One of the characteristics of environmental law is the use of indeterminate legal concepts and definitions that try to attain the most exact application of the norm.
Almost without exception, as a result of EU legislation, environmental regulations include an article that offers a series of legal definitions, which, in general, can constitute a determining factor in the concretion of the environmental protection levels of that specific regulation.
The concept of “circular economy” is understood as an extension of the concept “green economy”. The most widely used and authoritative definition of the latter comes from UNEP, that defines a green economy as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In this sense, in a green economy, growth in income and employment should be driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services.
The “circular economy” concept focuses on the resource cycle and proposes a model based on reusing, repairing, remanufacturing and recycling existing materials and products, when using raw materials. And the European Commission has just set the ground for the adoption of its first legal definition.
However, despite the fact that the European Commission adopted, in December 2015, an Action Plan for the Circular Economy to boost employment, innovation and investment and to develop a sustainable, low carbon, resource efficient and competitive economy, and presented a report on its implementation on March 4th 2018, it is surprising that the EU legislator has not established yet a legal definition of “circular economy”. Mainly because the measures adopted by waste regulations at European level aim to facilitate the transition to a circular economy and guaranteeing the Union’s long-term competitiveness, as laid down in article 1 of the Directive (EU) 2018/851.
Nevertheless, there is a chance to fill this gap if the proposal for a regulation on the establishment of a framework to facilitate sustainable investment is approved. This is a legal initiative of the European Commission that derives from its Action Plan 'Financing Sustainable Growth', and which includes benchmarks, ecological definitions and retail and corporate investors obligations.
Specifically, as established in article 2.1.g) of the above mentioned proposal, “circular economy" means: “maintaining the value of products, materials and resources in the economy for as long as possible, and minimising waste, including through the application of the waste hierarchy as laid down in Article 4 of Directive 2008/98/EC of the European Parliament and of the Council”.
It may be surprising that the “circular economy” concept, which focuses on the cycle of resources and proposes a model based on reusing, repairing, remanufacturing and recycling existing materials and products is not defined in the regulation of waste but, however, its definition could emerge in a regulation related with sustainable investments. This fact is nothing else than the reflection of the marked economic character of environmental law, whose application through incentives pursues the greatest socioeconomic efficiency, to achieving the objectives of conservation, protection and improvement the environment quality, the rational use of natural resources and the protection of human health as well.
This novel legislative initiative of the European Commission, which determines when an economic activity is environmentally sustainable for the purposes of establishing the degree of environmental sustainability of an investment, not only defines “circular economy”, but it also establishes the means to identify when an economic activity shall be considered to contribute substantially to the transition to a circular economy and waste prevention and recycling. Thus, according with article 9.1 of the Proposal for a regulation on the establishment of a framework to facilitate sustainable investment, an economic activity contributes substantially to this environmental objective through any of the following means:
- improving the efficient use of raw materials in production, including through reducing the use of primary raw materials and increasing the use of by-products and waste;
- increasing the durability, reparability, upgradability or reusability of products;
- increasing the recyclability of products, including of individual materials contained in products, inter alia through substitution or reduced use of products and materials that are not recyclable;
- reducing the content of hazardous substances in materials and products;
- prolonging the use of products including through increasing reuse, remanufacturing, upgrading, repair and sharing of products by consumers;
- increasing the use of secondary raw materials and their quality, including through high-quality recycling of waste;
- reducing waste generation;
- increasing preparing for re-use and recycling of waste;
- avoiding incineration and disposal of waste;
- avoiding and cleaning-up of litter and other pollution caused by improper waste management;
- using natural energy resources efficiently.
On the other hand, an economic activity shall be considered as significantly harming to circular economy and waste prevention and recycling, where that activity leads to significant inefficiencies in the use of materials in one or more stages of the life-cycle of products, including in terms of durability, reparability, upgradability, reusability or recyclability of products; or where that activity leads to a significant increase in the generation, incineration or disposal of waste (article 12.d).
The casuistry to determine when an economic activity contributes substantially to the transition to a circular economy and waste prevention and recycling or, instead, causes significant harm to circular economy and waste prevention and recycling and/or other environmental objectives (as listed in article 5 of the Proposal: climate change mitigation or adaptation, sustainable use and protection of water and marine resources, pollution prevention and control, and the protection of healthy ecosystems), will be developed by the Commission.
In accordance with article 16, the Commission shall adopt a delegated act to establish technical screening criteria for determining when an economic activity contributes substantially or causes significant harm to the environmental objectives. So the uniform criteria for determining environmentally sustainable economic activities will be developed and operationalized through subsequent delegated acts, which will define the technical screening criteria. Article 14 lists the requirements for these technical screening criteria, which shall, for example: be based on conclusive scientific evidence; be qualitative or quantitative, or both, and contain thresholds where possible; take into account the nature and the scale of the economic activity; take into account the environmental impacts of the economic activity itself, as well as of the products and services provided by that economic activity, notably by considering their production, use and end-of-life; or cover all relevant economic activities within a specific sector and ensure that those activities are treated equally if they contribute equally towards one or more environmental objectives, to avoid distorting competition in the market.
The development by the Commission of the aforementioned technical screening criteria should be done in one delegated act by 1 July 2021, with a view to ensure its entry into application on 31 December 2021, that is, six months later to allow those interested prepare for the application of the new rules.
In short, with the definition of “circular economy” and the development of its casuistry related with the sustainability or not sustainability of economic activities, we are in the "prelude" of the adoption by the EU legislator of the legal definition of circular economy and, accordingly, with the guarantee of its effective application as an object of law.
On March 8th 2019, the European Economic and Social Committee gave its opinion on this Proposal for a regulation on the establishment of a framework to facilitate sustainable investment.