"1 the Commission identified pressure on resources 1 COM(2014) 130, a public consultation on the Strategy is open until 31 October 2014, see 1

2 and environmental concerns as a key long-term trend affecting growth. The Commission also underlined the progress already made in view of achieving the 2020 headline targets on climate change and energy, while stressing the efforts still required. The Seventh Environment Action Programme (7th EAP)2 which entered into force in January 2014, requires Member States and the EU to integrate environmental and climate-related considerations into the European Semester and assess the appropriateness of the inclusion of a lead indicator and target in this process. Linking the debate on greening the European Semester and the mid-term review of the Europe 2020 Strategy with the 2014 Commission initiatives on the circular economy, waste policy and targets, green jobs, sustainable food, and sustainable building offers a promising avenue to boost the transition towards a green economy in the EU. Furthermore, debate is ongoing on the Commission's proposed framework for energy and climate policies up to 2030, in view of a final decision by the European Council no later than October A strengthened role of the Environment Council in the EU governance processes can contribute to a positive vision of a resource efficient and low-carbon Europe exploring new, sustainable sources of growth and prosperity. In March 2014, the Environment Council underlined that the potential of sustainable growth and the green economy should be addressed more specifically and clearly in the Annual Growth Survey as policy areas enhancing job creation and fostering innovation. It was also concluded that the Environment ministers have a role to play in the preparation of the Semester National Reform Programmes to ensure that the growth and job creation potential deriving from low carbon and resource efficient actions is fully taken into account 3. The next European Semester starting with the AGS for 2015 provides the opportunity to address these conclusions in the shorter term, together with identifying the longer-term priorities for the next five years under the mid-term review of the Europe 2020 Strategy. 2) A renewed green growth agenda A momentum is building to move to a circular economy where virtually nothing is wasted, industrial symbiosis are encouraged and where resources are creating far more value in the economy and society. The currently prevailing take-make-dispose model relies mainly on resource extraction and leads to a loss of valuable materials and enormous waste generation. This linear model is no longer a viable option for sustainable growth. Together with efficiency improvements, pumping resources back into productive use again and again is a route to improving competitiveness, creating new business opportunities and jobs and reducing environmental impacts of production and consumption. However, many framework conditions need to change as current systems, infrastructure, technology, business models and behaviour present barriers to shift to a resource efficient, circular economy and society. Stronger signals are needed to accelerate the transition. On 2 July 2014 the Commission adopted a number of initiatives constituting a renewed agenda for sustainable growth and resource efficiency, following on from the 2011 Roadmap to a resource efficient Europe. It is essential to identify concrete areas where joint effort on the part of EU and Member States can deliver results in the coming years and prepare the ground for long-term sustainable growth

3 The Commission Communication "Towards a circular economy: A zero waste programme for Europe" 4 aims to establish an enabling framework for the circular economy, which combines policy integration, smart regulation, research and innovation, leveraging investment and attracting financing, while promoting a strong role for business and consumers. The way products are designed is essential in a circular economy, as it relies of reuse, repair, remanufacturing, and eventually recycling. In this context a coherent EU product policy with an important role for eco-design is a must. Directing research and innovation to look for solutions in line with the circular economy concept, developing public-private partnerships and innovative financial instruments are further promising avenues to pursue. Waste policy is essential to deliver a resource efficient, circular economy. In the 7 th EAP the EU has already set out its political commitment to reduce waste generation, to recycle waste into a major, reliable source of raw materials, to recover energy only from non-recyclable materials, and to virtually eliminate landfilling. Ambitious yet achievable waste targets with a longer-term perspective and progressive increased recycling targets for municipal waste and packaging waste while simultaneously reducing and then phasing out landfilling of recyclable materials first and all recoverable materials later, are instrumental in providing a stronger signal for investment and policy development. At the same time implementation has to be significantly improved through better cooperation between the Commission and the Member States, including in identifying appropriate economic instruments landfill and incineration taxes, improved extended producer responsibility schemes, subsidies or penalties to promote separate collection at local level, pay as you throw schemes, etc. Moreover, there is scope for significantly simplifying reporting obligations, harmonising and streamlining the calculation of the targets and improving the reliability of key statistics. These measures can create jobs, alleviate import dependency, and reduce greenhouse gas emissions, marine litter but also direct costs related to waste generation and treatment. The Commission's legislative proposal to review recycling and other waste-related targets and provisions 5 address these areas, and propose, inter alia, to increase recycling/re-use of municipal waste to 70% in 2030, and of packaging waste to 80% in 2030, with materialspecific targets set to gradually increase between 2020 and 2030; phase out landfilling by 2025 for recyclable waste (including plastics, paper, metals, glass and bio-waste) to limit landfilling to maximum 25% of waste generated; and reduce food waste generation with an indicative objective of 30% by Precise measures are foreseen to improve the quality and comparability of the reported waste management statistics, ensure a proactive monitoring of the achievement of the targets through an early warning procedure aiming at ensuring the dissemination of the best practices, improving the transparency and cost effectiveness of producer responsibility schemes. The new measures can create more than direct jobs in the EU by 2030, in addition to the estimated jobs that will be created by the full implementation of the waste legislation in force. Specific initiatives are also developed concerning products, which have substantial environmental impacts food and buildings. Member States have a key role in taking a coordinated and targeted action to prevent food waste, while pursuing a common aspirational target. A vision of how a future sustainable food system might look, and setting out what steps might be needed to achieve it, are important in providing a framework for such efforts. The Commission Communication "Resource efficiency opportunities in the building sector" 6 focuses on better information on environmental performance of buildings based on an EU framework

4 with core indicators and increasing the use of recycled materials in the construction of buildings, by fostering a better functioning market for recycled construction and demolition waste. Providing information and advice to SMEs on how they can reduce resource use, innovate, cooperate and successfully compete in green markets can bring significant benefits to the economy in the EU. Investment in support programmes can generate times its value in cost and environmental savings 7. Under a Green Action Plan for SMEs 8 the Commission has presented a series of SME-oriented actions proposed at European level to help exploit the business opportunities that the transition to a green economy offers, by improving resource efficiency of European SMEs, supporting green entrepreneurship, exploiting the opportunities of greener value chains, and facilitating market access for green SMEs. International networking will be encouraged in order to better enable SMEs to enter fast growing green markets abroad. A number of measures will facilitate access to financial support for eco-innovation and resourcerelated improvements through European financial programmes such as COSME, Horizon 2020 and LIFE, while the EIB provides loans to banks in order to improve the access to finance for SMEs. Closer integration of the employment and environmental agendas is needed in order to support greening across many economic sectors. The Green Employment Initiative 9 of the Commission intends to enhance action in a number of domains, such as bridging the skills gaps; anticipating change, securing transitions and promoting mobility; supporting job creation; as well as increasing transparency and data quality. Another contribution to green growth is the inclusion of environmental priorities in the European Funds (New Cohesion Programmes, Rural Development Programmes, Maritime and Fisheries Fund Programmes, LIFE+, RTD, TENs, etc), which should be monitored closely over the coming years. In addition, by shifting consumption and production patterns towards green products and services, Green Public Procurement (GPP) is playing an important role in greening the economy and consequently in creating jobs in environmental goods and service sectors. Key actions to pursue are strengthening the GPP requirements for products with significant environmental impacts, while investigating the potential for mandatory requirements; strengthening the presence of GPP in EU funded projects; preparing guidance on how to make best use of the recently published Public Procurement Directives for GPP, and supporting innovative instruments, such as Pre-Commercial Procurement and Public Procurement for Innovation, as well as facilitating the creation of networks of public authorities on GPP. Finally, a political target on resource productivity can bring all these elements together and focus attention and increased effort on developing policies that contribute to environmental and economic objectives at the same time. Resource productivity in the EU grew by 20% in the period , but this growth is expected to slow down in the coming years. Maintaining the average growth rate observed over the past 10 years will lead to an increase in resource productivity by 30% by Such a development could boost GDP by nearly 1%, while creating over 2 million jobs more than in a business as usual scenario

5 Endorsing such a resource productivity target under the mid-term review of the Europe 2020 Strategy can provide the much needed link between the measures dealing with the restructuring of the economy and those addressing resource challenges. While the target would be monitored in the European Semester, each Member State would have the flexibility to focus on the resources or policy areas where improvements would be most economically and environmentally beneficial. Currently the most appropriate indicator is for resource productivity as measured by GDP on Raw Material Consumption (RMC) 11. Building upon the existing climate package and the related headline targets under the 2020 Strategy, the Commission presented, in January 2014, a 2030 climate and energy policy framework. While the EU is making good progress towards meeting its climate and energy targets for 2020, an integrated policy framework for the period up to 2030 is needed to ensure regulatory certainty for investors and a coordinated approach among Member States. The framework seeks to drive continued progress towards a low-carbon economy. It aims to build a competitive and secure energy system that ensures affordable energy for all consumers, increases the security of the EU's energy supplies, reduces our dependence on energy imports and creates new opportunities for growth and jobs. A centre piece of the framework is the target to reduce EU domestic greenhouse gas emissions by 40% below the 1990 level by The Commission also proposes an objective of increasing the share of renewable energy to at least 27% of the EU's energy consumption by The role of energy efficiency in the 2030 framework will be further considered in a review of the Energy Efficiency Directive due to be concluded later in ) Questions for Ministers Do you agree that environmental as well as climate policies offer important opportunities in terms of growth and jobs creation and therefore there is scope and need to better streamline green policies into the European Semester and to strengthen the environmental dimension of the EU 2020 Strategy, including its the governance? What are the most promising areas to focus on? Do you agree that resource productivity indicators and/or a political target on resource efficiency should be endorsed in the mid-term review of the Europe 2020 Strategy and monitored in the European Semester to concentrate more efforts on measures, which are both economically and environmentally beneficial? On several occasions Environment Ministers have acknowledged the need for a greater involvement in the EU governance processes. Would you agree that such message should be translated into a specific set of Council Conclusions to be addressed to the European Council? If so, what specific messages should be conveyed? 11 RMC is an aggregate indicator measuring (in tonnes) all the resources used in the economy, while taking into account resource use embedded in imports. Currently it is available for the EU and some Member States. Countries for which RMC is not available could use Domestic Material Consumption in the meantime. 5

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