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27 March 2023

The EU’s endeavours in pursuing resilient and sustainable supply chains, including for Critical Raw Materials

On 16 March 2023, the European Commission (hereinafter, Commission) published its Proposal for a Regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/102 (Critical Raw Materials Act), which sets targets for the production, refining, and recycling of critical raw materials (hereinafter, CRMs) needed for the green and digital transitions.

The Proposal is accompanied by a Communication, which proposes measures to support “the diversification of supply chains through new international mutually supportive partnerships”. With regard to due diligence, the Explanatory Memorandum to the Commission’s Proposal expressly states that the rules complement the Commission’s Proposal for a Corporate Sustainability Due Diligence Directive, which is currently being discussed by the European Parliament and the Council of the EU.

The EU’s strategy to ensure resilient supply of Critical Raw Materials

The EU has been working to secure future supply chains in a context of environmental and geopolitical imperatives, in which access to CRMs is needed to enable the transition to “green” and environmentally friendly technologies. This strategic shift has been impacting the EU’s industrial, trade, and investment policies, which are being adjusted to secure the ever-increasing demand of CRMs that are necessary to produce, inter alia, renewable energies and batteries for electric vehicles. The reliance on certain CRMs poses a risk for the EU with respect to meeting its climate objectives, given that the demand for CRMs for the energy transition could significantly grow by 2050. For instance, Eurometaux, the European non-ferrous metals association estimates that demand for nickel would grow by 103%, by 331% for cobalt, and even by 3,500% for lithium. In the context of emerging environmental and geopolitical challenges, the Critical Raw Materials Act seeks to foster and maintain sustainable and responsible corporate practices throughout global value chains.

Using trade policy to secure access to Critical Raw Materials

In recent times, the EU has been leveraging its trade policy in various ways to ensure access to critical raw materials. For example, at the WTO level, the EU initiated a dispute against China, for rare earths export restrictions, and won a case against Indonesia’s nickel export taxes and export restrictions. The EU also pursued Economic Partnership Agreements (EPAs) with trading partners in Africa, Latin America, and Asia, seeking provisions to restrict the imposition of raw materials export taxes and the imposition of investment restrictions in mining, so as to ensure that EU businesses are not discriminated against in the access to critical raw materials.

Most notably, the recently negotiated EU-Chile Advanced Framework Agreement, which modernises the current EU-Chile Association Agreement, provides for a dedicated chapter on ‘Energy and Raw Materials’ with commitments on access to critical raw materials. The chapter includes a joint commitment to advance cooperation in the area of energy and raw materials, focusing on energy efficiency, responsible mining, standards, and research and innovation in green energy and sustainable raw materials. Both Parties also committed to carry out environmental impact assessments for any energy and raw materials project that may have impacts on health, biodiversity, land, soil, air, or water.

Necessary adaptation by economic operators

The Commission’s Proposal for the Critical Raw Materials Act focuses on increasing the availability of such materials in the EU Single Market and aims at ensuring the EU’s access to “a secure, diversified, affordable and sustainable supply of critical raw materials”. These materials are needed for crucial strategic sectors, including “the net zero industry, the digital industry, aerospace, and defence sectors”. While the demand for such raw materials is projected to increase, the EU heavily relies on imports from third country suppliers that possess large concentrations of CRMs in their territories. For instance, the production of lithium, the CRM for batteries, is concentrated in Argentina, Australia, Chile, and China.

The Critical Raw Materials Act contains a set of actions, including the provision of clear benchmarks for the EU’s domestic capacities and for the sourcing of raw materials. It also foresees to reduce the “administrative burden” and to “simplify permitting procedures for critical raw materials projects in the EU”, for instance by establishing a new framework to select and implement Strategic Projects that can benefit from “support for access to finance and shorter permitting timeframes”. It remains to be seen whether private operators would indeed benefit from the stated advantages, such as “support for access to finance and shorter permitting timeframes”.

The Critical Raw Materials Act further calls for the establishment of a “large-scale skills partnership on critical raw materials and of a Raw Materials Academy”. Additionally, EU Member States would be required to “adopt and implement national measures to improve the collection of critical raw materials rich waste and ensure its recycling into secondary critical raw materials”.

The Critical Raw Materials Act “provides for the monitoring of critical raw materials supply chains, and the coordination of strategic raw materials stocks among Member States”, requiring that “certain large companies perform an audit of their strategic raw materials supply chains, comprising a company-level stress test”. These requirements will create new obligations, and possibly burdens, for economic operators, inter alia, due to the provisions on the need for economic operators’ monitoring capacity, the promotion of circularity, and the new audit requirements for large companies regarding their strategic raw materials supply chains.

The broader rules on Corporate Sustainability Due Diligence

In addition to the new requirements and obligations put forth by the Critical Raw Materials Act, the EU is currently working on rules for more sustainable supply chains. On 23 February 2022, the European Commission had published its Proposal for a Directive on Corporate Sustainability Due Diligence. On the basis of the Commission’s Proposal, economic operators would be required to “identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss”. The European Parliament and the Council of the EU are currently discussing the Proposal and are working on their respective positions. Once positions have been established, inter-institutional trilogue negotiations will follow with the objective to reach a commonly agreeable text.

The future EU rules on Corporate Sustainability are intended to advance the green transition and, at the same time, protect human rights in global value chains. For businesses, these new rules will ideally deliver increased legal certainty and a level playing field, but will likely also raise compliance costs due to the operationalisation of the new requirements throughout their value chains.

On 9 February 2023, Members of the European Parliament’s Committee on Environment, Public Health and Food Safety (ENVI) voted to strengthen requirements on climate protection under the proposed Corporate Sustainability Due Diligence Directive, which means that businesses might have to comply with stricter obligations on environmental and climate impacts once the Directive comes into force. The European Parliament’s Committee on Legal Affairs (IURE) is responsible for defining and coordinating the European Parliament’s position on the Proposal and is expected to vote on the draft report on the Commission’s Proposal in March, which would be followed by a vote of the European Parliament’s plenary during its session in May.

Mixed reactions

Generally, industry associations welcomed the EU’s initiative on CRMs and the benefits it promises to deliver. However, there have also been rather critical voices. Already on 9 November 2022, the International Council on Mining and Metals (hereinafter, ICMM) had issued a communication recalling the need to avoid “narrow self-interests” given that the “minerals required for the transition are not distributed in an equitable fashion globally”. Therefore, in the ICMM’s view, “efforts to stockpile critical raw materials would be detrimental to the stated goals of the energy transition, as it could potentially result in inequitable access to critical minerals that would disproportionately impact low-income countries”.

On 7 March 2023, the European Automobile Manufacturers’ Association expressed its views, highlighting the need to create a “supportive investment environment for mining, refining and recycling projects, for example through low energy costs, fast authorisation procedures, practical environmental standards, skilled workers”. The European Automobile Manufacturers’ Association also emphasised the need for enhanced domestic capacity, the removal of barriers to extracting, refining, and processing strategic critical raw materials, and the respect to international standards in the access to critical raw materials, as well as the importance of access to funding for projects.

The next steps

The proposed Critical Raw Materials Act appears to be a logical step by the EU towards more resilient and sustainable supply chains of key raw materials, but should be critically assessed in view of the need for equitable global access to these important raw materials. The Commission’s Proposal will now have to be discussed and agreed by the European Parliament and the Council of the EU, followed by its formal adoption and entry into force.

 

Singapore and the UK sign a Green Economy Framework to promote sustainable energy, transport, and finance

On 1 March 2023, Singapore’s Minister-in-charge of Trade Relations, S Iswaran, and the UK Secretary of State for Energy Security and Net Zero, Grant Shapps, signed a Memorandum of Understanding (MOU) on the UK-Singapore Green Economy Framework. The Green Economy Framework aims at promoting bilateral cooperation in the green economy to support economic growth and to create jobs in green sectors, while encouraging the decarbonisation of economic activities. The Green Economy Framework builds on the existing UK-Singapore Free Trade Agreement and the Digital Economy Agreement, combining elements of climate policy, economic policy, and trade policy. This article looks at the areas of cooperation provided under the Green Economy Framework and the focus on the decarbonisation of transportation and the development of green technologies.

Singapore’s ambition for international green cooperation

Due to its urban density and limited land area, Singapore is at a disadvantage in pursuing alternative energy options and is heavily reliant on international cooperation to achieve its decarbonisation targets. According to Singapore’s National Climate Change Secretariat, Singapore’s land is relatively flat, with low wind speeds and a “lack of high-quality hydrothermal resources”. Given Singapore’s geographical situation, Singapore is committed “to pursue bilateral, regional, plurilateral, and multilateral collaboration to access regional and global mitigation opportunities”.

Singapore’s efforts to implement the commitments of the Paris Agreement 

Singapore is a Party to the Paris Agreement, an international treaty under the United Nations Framework Convention of Climate Change (UNFCCC), notably committing to reduce greenhouse gas emissions. Article 4 of the Paris Agreement requires each Party to “prepare, communicate and maintain successive nationally determined contributions that it intends to achieve”. These National Determined Contributions (NDCs) refer to climate action plans to reduce emissions and to adapt to climate impacts, which must be updated by each Party every five years. According to Singapore’s Second Update of its First Nationally Determined Contribution, which was submitted to the UNFCCC on 4 November 2022, Singapore committed to reduce emissions to around 60 million metric tonnes of carbon dioxide equivalent (MtCO2e) in 2030.

In light of its geographical disadvantage, Singapore has been actively pursuing greater cooperation in relation to green economy issues with like-minded partners. On 18 October 2022, Australia and Singapore signed the Australia-Singapore Green Economy Agreement, the first instrument of its kind, with the aim of supporting and accelerating both Parties’ respective green transitions through enhanced green economy cooperation (see TradePerspectives, Issue No. 21 of 14 November 2022).

In addition to the Australia-Singapore Green Economy Agreement, Singapore also looks at developing further cooperation in the green economy with other ASEAN Member States, such as through the conclusion of a Green Economy Framework with Malaysia. Additionally, Singapore has signed Memoranda of Understanding with a variety of countries, including Colombia, Indonesia, Morocco, Peru, Papua New Guinea, and Viet Nam, on carbon credits collaboration in accordance with Article 6 of the Paris Agreement, which recognises that “[…] some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity”. Singapore has also played an active role to support the multilateral framework of cooperation on climate change under the UNFCCC, including co-facilitating the negotiations at the 2021 United Nations Climate Change Conference (COP-26).

The UK-Singapore Green Economy Framework

The UK is Singapore’s fourth largest European trading partner, while Singapore is the UK’s 19th largest trading partner. The UK is the largest European investor in Singapore and the second-largest European investment destination for Singaporean companies. As both the UK and Singapore recognise the importance of their bilateral relationship, they have been pursuing enhanced cooperation in a number of emerging areas, namely in the area of digital trade on the basis of the UK-Singapore Digital Economy Agreement and now in the area of sustainable energy, transport, and finance under the UK-Singapore Green Economy Framework.

According to the British High Commissioner to Singapore, Kara Owen, “Singapore is an important partner to the UK in working towards a sustainable and net zero future”. High Commissioner Owen further noted that, “With significant and ever-growing investments in UK’s renewable energy sector, the UK-Singapore Green Economy Framework would “further strengthen our existing, long-term collaboration by creating new growth opportunities for both countries”. The Director General of the Institute of Export and International Trade, the leading association of exporters and importers in the UK, Marco Forgione, stated that the UK-Singapore Green Economy Framework would “leverage the UK and Singapore’s strengths in areas like low-carbon technology, shipping and finance to deliver long-term sustainable policy, regulation and technical solutions and projects between our private sector and academic communities”.

The areas of cooperation

Under the Green Economy Framework, the UK and Singapore have identified three initial areas of interest, which could be further expanded and are subject to a regular review and update by both countries. The Framework also refers to areas of activities that would be carried out by Singapore and the UK with businesses and academia, which will be further outlined in a forthcoming Work Plan that is to be updated annually by both countries. The Framework is to be implemented through various mechanisms, including Government policy dialogues, business matchmaking, industry workshops, and research partnerships. The Green Economy Framework serves “as a record of the Participants’ understanding, and does not create legally binding obligations between the Participants or between either Participant and any third party”.

The current areas of cooperation in the Green Economy Framework are divided into three pillars, namely: 1) Green transport; 2) Low carbon energy technologies; and 3) Carbon markets and sustainable finance.

With regard to the pillar on green transport, both countries committed to cooperate in a number of areas, notably: 1) Maritime decarbonisation efforts, such as green and digital shipping corridors; 2) Air transport decarbonisation efforts, including sustainable aviation fuels and carbon credits, and by improving air traffic management; 3) Continued bilateral and multilateral cooperation in the international fora to achieve decarbonisation objectives, such as within the International Civil Aviation Organization and the International Maritime Organization; and 4) Strategies and legal frameworks for zero-emission vehicles and related charging infrastructure.

With regard to the pillar on low-carbon energy technologies, both countries committed to cooperate in: 1) The advancement of low-carbon hydrogen technologies and the development of certification, standards and wider regulations to support the growth of the hydrogen economy; 2) Policy, regulatory and technical aspects of carbon capture, utilisation and storage, sharing of best practices and identification of areas of mutual interests on which to further discussions and cooperation; and 3) Policy, regulatory and technical aspects of grid interconnection, cross-border electricity trade and solutions to improve system resiliency and flexibility, such as energy storage systems and smart grid technologies.

Lastly, with regard to the pillar on carbon markets and sustainable finance, both countries committed to cooperate to “increase transparency in carbon markets and advance climate ambition through high-integrity international carbon markets”. Both countries also committed to cooperate on sustainable finance in the context of the annual UK-Singapore Finance Dialogue, which is co-chaired by the Monetary Authority of Singapore and the HM Treasury.

In addition to these three pillars, the UK and Singapore also seek to explore activities that support collaboration between Governments, academia, and the business community. This comprises information exchanges and dialogues on technical regulations; collaborations on standards development and adoption of internationally-recognised standards; and mutual recognition of conformity assessment procedures in relation to the green economy. Through these activities, the UK and Singapore expect to unlock more investments and job opportunities in the green sector.

Strengthening existing UK-Singapore cooperation

The UK-Singapore Green Economy Framework pursues greater cooperation to address challenges arising from decarbonisation efforts and to enable drivers of the green economy. It remains to be seen whether Singapore and the UK will build on this achievement and, over time, extend the Framework to additional commitments, such as by adding a specific pillar and initiatives on trade and trade-related issues. Already, the Green Economy Framework is poised to further strengthen UK-Singapore cooperation, creating growth opportunities in the areas of sustainable energy, transport, and finance.

 

Italy’s proposal to prohibit ‘meaty’ names for plant-based products moves ahead in the Parliamentary Committee on Agriculture

Plant-based meat-like food is increasingly popular, but there is strong opposition regarding the use of terms traditionally applied to meat and meat products for plant-based alternatives. In Italy, on 29 December 2022, the Proposed Law No. 746 on Provisions on the naming of food products containing vegetable proteins was introduced in Italy’s Parliament. Italy intends to follow France, which, on 29 June 2022, had adopted Decree No. 2022-947 on the use of certain names used to designate foodstuffs containing vegetable proteins, prohibiting the use of names that designate foodstuffs of animal origin to be used to describe, market, or promote foodstuffs containing vegetable proteins.

This article discusses the Proposed Law No. 746 and looks at the French Decree No. 2022-947 and the situation at the EU level where, different from dairy terms like milk and yoghurt, ‘meaty’ terms like ‘steak’, ‘schnitzel’, and ‘burger’ are not reserved for meat and meat products. In 2022, France became the first EU Member State to impose such a ban, while, in 2020, the European Parliament rejected a proposal that would have resulted in EU-wide restrictions.

The Proposed Law on the naming of food products containing vegetable proteins

The Proposed Law No. 746 aims at prohibiting the use of legal denominations referring to meat in products consisting entirely, or mainly, of plant-based ingredients, while safeguarding the particular cases of some composite products that can contain both plant and animal proteins.

The introduction to the Proposed Law No. 746 reiterates that using meat-related terms on plant-based products would “lead consumers to incorrectly draw assumptions that the plant-based products had the same nutritional components as meats” and that “using these denominations means to evoke, in the consumer’s imagination, some concepts closely linked to livestock production, such as: the production methodology made up of personal commitment, manpower and passion for animal breeding, their protection and the protection of the environment and landscape, as well as the skills and specialist knowledge required for the curing of cold cuts or the correct processing of meat”. The intention of the Proposed Law No. 746 is, therefore, to “restore correct market conditions among all operators in the food sector: completely different products should be indicated with completely different names”.

Article 1 of the Proposed Law No. 746 identifies the scope of application of the law. Article 2 defines ‘vegetable proteins’ as “proteins produced or deriving from organisms belonging to all kingdoms other than the animal kingdom”. Article 3 introduces a ban on the use of names referring to meat, or meat-based products, for foods that contain vegetable proteins and states that: “1. In order not to mislead the consumer as to the characteristics of the food, its effects or properties, in naming a processed product containing plant proteins, it is prohibited to use: a) legal denominations referring to meat, to a meat-based production or to products obtained mainly from meat; b) references to animal species or to groups of animal species or to an animal morphology or anatomy; c) specific terminology of the butcher’s, delicatessen or fishmonger’s shop; d) names of foods of animal origin representative of commercial uses”. Article 3 would ban terms such as ‘bresaola di seitan’ ‘tofu steak’, or ‘vegan mortadella’ to be made on plant-based products. Article 4 of the Proposed Law No. 746 introduces certain exceptions for products of predominantly animal origin in which vegetable proteins are introduced, such as ‘mortadella’. Under Article 5, the names referred to in Article 3 “may be used in the description of combinations of foodstuffs of animal origin with other types of foodstuffs which neither replace nor are alternatives to those of animal origin, but are added to them within these combinations”. Article 6 refers to mutual recognition as a way to guarantee the free movement of goods within the Single Market, stating that “Products lawfully manufactured or marketed in another Member State of the European Union, in another State that is a party to the Agreement on the European Economic Area or in Turkey are not subject to the requirements of this law, provided that the objectives general principles of sustainability aimed at protecting the environment and human, animal and vegetable health and the interests of consumers, referred to in article 1, are recognized by the provisions of the State of origin”.

The Proposed Law No. 746 is almost identical to France’s Decree No. 2022-947 on the use of certain names used to designate foodstuffs containing vegetable proteins, which was adopted on 29 June 2022 (see TradePerspectives, Issue No. 14 of 18 July 2022). The French Decree No. 2022-947 is, however, more precise and provides in its Annex a list of names of foodstuffs of animal origin, which may contain vegetable proteins and the maximum share of vegetable proteins that may be contained in the foodstuffs for which those names are used. The list includes, inter alia, the terms “preparation of minced meat” (7.0% vegetable protein allowed), “bacon” (0.5%), “bresaola” (0,5%), “sausage” (0,5%), “chorizo” (3,0%), and “omelette” (0.1%).

Prior to its adoption, Italy must notify the Proposed Law No. 746 to the European Commission under the EU’s Technical Regulation Information System’s (TRIS) procedure. Starting from the date of notification of the draft, a three-month standstill period, during which the notifying EU Member State may not yet adopt the technical regulation in question, enables the European Commission, the other EU Member States, and other stakeholders to examine the notified text and to provide comments. 

The EU legal framework for “meaty” and dairy names for plant-based products

At the EU level, there has also been a debate on the use of “meaty” and dairy names for plant-based products. For plant-based dairy names, the debate was mostly settled on 14 June 2017, when the Court of Justice of the European Union (hereinafter, CJEU) handed down its judgment in Case C-422/16 TofuTown. The CJEU held that purely plant-based products, such as tofu or soya, cannot, in principle, be marketed with designations such as “milk”, “cream”, “butter”, “cheese” or “yoghurt”, which, under Regulation (EU) No 1308/2013 of the European Parliament and of the Council establishing a common organisation of the markets in agricultural products (hereinafter, CMO Regulation), are reserved for animal products. The CJEU observed, in particular, that the addition of descriptive or explanatory terms indicating the plant origin of the product concerned, and/or that the product does not contain animal products, cannot completely exclude the likelihood of confusion on the part of consumers. As regards the principle of equal treatment, the CJEU held that each sector (for example the dairy sector and the meat sector) in the CMO Regulation embodies features specific to it and that, as a result, a comparison of the technical rules and procedures adopted in order to regulate the various sectors of the market cannot constitute a valid basis for the purpose of proving discrimination between dissimilar products, which are subject to different rules.

In fact, for meat products, with a few exceptions, there are no legal names, similar to those for dairy products. Annex VII to the CMO Regulation contains only general sales descriptions for meat of bovine animals (like “veal” in English), but currently no different language versions of meat products like “sausage”, “prosciutto”, or “Schnitzel”. In 2020, in the context of the Commission’s Proposal revising the CMO Regulation, Members of the European Parliament had proposed an amendment that intended to reserve the use of meat-related terms and names such as “steak”, “sausage”, or “burger”, currently used for meat and meat cuts, “exclusively for products containing meat”. On 23 October 2020, the European Parliament’s plenary rejected the amendment, which had been approved by the European Parliament’s Agriculture Committee. Thus, Regulation (EU) 2021/2117 of the European Parliament and of the Council of 2 December 2021 amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products does finally not include a reservation of meat-related terms and names exclusively for products containing meat.

Does Italy’s draft law contradict EU policy initiatives?

Italy’s Proposed Law No. 746 foresees the prohibition of denominations associated with meat for plant-based food products. This might be considered as a protectionist measure benefitting the meat sector. Arguably, the Proposed Law No. 746 goes against the objectives of major EU policy initiatives, namely the EU’s Farm to Fork Strategy and Europe’s Beating Cancer Plan, which both emphasise the need to move to “a more plant-based diet with less red and processed meat”, reducing not only risks of life threatening diseases, but also the environmental impact of the food system. Furthermore, Regulation (EU) 2021/1119 of the European Parliament and of the Council establishing the framework for achieving climate neutrality (‘European Climate Law’) has the objective to reduce greenhouse gas emissions by at least 55% by 2030. Arguably, reducing emissions from the agricultural sector and shifting away from intensive animal farming and meat production towards more plant-based diets might be necessary for meeting the Paris Agreement’s climate target of limiting global warming to “well below” 2°C. In Italy, it has also been argued by the non-governmental organisation ProVeg, a food awareness organisation working to transform the global food system by replacing animal-based products with plant-based and cultured alternatives, that “plant-based meat alternatives can be healthier than their conventional counterparts because they tend to contain no cholesterol, more complex carbohydrates, healthy fibre, and are free from antibiotic residues, hormones, heavy metals, and pathogenic bacteria and viruses”.

Notably, the existing provisions of the Regulation (EU) No. 1169/2011 on the provision of food information to consumers may provide a sufficient legal basis to protect consumers from being misled by denominations for plant-based meat alternatives if those are also denominated ‘vegan’ or ‘vegetarian’.

The way forward

In the context of the examination of the Proposed Law No. 746, on 21 March 2023, an informal hearing with representatives of the Italian industry associations Agrinsieme, representing the Italian agri-food companies and cooperatives, and Coldiretti, representing the Italian agricultural sector, took place in the Agriculture Commission of Italy’s Parliament. At the end of the examination, which started on 15 March 2023, the Committee will submit the text to the Chamber of Deputies for approval. If approved, it will move to the Senate for approval and to the President of the Republic to be promulgated and finally published in Italy’s Official Journal. As stated above, prior to its formal adoption, Italy must also notify the Proposed Law No. 746 to the European Commission under the EU’s TRIS procedure and possibly also, through the EU, to the WTO Committee on Technical Barriers to Trade (TBT).

The next steps taken in Italy, the EU, and its Member States on the use of “meaty” names for plant-based products should be closely monitored and stakeholders should be prepared to participate in the debate by interacting with relevant EU Institutions, trade associations, and other affected stakeholders.

 

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Felipe Amoroso, Ignacio Carreño, Joanna Christy, Tobias Dolle, Alya Mahira, Lourdes Medina Perez, and Paolo R. Vergano contributed to this issue.

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