International: The EU Green Deal and its implications for Asia-Pacific and Thailand
In this article, we will discuss the foundations of the European Union’s ambitious plan, the “European Union Green Deal”, a program to advance the sustainability of member economies and with profound implications for Asia-Pacific. and Thailand in particular.
Given the stringent environmental, sustainability and other regulatory standards of the EU’s Green Deal Sustainable Products Initiative, it is essential for Asia-Pacific businesses to monitor the targets and EU Green Deal ambitions to be ready to meet higher standards for imports into the EU.
- What is the European Union Green Deal?
- Sustainable Products Initiative
- Implications of the European Green Deal for Asia-Pacific and Thailand
To overcome the existential threat of climate change while achieving economic growth, the European Commission launched the European Union (EU) Green Deal on December 11, 2019, championing a vision to become the world’s first climate-neutral continent in 2050.
The EU Climate Law codifies the objectives of the EU Green Deal to make EU climate, energy, transport and taxation policies capable of reducing net greenhouse gas emissions. greenhouse to at least 55% of 1990 emissions by 2030.
The key elements of the EU Green Deal are:
- A higher EU climate target on its milestones for 2030 and 2050
- Eliminate the emission of pollutants or toxic substances
- A secure, cost-effective and renewable energy supply
- Protect and restore ecosystems and biodiversity
- The Circular Economy Action Plan (CEAP), aimed at boosting a green and sustainable European economy
- The farm-to-fork strategy to achieve an environmentally friendly food system
- Efficient use of energy and resources in construction and renovation
- Advance the transition to sustainable and intelligent transport.
Strict environmental, sustainability and regulatory standards under the EU Green Deal will affect imports into the EU. Therefore, it is essential that companies monitor the objectives and ambitions of the EU Green Deal and prepare now to comply with these higher sustainability standards for their products.
The Sustainable Products Initiative (SPI), part of CEAP, will propose additional legislation to ensure that products on the EU market are more durable, reusable, repairable and energy efficient, while simultaneously possessing the ability reduce waste and release harmful chemicals into the environment.
The CEAP, together with the SPI, will introduce new eco-design requirements, ultimately creating a new standard for sustainable products in the EU that will require: the incorporation of recycled materials instead of primary raw materials in production; limit single use; and prohibit the destruction of unsold durable goods. In addition, the SPI will extend the producer’s responsibility over the product throughout its life cycle (from manufacture to disposal of the product). Thus, products that cannot be recycled or are difficult to recycle may be subject to additional costs, such as higher taxes for collection and sorting, while products that are easily recyclable, repairable or reusable could benefit from financial incentives.
The SPI will enable consumers to consider sustainable choices and the environmental and social impacts of products and, in addition, will help to combat greenwashing (misleading sustainability claims made by companies). Companies will need to be more transparent with consumers about a product’s lifespan and carbon footprint as well as the availability of repair services, spare parts and repair manuals for the product. This information should be easily accessible via a quick response (QR) code.
It is expected that the first stage of eco-design requirements will apply to products such as textiles, furniture, detergents, paints, lubricants, iron, steel and aluminum due to their high environmental footprint and their potential for circularity. Further steps should include product or well-defined product group specific legislation on compliance with certain eco-design requirements.
The EU has become a key trading partner for the Asia-Pacific region. While trade agreements between Asia and the EU have multiplied in recent years, exports from Asia to the EU have increased significantly. According to statistics from the European Commission (Eurostat), in 2021 around 44% of EU imports came from Asia. Specifically, in 2021, the EU imported over $153 billion worth of goods from ASEAN, a 19.11% increase in imports from the previous year. Statistics show that ASEAN is the EU’s third largest trading partner after the United States and China.
According to data from the Thai Ministry of Commerce, in 2021, Thailand exported over $25 billion worth of goods to the EU, accounting for 9.26% of Thailand’s total exports that year.
Thailand and the EU have a common goal of moving towards a circular economy and already advanced cooperation on CEAP by sharing know-how, best practices, policies, regulations and actions. In addition, to encourage sustainable development, Thailand and the EU are negotiating a partnership and cooperation agreement to enhance cooperation between nations in the areas of circular economy, plastic waste management and international cooperation in the bioeconomy.
Overall, the EU Green Deal may increase costs and liabilities for Thai companies and other Asia-Pacific companies exporting to the EU. In the coming years, the EU will impose specific requirements on companies to provide information on their social and environmental standards for sustainable production under the EU’s Product Environmental Footprint (PEF) method. Companies will have to justify the environmental sustainability of their products throughout their value chain. In the near future, other legal mechanisms may come into play, such as new human rights laws and environmental due diligence to complement the EU Green Deal.
The SPI, in particular, can also incentivize companies exporting to the EU to invest in the transition to new sustainable production models. For example, companies may have to start researching and investing in sourcing recycled materials instead of primary raw materials, or adapting to higher sustainability standards to ensure products are more durable, reusable , repairable and energy efficient, while producing minimal waste and harmful chemicals.
Additionally, under the SPI, companies may be required to disclose more information about the level of sustainability of inputs in their product supply chains, such as recyclability potential, carbon footprint, reparability , resource use, so that consumers can compare sustainability levels of products as well as strengthen market surveillance to combat corporate greenwashing.
Therefore, these developments will increase costs and competition for businesses to meet sustainability demands in the global market. On the other hand, such a transition will provide opportunities and competitive advantage to companies that already produce goods and services with high sustainability standards.
To overcome climate change, the EU Green Deal encourages Thailand and other EU trading partners in the Asia-Pacific region to transition to more environmentally sustainable economies by imposing a variety of regulatory standards over the next few years. It is important that companies exporting to the EU are well aware of these changes and start preparing now to comply with these stricter standards in the near future.
We expect the EC to provide additional information on the EU Green Deal in the coming months, and we will keep you updated on the latest developments in future articles.
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