Environmental Law in the EU: A Pathway Toward the Green Transition

Abstract

Thanks to EU environmental law, much has been achieved over the last 40 years. EU Treaties mirror this success and the importance afforded to environmental protection. The European Union’s goals are not solely economic, but also environmental. Furthermore, the proper functioning of the internal market must be accommodated with a flurry of non-market values, among which is environmental protection, the legal protection of which is also essential. Recently, the EU ambition to achieve, on its own, climate neutrality by 2050 is prompting a major legislative reform ranging from energy transition to ecosystem restoration. The emphasis is placed on a ‘net-gain principle’ underpinning a ‘regenerative growth model’ substituting the no net loss model that is insufficient to cope with the growing environmental pressures. What is more, the EU aims to reduce its global footprint. Last, the 672.5 billion euros to be invested by the 27 Member States under the Resilience Recovery Facility, which is to guarantee the economic, social and environmental resilience of the Member States, must be allocated to reforms and investments related to the green transition.

1 Introduction

Although not mentioned in the 1957 Treaty of Rome, environmental concerns have, through various Treaty reforms, gradually been able to establish themselves as one of the primary values enshrined in the EU Treaties. With the entry into force of the Treaty of Lisbon on 1 December 2009, environmental issues are not only cutting across traditional boundaries of ‘official’ disciplines, but are also entangled with other tradable as well as non-tradable interests. Henceforth, environmental protection is not only a core objective of the Union but has also been placed on an equal footing with economic growth and the internal market.

The first section of this chapter seeks to highlight the real teeth of the particularly far-reaching provisions of the Treaty on European Union (TEU), the Treaty on the Functioning of the European Union (TFEU), and the Charter of Fundamental Rights (EUCFR) enshrining cross-cutting concepts that are likely to enhance environmental values. Section 2 addresses the green transition and the manner in which it is fleshing out the integration principle. Lastly, Sect. 3 discusses how 37% of the 672.5 billion euros of the European Recovery and Resilience Facility allocated to the 27 Member States will be subject to climate and environmental conditionality, given the requirement that national investments should cause no “significant harm to environmental objectives”.

2 The EU Constitutional Environmental Framework

In this first section, we shall comment on the key obligations of the TEU and TFEU provisions referring to the environment (De Sadeleer 2014, pp. 4–93; Sikora 2020). Particular attention will be paid to the concept of sustainable development, the integration clause, and the obligation to achieve a high level of protection. As will be seen, these obligations are to a great extent intertwined.

2.1 Sustainable Development

At the outset, the concept of sustainable development was forged in an attempt to reconcile development needs with environmental protection. Given the current challenges related to energy production and consumption, climate change, biodiversity loss, illegal immigration prompted by natural disasters and the limited amount of heavily exploited natural resources, the importance of sustainable development is even more obvious today than when the concept was forged at the end of the 1980s.

With the entry into force of the Treaty of Lisbon, sustainable development was subsequently recognised as one of the main objectives to be pursued by the EU. The concept is currently enshrined in Article 3(3) to (5) TEU, Article 21(2)(d) to (f) TEU, Article 11 TFEU and Article 37 of the Charter of Fundamental Rights of the EU.

The third paragraph of Article 3 TEU reads as follows: “The Union … shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance”. Since it is made up of three heads (social, environmental and economic), sustainable development in EU law represents a delicate balancing of competing social, economic and environmental interests. From the perspective of sustainable development, the concept of the environment has, in addition to its core elements, an economic dimension as well as a social dimension.

Moreover, pursuant to paragraph 5 of the above provision and also Article 21(2)(d) TEU, sustainable development is one of the cornerstones of EU external policy.

In addition, sustainable development is also encapsulated in Article 11 TFEU and Article 37 of the Charter of Fundamental Rights of the EU, without however being defined. Under these two provisions, sustainable development is set out as the objective to be pursued by the EU’s environmental policy. Article 11 TFEU provides that: “Environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities, in particular with a view to promoting sustainable development”. Similarly, Article 37 of the Charter lays down that “a high level of environmental protection and the improvement of the quality of the environment must be integrated into the policies of the Union and ensured in accordance with the principle of sustainable development”.

In view of Article 3(3) TEU, sustainable development, and hence the objective of environmental protection, cannot be dissociated from other policies, and in particular the internal market. Indeed, paragraph 3 of the provision places these objectives on an equal footing. Consequently, they must be analysed more in terms of reconciliation rather than opposition. Moreover, environmental concerns are not isolated; they overlap with other policies that were originally regarded as ancillary to or liable to counter the goals of economic integration. In particular, policies relating to the consumer, health and the environment share a range of common features, so much so that one may speak of a cross-fertilisation between them.

2.2 Environmental Integration Clause

Environmental protection has often given way to socioeconomic considerations. For instance, in cases involving overlap of administrative regulations, the solutions adopted by the EU and national courts have generally leant in favour of economic development rather than the conservation of natural resources. Nature has thus paid a heavy price for the lack of incorporation of environmental requirements into other policies.

As discussed above, one of the key features of sustainable development is precisely the integration of environmental concerns into socioeconomic policies. In other words, curbing unsustainable trends requires the integration of environmental requirements across policies such as energy, agriculture and fisheries, forestry, industry, transport, regional development, land use, and land planning. Unless this is achieved, environmental degradation will continue apace.

As far as EU law is concerned, in addition to recognising sustainable development, it was also indispensable to provide for different policies to be decompartmentalised in line with environmental considerations. Against this background, a number of treaty provisions require the integration of environmental concerns.

Firstly, by virtue of Article 13 and 21(3) TEU and Article 7 TFEU, the Union ensures consistency of all its policies and activities. Secondly, Article 11 TFEU and Article 37 CFREU require environmental protection requirements to be integrated into the Union’s policies and activities, in particular with a view to promoting sustainable development.

2.3 The EU Environmental Policy

Entirely devoted to the environment, Title XX of the TFEU does not limit itself to confirming the EU’s competence in environmental matters; it also sets out objectives, states principles, and establishes criteria.

In line with Article 3 TEU, the EU aims “to promote …the well-being of its peoples” and, in particular, “a high level of protection and improvement of the quality of the environment”.

With regard to environmental policy, the competence is defined in terms of objectives to be achieved, rather than areas of activities to be regulated. Indeed, pursuant to Article 191(1) TFEU, the environmental policy pursues four objectives:

• preserving, protecting and improving the quality of the environment,

• protecting human health,

• prudent and rational utilisation of natural resources,

• promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

These objectives have proved to be particularly far-reaching, especially when compared with those of the transport policy. They play a key role in justifying Article 192 TFEU as the legal basis for a swath of environmental measures. Given the extremely general and fluid nature of these four objectives, the EU lawmaker is left with a genuine discretionary power as to the fundamental choices of this policy. In Peralta, the Court of Justice ruled that former Article 130r (Article 191(1) TFEU) “confines itself to defining the general objectives of the Community in environmental matters.” “Responsibility for deciding what action is to be taken” in order to achieve these goals is conferred on the lawmaker by [Article 192 TFEU].¹ Consequently, the priority areas for action are likely to change regularly in accordance with political willingness to ward off environmental risks. Given that the powers to act in environmental matters are so broad, the EU environmental competence encompasses almost any environmental measure: biodiversity, water, soils, air, climate, hazardous substances, waste, oil spills, product life-cycle analysis, pesticides, listed installations, noise, impact assessments, procedural rights such as access to information and justice, etc. It thus proves difficult to draw the limits of this protean policy.

The environmental policy is the only EU policy to proclaim a cluster of principles. Article 191(2) TFEU is worded as follows:

Union policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Union. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay.

Given that most of these five principles were already embodied in international environmental agreements, they did not take root in virgin soil. For instance, prevention and precaution straddle both international and EU law. Even though there are various definitions of these five principles in international environmental law, these five principles have not been defined by the Treaty framers. It is well known that the adoption of environmental measures owes more to political compromise than to tidy application of constitutional principles. However, this does not mean that the principles enshrined in the TFEU are devoid of legal effects. On the contrary, in contrast to other rules of indeterminate content, these five principles are mandatory (De Sadeleer 2020, pp. 449–494). Furthermore, the Article 192(2) principles also apply to national authorities, if the latter are obliged to implement EU directives that encapsulate one or more of these principles (De Sadeleer 2020).

These five principles, in fact, have a guiding, oriented role, rather than merely a theoretical or political role. On one hand, they enrich the formulation and implementation of environmental law. They can be invoked by the EU institutions as a justification for adopting stringent regulatory regimes. Conversely, the Member States can also use them to derogate from the free movement of goods. On the other hand, by more clearly defining the limits within which public administrations exercise their discretionary powers, they provide the former with a more coherent orientation and consequently legitimise their actions. Lastly, by freeing courts from the constraints of an overly literal interpretation of texts, they also have an interpretative function.

Pursuant to Article 3(3) TEU, 191(2) TFEU and Article 37 CFREU, EU policies shall aim at attaining a high level of environmental protection.² Measures related to the establishment of environmental protection and the obligation to attain a high level play a key role in carving out an environmental general interest. In effect, restrictions placed on basic rights, such as property or economic activities, with a view to protecting the environment can be justified provided, on one hand, that those restrictions correspond to objectives of general interest and, on the other hand, that they do not constitute an intolerable interference impairing the very substance of the rights guaranteed. Measures impairing fundamental freedoms might be justified in the light of this obligation. The conservation of biodiversity,³ waste management,⁴ water protection,⁵ and prevention of climate change⁶ have thus been recognised by the Court of Justice as pursuing an objective of general interest restricting basic rights.

In sharp contrast to the above obligations, the four requirements set out in Article 191(3) TFEU play an ancillary role.

Lastly, one has to bear in mind that the EU has no exclusive competence for protecting the environment. Pursuant to Article 4(2)(e) TFEU, the environment has been classified among the eleven shared competences, alongside the internal market, consumer protection, and transport. Accordingly, in the light of Article 2(2) TFEU, the EU has the power to legislate and to adopt legally binding acts in the environmental area. Both the EU and Member States may act in order to protect the environment. However, Member States exercise their competence inasmuch as the EU has not exercised its own competence. Since environmental policy is not vested exclusively in the EU, the principle of subsidiarity enshrined in Article 5(3) TEU applies. In particular, the focus is on whether the EU is the most appropriate decision-maker. The EU ‘action’ must satisfy two tests. First, the EU institutions have to demonstrate that the objectives of the proposed action cannot be sufficiently achieved by the Member States “either at central level or at regional and local level” (sufficiency test). Second, they should also demonstrate that the proposed action by reason of its scale or its effects “can be better achieved at Union level”. According to this second test, the lawmaker is required to demonstrate that the proposed action has an added value in terms of effectiveness (value-added test).

3 The EU Green Pact: A Silent Revolution?

3.1 Introductory Remarks

Whether it is its stuttering growth, its flagging demography, its timid foreign policy or its timid technological innovation, Europe is showing signs of weakness. Failing to assume political and military leadership, the EU is trying to strengthen its credibility by positioning itself at the forefront of the green transition, which should significantly modify our production and consumption patterns. According to the European Commission, “We are at a crucial moment in the global response to climate and biodiversity-related emergencies, and we are the last generation that can still act in time” (European Commission 2021a).

In this context, the European Commission adopted two landmark communications, in 2019 and 2021. The first of these two communications, the European Green Deal adopted by the Commission in December 2019, sets out the blueprint for this transformational change (European Commission 2019; Krämer 2020). The Commission analyses the development of policies for clean energy supply across the economy, industry, production and consumption, large-scale infrastructure, transport, food and agriculture, construction, taxation and social benefits. Furthermore, it foresees the adoption of a swath of strategies on biodiversity, the circular economy, zero pollution, sustainable and smart mobility, sustainable food, hydrogen, batteries, marine renewable energy and many others.

Under European climate legislation (Regulation (EU) 2021/1119), the EU has set ambitious targets to reduce net emissions by at least 55% by 2030 compared to 1990, as well as to be the first climate-neutral continent by 2050. In this context, a new communication, the ‘Fit for 55’ package, sets forth a number of legislative proposals, which aim to enable the European Union to reach this 55% reduction by 2030 and thus achieve climate neutrality by 2050. In other words, these proposals are interconnected and oriented towards the same objective of ensuring a just, competitive and green transition by 2030 and beyond.

Against this background, the Commission is in the process of submitting to the EU lawmaker 12 legislative proposals (Fit for 55), several of which are likely to impact trade and investment with third countries. The EGD appears to be significantly more ambitious than previous EU environmental programmes for the following reasons:

• the sheer breadth of the green transition given that it ranges from the energy transition to the restoration of ecosystems,

• the speed with which the green transition is unfolding given that a reduction of 55% of GHG emissions must be achieved by 2030,

• the binding nature of the legislative acts (directives and regulations) that flesh out the non-binding Commission’s Strategies,

• the emphasis placed on a ‘net-gain principle’ underpinning a ‘regenerative growth model’⁷ substituting the no net loss model⁸ that is insufficient to cope with the growing environmental pressures the EU is facing,

• the complementarity of the internal and external action in order to reduce the EU’s footprint.

3.2 The Background to the Green Transition

The green transition responds to political, economic and security needs. First of all, Europe has always been at the forefront of the promotion of universal values, such as democracy, the rule of law and fundamental rights,⁹ which could be shaken by the scale of the climate crisis. As a strong defender of these values, the EU must assume global leadership by encouraging third countries to pursue the same level of ambition.

Secondly, as Europe does not have sufficient fossil fuels and mineral resources to ensure its growth, it has every interest in becoming self-sufficient¹⁰ in a world where resources, particularly raw materials (such as Antimony, Heavy Rare Earth Elements, Scandium, Silicon metal, etc.), are becoming increasingly scarce (See, among others, European Commission 2011). This self-sufficiency can be achieved by resorting to renewable energies and promoting a circular economy where everything is recycled. Forced to innovate, European companies will become more competitive whereas their foreign competitors will eventually fall victim to the poor management of natural resources by their national authorities.

Thirdly, in terms of security, the European continent is surrounded by regions facing recurrent instability that could be exacerbated by climate change and diminishing water resources. Victims of drought and famine, entire populations form the Sahel and the Middle East could seek refuge in the European Eldorado and be stranded on the shores of Fortress Europe.

While it is one thing for the EU institutions to proclaim ambitious goals, it is quite another to determine the means to achieve them. Once again, the devil lies in the regulatory detail. In addition to a flurry of legislative proposals, the financial and social dimensions of the green transition also play a key role in achieving this paradigmatic change. Indeed, it will take more than a stick to make the donkey move. Also, without public and private investment, the new standards will not have the desired effect. The 672.5 billion euros foreseen by the Resilience Recovery Facility, which is to guarantee the economic, social and environmental resilience of the Member States, must be allocated to reforms and investments related to the green transition (Article 19(3) e) of European Union 2021a). As public investment will be insufficient to achieve climate neutrality by 2050, since the taxonomy regulation of 2020 (European Union 2020) the private sector has been encouraged to invest in economic activities classified as sustainable. This has met the expectations of the market, which issued €278 billion in green bonds in the EU in 2019. Inter-generational solidarity in the face of the climate challenge requires other types of financial solidarity between States (Just Transition Facility of €55 billion) but also between citizens (Just Transition Fund of €17.5 billion).

3.3 The Legal Conundrum

The legislative reforms envisaged by the European Commission appear, at first sight, to be very ambitious. However, this silent revolution will not happen overnight. As a starting point for this reform, the 2019 Green Deal was progressively refined in 2021 by the ‘Fit for 55’ package and a host of strategies, from forest management (European Commission 2021b) to pollution abatement (European Commission 2021c). The ambitious objectives announced in these ‘soft law’ acts need to be fleshed out into binding secondary legislation.

The success of the European green transition is therefore dependent on a complex normative process where directives and regulations intertwine in a flurry of public policies, subject to variable competences (exclusive, shared, etc.), involving institutions with divergent, if not antagonistic, interests. With the adoption of the European climate law in June 2021, a first step was taken (European Union 2021b; Misonne and Peeters 2022).

It has always been a tall order to specify with exactitude the division of competence between the EU and the Member States. Given the cross-cutting nature of environmental issues, the exercise of competences relating to these has been dogged with controversies. In fact, the allocation of competence between the EU and the Member States tends to be not so much a separation but rather an intermingling of powers. Given that the EU environmental policy also embraces health issues, the management of natural resources and territorial management, and to some extent worker protection, other areas classified as shared competences are likely to interact with the environmental policy. Accordingly, their relationship is more dynamic than static. Several axes of the legislative reform emerge:

• maximum integration in the framework of the internal market (Article 114 TFEU),

• minimum integration in the case of the environmental policy (Article 192(1) TFEU),

• tax harmonisation (Article 113 TFEU) (European Union 2003a),

• minimum integration in the case of the energy policy (Article 194(1) TFEU).¹¹

We provide here but a few illustrations of the legislative changes envisaged by the European Commission.

The ‘Fit for 55’ package (European Commission 2021a) includes four proposals promoting cleaner vehicles and fuels through new product standards (See, among others, European Union 2019). All these measures are mutually reinforcing and complementary. In addition, the Commission also proposes promotion of the use of sustainable fuels in the aviation and maritime sectors as a complement to the Emissions Trading Scheme (ETS) for both sectors. These harmonisation measures are based on Article 114 TFEU (European Union 2019). With the aim of greening transport and reducing sector GHG-emissions by 90% by 2050, the Commission pledges to ban subsidies and increase prices for fossil fuels, which falls within Member States’ competences.

The modifications of the EU’s common framework for energy taxation—the Energy Taxation Directive, which lays down structural rules and minimum excise duty rates for the taxation of energy products used as motor fuel and heating fuel, and electricity (European Union 2003a)—should complement other initiatives in the EU’s ‘Fit for 55’ package by ensuring that the taxation of motor and heating fuels and electricity in the EU reflects their environmental impact. The Commission envisages banning the current tax exemptions, including for aviation and maritime fuels.

The European Commission proposes a revision of the rules of the aviation emissions trading scheme (European Union 2003b), also based on Article 192(1) TFEU, as part of the ‘Fit for 55’ legislative package, to ensure that the sector contributes to the more ambitious target of achieving a net emissions reduction of at least 55% by 2030, compared to 1990 levels. Free allowances allocated to airlines would be reduced over time.

One of the other elements of the ‘Fit for 55’ package is a revision of the Renewable Energy Directive (RED II) (European Union 2018a) to meet the new 55% GHG target. Under RED II, Member States are currently obliged to ensure that at least 32% of their energy consumption comes from renewable energy sources by 2030. The revised RED II sets a new EU target of a minimum 40% share of renewable energy sources in final energy consumption by 2030. The RED II Directive is also based on Article 192(1) TFEU.

In addition, the European Commission wants to foster a ‘renovation wave’ of public and private buildings, enforce legislation related to the energy performance of buildings (European Union 2010) and review the Union’s standards on construction products.

Similarly, the adoption of the New Circular Economy Action Plan (European Commission 2020c) will lead to the amendment of a large number of waste directives, most of which were adopted on the basis of Article 192 (1) TFEU (De Sadeleer 2017, p. 714). With a view to fostering resource efficiency and climate neutrality in industrial production chains, the Commission is intent upon doubling the recycling rate by 2030 and enhancing sustainable product design, reuse and recycling with a particular focus on resource-intensive sectors such as textiles, construction, electronics and plastics.

Regarding pollution, in 2021 the Commission adopted a zero pollution action plan for air, water and soil. The plan aims to reduce pollution from urban runoff and particularly harmful sources such as micro-plastics and pharmaceuticals.

However, responses to the climate crisis require more than the adoption of product or waste management standards in the internal market. More is needed. Indeed, the simultaneous climate and biodiversity crises cannot be dealt with separately. Restoring nature and allowing biodiversity to thrive again is essential in order for more carbon to be absorbed and stored (European Commission 2021a). Hence, the European Commission is also considering amending several environmental directives that were adopted on the basis of Article 192 of the TFEU. In this context, the Commission wants to increase the capacity of EU forests, soils, wetlands and peatlands, oceans and water bodies to act as carbon sinks. With respect to the Regulation on land use, land-use change and forestry (LULUCF), based on Article 192(1) TFEU (European Union 2018b), the Commission proposes setting higher ambitions for the expansion of the EU’s natural carbon sink, which is essential to balance emissions and achieve climate neutrality by 2050.

In its Biodiversity Strategy (European Commission 2020d), the Commission proposes quantified targets, such as increasing the coverage of terrestrial and marine protected areas that are part of the Natura 2000 network established under Directive 92/43 on the conservation of natural habitats and of wild fauna and flora (European Union 1992).

The EU could thus become the first international organisation to achieve climate neutrality by 2050, to replace a linear economy with a circular economy that relies upon fewer natural resources, to halt the erosion of biodiversity, to eradicate pollution, to mitigate the ravages of intensive agriculture, and to reforest massively.¹²

3.4 A Path Strewn with Pitfalls

That being said, the green transition and climate neutrality could fail on more than one count. While the implementation of the Green Deal should strengthen the centripetal forces (adoption of uniform product standards and harmonisation of energy standards), many parts of the subsequent strategies, such as sustainable mobility, agriculture, nature protection, pollution abatement, etc., depend on the goodwill of the Member States, for the simple reason that these areas are not or are only partially harmonised. It will therefore be necessary for the EU institutions to entice the 27 Member States to adopt ambitious environmental protection programmes in order to move forward.

While the harmonisation process is the hallmark of European integration, by setting ambitious objectives through soft law instruments (communications) that bind neither the Member States nor economic operators, the European Commission tends to be incantatory. Political will must be anchored in EU secondary law. Thus, the challenge for the Commission is to flesh out these numerous soft law proposals into legislative proposals to be adopted by the European Parliament and the Council. If this is not the case, the gap between the States willing to implement the green transition and those who doubt its virtues, such as Poland, could widen.¹³

In a globalised economy, the imposition of new standards has the effect of increasing the burden on European undertakings, which are competing with economic operators who are not obliged to integrate negative externalities into the price of their products and services (De Sadeleer 2020, pp. 4–92). The European Commission would like to put an end to this distorted competition. The import of a range of products produced by carbon-intensive industries (nickel, steel, fertilisers, cement, etc.) into the EU would be subject to certificates the value of which would be equivalent to that of the greenhouse gas emission quotas that 12,000 European companies must acquire annually (European Commission 2021d). This border adjustment aims to reduce the risk of carbon leakage. This would ensure that the price of imports of goods subject to CBAM more accurately reflects their carbon content. Here too, the problem lies in the fact that third countries are opposing CBAM on the grounds that this new scheme would amount to a protectionist measure that breaches several fundamental principles of the WTO.

Moreover, the willingness of the European Commission to reform is a last-minute political compromise, as Mrs von der Leyen had to present this programme in order to convince a majority of MEPs to support her candidacy for the Presidency of the European Commission. After seven decades of proclaiming the creed of unbridled productivism, are the senior officials of her institution convinced of the need to change the traditional economic paradigm? So the departure from a business-as-usual approach requires a profound change in administrative culture.

Finally, the path taken by the European lawmaker is strewn with pitfalls. One should bear in mind that the measures adopted by the Union to promote renewable energies, such as support for first-generation biofuels (WTO 2021), have undoubtedly done more harm than good. Moreover, the incentive price of the carbon market has only recently emerged, and this market still does not apply to transcontinental flights.¹⁴ But more fundamentally, the green transition advocated by the European Commission is based on the postulate of decoupling negative externalities from economic growth,¹⁵ which is not called into question, whereas the environmental crisis is partly due to the overconsumption of goods and services.

The implementation of the Green Pact commitments should certainly enable the EU to improve its image, which has no doubt been tarnished by the pandemic crisis.

3.5 The Geopolitics of the Green Transition

Whereas the EU lags behind in research and technological development, including robotics and artificial intelligence, and risks becoming dependent on the US or China, some of its more advanced policies, such as CBAM or the extension of the ETS to aviation, pose pressures for EU companies competing abroad (Damjanovic and De Sadeleer 2020).

In addition, a central feature of EU environmental law is its multi-level character. Even if EU environmental policy were to succeed in reducing pollution in the EU, the European environment would still suffer from polluting sources located outside its Member State territories. Conversely, to fuel its economic development, the EU is becoming increasingly dependent on imports of natural resources. It follows that environmental problems associated with the extraction and processing of many materials and natural resources are shifting from the EU to the respective exporting countries. Thus, the EU cannot conduct its environmental policy in isolation.

The global challenges of climate change and environmental degradation require a global response. The EU is playing a key role in the implementation of the Paris Agreement as well as a number of other environmental multilateral agreements. In promoting ambitious internal environment, climate and energy policies, the EU will impact third countries. In this regard, the European Commission envisages a stronger ‘green deal diplomacy’ focused on convincing and supporting others to take on their share of promoting more sustainable development. Apart from providing the revenue for internal reforms, the EU’s green-digital recovery model provides much-needed financial support for the EU’s geopolitical appetites and presents an opportunity for a paradigmatic shift in the global economy towards sustainable development. The new recovery facility (RRF) thus enables the EU to align the internal reforms with the achievement of Europe’s geopolitical goals.

4 Avoiding Significant Harm to Environmental Objectives

The Green Deal aims to put sustainability at the heart of the EU budget,¹⁶ given that it should contribute to achieving climate objectives. In this connection, the Commission has proposed a 25% target for climate mainstreaming across all EU programmes.

The Covid 19 crisis is having deep economic effects. EU GDP has contracted by around 7.5% this year, far deeper than during the global financial crisis in 2009, while the EU unemployment rate rose to 9% in 2020, adding to the risk of rising poverty and inequality (European Commission 2020a). Although the pandemic has hit all countries, its impact differs considerably between Member States. As a result, some are much more in need of financial support than others. The EU has acted rapidly to deliver a coordinated and powerful collective response to the social and economic consequences of the crisis.

€672.5 billion—about 90% of the European Commission’s borrowing—will be allocated to the European Recovery and Resilience Facility (RRF). This amount is broken down into grants (€312.5 billion) and loans (€360 billion) to Member States (Article 6 of European Union 2021a). 70% of the grants for national recovery programmes will be allocated in 2021–22, while the remaining 30% will be allocated in 2023.¹⁷

Among the six pillars on which the facility is based, the ‘green transition’ occupies first place.¹⁸ On the climate-environment side, two sub-objectives are pursued: on the one hand, the green transition and, on the other hand, the achievement of the climate objectives. The green transition should be supported by reforms and investments in green technologies and capacities, including biodiversity, energy efficiency, building renovation and the circular economy.¹⁹

Given that the climate and environmental objectives are at the heart of the European Commission’s Green Pact, the Climate Law and subsequent legislative proposals, it was essential that these 672.5 billion euros in grants and loans should be subject to climate and environmental conditions. The recovery and resilience facility (RRF) breaks new ground in that the socioeconomic assessments specific to the European Semester are now supplemented by an environmental assessment.

The RRF regulation, which is the main instrument to allocate money to the Member States under the Next Generation EU Recovery Package, includes not only a substantial contribution to environmental objectives, but also a requirement that an activity “does not harm” any of the environmental objectives (DNHS principle). Accordingly, Article 17(1) of the taxonomy Regulation 2020/852²⁰ provides detailed criteria in relation to each of the environmental objectives to ascertain whether a particular economic activity may be considered to cause significant harm to those objectives.²¹

On the other hand, while 30% of the EU budgetary expenditure should be devoted to supporting climate objectives, at least 37% of national measures supported by the Facility should be investments and reforms that support climate objectives.

To conclude, the draft plans are thus to be assessed by the European Commission against two criteria, one negative and one positive. This requirement is unprecedented, as for the first time in its history, a significant part of the EU budget is now subject to environmental conditionality.²² Accordingly, eligibility for a payment from the RRF is conditional on compliance with climate and environmental horizontal requirements that are different from and additional to the requirements directly established by the fund from which the payment is made.²³

Each national measure implementing the recovery plan must in any case be subject to such an assessment. None of them should cause “significant harm to environmental objectives”.²⁴ Moreover, Member States must provide an individual assessment for each measure of each part of their plan. However, for national measures that would fully support the six environmental objectives, a simplified assessment is possible.

The designation of the departments within the European Commission responsible for the assessment is a matter for the internal organisation of this institution. However, this choice is crucial. It is to be feared that the officials of the DG in charge of cohesion policy will take less interest in environmental aspects than the officials of the DG for Environment.

The European Commission cannot demand that a Member State invest more in biodiversity or in the circular economy. It should, in our view, only check that the positive and negative aspects of the DNHS principle have been respected.

The RRF does not address the consequences of a negative assessment by the European Commission of a measure on the grounds that it would be contrary to the DNHS principle. Should such incompatibility lead the European Commission to reject the plan as a whole?

The arrangements put in place to enforce the DNHS principle reinforce, on the one hand, state choices and, on the other hand, the Commission's discretionary power, which is practically free of any external control.

5 Conclusions

The Union’s goals are no longer solely economic, but also environmental. Furthermore, the proper functioning of the internal market must be accommodated with a non-market value, the legal protection of which is also essential. Since qualitative requirements have been laid down, the requirements of integration, a high level of protection and the principles of environmental law are thus more than just simple policy guidelines.

The Green Deal is likely to accelerate sustainable development in the EU with a particular focus on environmental sustainability. Sustainability which has so far been lying at the periphery of EU economic policies, is deemed to be at the heart of the European integration project. Accordingly, the Green Deal relies on a new governance framework, multiple regulatory approaches ranging from soft to hard law, and significant financial and fiscal commitments (Jendrośka et al. 2021).

Sustainable economic growth goes hand in hand with the conservation of national resources for the benefit of future generations, improvements in living standards, protection of workers against industrial nuisances, consumers’ awareness of their ecological impact, and biodiversity conservation. From this perspective, environmental protection ultimately provides an incentive for more responsible economic growth.