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EU update – March 2022


Ukraine-Russia crisis is causing oil prices to soar while discussions on a Russian oil ban are still ongoing

On 24 February 2022, Russia launched a military invasion on Ukraine. The list of economic sanctions in the EU and globally against Moscow escalated quickly, leading to an investment ban on projects in Russia involving the exploration or production of coal, oil and gas. EU Member States are still discussing whether to follow the US-led oil embargo on Russia since purchasing energy from Moscow contributes to the financing of Russian military operations in Ukraine in the order of €1 billion per day according to some experts. The German Vice-Chancellor Robert Habeck highlighted that it was a difficult decision to take as it would impact the chemical industry and their supply chains.

The EU gets a third of its oil from Russia and about 4 to 8 percent comes by pipeline and could be replaced without problems by buying oil on international markets but the dependence on Russian crude varies in each country.

Global oil prices surged these past few days following the discussions on a possible Russian oil ban with Brent crude reaching $111 a barrel (a surge of more than $3) and US West Texas Intermediate (WTI) crude  reaching $108.35 both on Monday 22 March. As a temporary measure, the International Energy Agency (IEA) agreed to release 63 million barrels of emergency oil stocks to the market.

Other impacts also threaten the global economy; according to the UN chief Antonio Guterres, the war could lead to a “hurricane of hunger and a meltdown of the global food system”. The UN’s Food and Agriculture Organization said the number of undernourished people could rise from 8 to 13 million people. Economies and markets were also still recovering from the COVID-19 pandemic but volatility increased in stock markets, with Moscow’s stock exchange closed for three weeks and partially reopened as of 21 March 2022.

The OPEC is expected to meet on March 31 to discuss further solutions to this current constraint.

Chemicals regulations are undergoing new developments: Commission opens consultation for REACH revision and publishes Sustainable Product Initiative

The consultation period on the revision of the REACH Regulation to help achieve a toxic-free environment is closing on 15 April 2022. The objective of the revision is to ensure that the REACH regulation reflects the Commission’s standpoint on innovation as well as an effective level of protection of health and the environment as stated in the Chemicals Strategy for Sustainability adopted on 14 October 2020.

On other developments affecting chemicals regulations at the EU level, the Sustainable Products Initiative (SPI) was published on 30 March.  The initiative is designed to revise the Ecodesign Directive and includes additional legislative measures aiming to make products placed on the EU market more sustainable.

The SPI proposes to have information requirements and classes of performance of products. Under article 7(5), information requirements will be set to enable the tracking of all substances of concern throughout the lifecycle of the products covered therein.

Requirements include information on the name of the substances of concern present in the product and their location in it, but also their overall concentration, maximum concentration, or concentration range.

The list of substances are taken from the Annex IVX of the REACH Authorisation list, the Annex VI of the CLP Regulation Part 3, with 9 types of classification, and to any other substance that negatively affects reuse and recycling of materials. The information requirements do not apply to articles but only to finished products and main components. This could potentially mean thousands of substances will be tracked.

Council agrees on the Carbon Border Adjustment Mechanism (CBAM)

On 15 March, the French Presidency of the Council of the European Union reached an agreement on the CBAM, one of the main components of the European Union’s “Fit for 55” package.

The measure seeks to avoid carbon leakage and encourage partner countries to set up carbon pricing policies in order to fight climate change. The CBAM will focus on imports of carbon-intensive products manufactured in non-EU countries where climate change policies are less stricter than in the EU and will seek to prevent the products from compromising the EU’s greenhouse gas emissions reduction targets. The products from the following sectors will be taken into account : cement, aluminium, fertilisers, electric energy production, iron and steel.  

The ministers agreed on a majority of issues including a new registry for importers at the EU level and supported Germany’s idea to create a “climate club” for developing countries to align their carbon pricing policies in order to further reduce their emissions.

The Council will now enter into further negotiations, for instance, on the revision of the EU carbon market and the use of revenues obtained with the EU’s new border tariff. Free allowances – permits which are given to companies to allow them to pollute for free– are also still on the table for discussion.

In the European Parliament, the report on CBAM by Mohammed Chahim (S&D, the Netherlands) is expected to be voted in plenary in June and according to the rapporteur on the CBAM lead EU lawmaker, free allowances will have to be included in the discussion.

The timetable for the full entry into force of CBAM will remain the same and is expected to start at the beginning of 2026 but it could be applied as early as 1 January 2025 as a transitional set-up of the mechanism.

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