EUROPEAN COMMISSION Brussels, 17.3.2016 SWD(2016) 64 final Circular Economy Package COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council laying down rules on the making available on the market of CE marked fertilising products and amending Regulations (EC) No 1069/2009 and (EC) No 1107/2009 {COM(2016) 157 final}

{SWD(2016) 65 final}



COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council laying down rules on the making available on the market of CE marked fertilising products and amending Regulations (EC) No 1069/2009 and (EC) No 1107/2009

TABLE OF CONTENTS Introduction 1.Procedural issues and consultation of interested parties

1.1.Identification 1.2.Organisation and timing 1.3.Consultation and expertise 1.4.Scrutiny by the Commission Impact Assessment Board 2.Regulatory context 3.Problem definition 3.1.Lack of awareness about nutrient recycling 3.2.Lack of internal market 3.3.The impacts of mutual recognition of fertilisers covered by national laws 3.4.Weaknesses of the current EU Fertilisers Regulation 3.5.Drivers of the problem 3.6.Who is affected, in what ways and to what extent? 3.7.Expected evolution of the problem 3.8.EU right to act 4.Objectives 4.1.General policy objective 4.2.Specific policy objectives 4.3.Operational objectives 4.4.Consistency with other policies and objectives 5.Policy options

5.1.Possible options which have been discarded at an early stage 5.2.Description of the examined options 6.Analysis of impacts 6.1.Descriptions of impacts and their corresponding assessment criteria 6.2.Option 1: no action 6.3.Option 2: creation of an internal market for fertilising products by listing individual product types 6.4.Option 3: creation of an internal market for fertilising products by listing authorised ingredients 6.5.Option 4: creation of an internal market for fertilising products by using the New Legislative Framework 6.6.Option 5: creation of an internal market for fertilising products by adopting different variants of options 4 7.Comparing the options 8.Monitoring and evaluation 8.1.Supporting the implementation of the new legislative proposal 8.2.Measuring the fulfilment of the objectives 9.References 10.Glossary of technical terms and abbreviations ANNEX I The global and EU supply and demand of fertilising products and additives ANNEX II Additional evidence illustrating the problems with the current regulatory framework ANNEX III Evaluation of administrative burden costs ANNEX IV SMEs Test and competitiveness proofing ANNEX V List of relevant EU legislation in relation with fertilising products

ANNEX VI Background information concerning the proposed list of contaminants levels for the different categories of products ANNEX VII Description of each possible options envisaged in this impact assessment ANNEX VIII Assessment criteria ANNEX IX Characteristics of plant biostimulants and agronomic fertiliser additives ANNEX X Regulation (EC) No 2003/2003 relating to fertilisers ANNEX XI Overview of some national fertiliser laws and their discrepancies (Source: the Fertilisers Study) ANNEX XII Summary of various stakeholder consultations carried from 2010 to 2015.



Introduction The market of fertilising products covers different categories namely fertilisers, soil improvers, liming materials, growing media, plant biostimulants, fertiliser additives and mixtures thereof. For an explanation see also glossary of technical terms in Section 10. Each product category has different characteristics and safety profiles depending on the nature of the feedstock used in manufacturing them (mined feedstock, domestic organic and secondary raw materials from waste streams or industrial by-products) as well as different market dynamics. Fertilisers provide 'food for plants'. They replenish soils with nutrients and help professionals and private consumers to maintain or increase crop yields to produce food and non-food products (e.g. energy commodity crops) for the world's growing population. They accounted for approximately 60% of the registered yield increase in the last 50 years. Consequently, the access to efficient fertilisers to feed an additional 2 billion people by 2050 is a relevant issue. Fertilisers can be divided into three sub-categories: 1.inorganic fertilisers composed of synthetic chemicals and/or minerals such as various nitrogen, phosphate, and potassium substances; 2.organic fertilisers mainly made of organic matter from various sources such as processed manure and compost; 3.organo-mineral fertilisers which result from the chemical reaction between organic and inorganic fertilisers with the objective to delay the release of nutrients. Alongside fertilisers, other product categories such as soil improvers, liming materials and growing media are also used in agriculture to improve crop yield. Soil improvers include products added to soil in situ to maintain or improve its physical, chemical or biological properties (e.g. increasing organic matter/carbon content through adding compost, limiting soil dewatering and erosion…). Liming materials are inorganic products whose main function is to correct soil acidity. Growing media are products used in horticulture to offer a growing substrate for root development, e.g. off-soil greenhouse production systems, potted plants in nurseries. Plant biostimulants are products that, when applied to a crop or to its rhizosphere (on the soil close to the roots), will influence its nutrition pathways and hence will either enhance its nutrition efficiency or its resistance to abiotic stress, or modify the quality traits of the plant, mainly by improving the crop’s capacity for nutrient uptake or by improving its nutrient use efficiency.

Agronomic fertiliser additives are products which influence the release patterns of nutrients present in fertilising products to modify their availability for feeding crops more efficiently. As illustrated in Figure 1 below, the inorganic fertiliser business represents 80% of the estimated total value of the EU fertilising product market. Not all inorganic fertilisers are marketed as EC fertilisers (See Section 2). The organic fertiliser market represents around 4.5% of the market. This figure however excludes raw manure which is an important source of nutrients for crops but is mainly used by farmers directly on their own or neighbouring fields generally without commercial transactions. Commercial transaction of raw manure between Member States is subject to mutual agreement under Regulation (EC) No 1069/2009 laying down health rules as regards animal by-products and derived products not intended for human consumption (hereinafter the Animal By-Products Regulation - ABPR). By convention raw manure is therefore not considered as a fertilising product in the sense of the future regulation on fertilising products and should not be included in its scope. Organo-mineral fertilisers, soil improvers, liming materials and growing media represent about 12.5 % of the current value of the EU fertiliser market. Plant biostimulants represent only 2.25% but with a strong market development potential. Lastly agronomic fertiliser additives represent less than 1% of the current market value but again with a strong market development potential. See Annex I for more details on the current size and future market trends for each sub-category. Figure 1: Market value distribution per category of fertilising products.

(Source: the Fertilisers Study) Note: ’Other products’ can be defined as products the primary objective is not to bring nutrients to the plants. According to Eurostat and the Fertilisers Study, the EU fertilising product market as presented above, is an economic sector that has between EUR 20 billion and EUR 25 billion in annual turnover. Around 95 000 to 100 000 jobs (expressed as Full Time Equivalent) are involved: i.e. approximately 1% of European Gross Value Added for the whole manufacturing sector and 0.2-0.3% of the workforce in manufacturing. Due to the lack of available statistics in Eurostat (except for inorganic fertilisers), the number of SMEs active in the sector was estimated on the basis of information collected from various industry federations. In the inorganic fertilisers (which are international trade commodities), large companies represent 75% of the total market value whereas for the other groups of products, SMEs represent approximately 98%. In total, 90% of the number of enterprises active in the production, sales and imports of fertilising products are estimated to be SMEs. As fertilising products are key ingredients for crop production, a competitive European fertilising product industry is essential to ensure a reliable access of European agriculture to fertilising products at competitive prices. 1.Procedural issues and consultation of interested parties 1.1.Identification Lead Directorate General: Internal Market, Industry, Entrepreneurship and SMEs (DG GROW). Other Directorates-General involved in the ISSG: Environment, Health, Agriculture, Trade, Secretariat General and Legal Service. Agenda Planning/WP Reference: 2012/ENTR/001. 1.2.Organisation and timing DG Growth set up an Inter-service Steering Group (ISSG) on the revision of Regulation (EC) No 2003/2003 (hereinafter the ‘Fertilisers Regulation’) to which the above-mentioned Services were invited. The ISSG met in July 2012, February 2013, May 2013, September 2013, March 2014, May, July and October 2015 in order to discuss the preparation of the impact assessment and the legal proposal. The members of the ISSG were also invited to participate in meetings with industry and Member States representatives held during the preparation of this report. 1.3.Consultation and expertise In September 2009, the French Ministry for Food, Agriculture, Fisheries and Rural Affairs and the French Ministry for Economy, Financial Affairs and Industry organised a workshop to identify the main regulatory failures that hamper the functioning of the EU fertilising product market. It concluded that the intra-EU trade of fertilising products not covered by the Fertilisers Regulation is hindered by diverging national requirements. The entry into force of Regulation (EC) No 764/2008 of the European Parliament and of the Council of 9 July 2008 (hereafter the ‘Mutual Recognition Regulation’) that applies to non-harmonised products has not entirely met the expectations of the economic operators in terms of reducing the administrative burden. Many Member States hold negative opinions towards applying mutual recognition to fertilising products covered by national rules as described in Section 3.2. In December 2010, the Commission published the results of an ex-post evaluation of the Fertilisers Regulation and the implications of the entry into force of the Mutual Recognition Regulation for the fertilising products sector (hereinafter 'the ex-post evaluation'). The evaluation covered 10 Member States representing around 75% of the total EU fertilising products consumption in 2008, 28 companies and 4 European Trade associations. The evaluation concluded that the Fertilisers Regulation had been effective in simplifying and harmonising the regulatory framework for the inorganic fertiliser market. However, the limited scope of the current Fertilisers Regulation was seen as the most important deficiency to be addressed in order to ensure a functioning internal market. The findings of the ex-post evaluation are further detailed in the problem definition and are all addressed by this impact assessment. In January 2011, the Commission mandated an external study for the collection of data on the EU fertilising product market and the assessment of different policy options in view of the potential extension of the scope of the Fertilisers Regulation. During the preparation of this study (hereinafter the ‘Fertiliser Study’), a broad range of businesses and competent authorities were invited to share their expertise on the current legal framework for the placing on the market of fertilising products through several questionnaires and interviews.

The consultation confirmed that the intra-EU trade of fertilising products other than those covered by the Fertilisers Regulation is hindered by major differences between national legislation covering the placing on the market of national fertilising products (i.e. fertilising products not covered by the Fertilisers Regulation). More details are available in Section 3 and Annex II. These differences lead to considerable additional costs of product registration for producers (according to the analysis described in Table 23 of Annex III this could amount up to EUR 25.2 million annually for the whole industry). In December 2011, the results of the study and a set of policy options for the revision of the Fertilisers Regulation were presented to the Working Group of the Competent Authorities responsible for the implementation of the Fertilisers Regulation (hereinafter referred to as the ‘Fertilisers WG’), which is composed of representatives of the Member States and open to observers from EU fertilising products manufacturers, non-EU producing countries, environmental NGOs, Trade Unions, Farmers and Consumer associations. The options examined in this impact assessment were presented in detail and stakeholders were requested to provide their initial views on the options either orally in the meeting or by sending written comments to the Commission in the subsequent weeks. Since 2011, the members of the Fertilisers WG were regularly consulted on the developments of a future proposal for a revised Regulation and at the beginning of 2014 bilateral meetings took place in several European capitals to discuss the possible consequences of the revision of the Fertilisers Regulation for the competent authorities and local stakeholders. The outcomes of the Member States consultation are detailed in Section 6 for each examined option. In the framework of the implementation of the Small Business Act, requests for inputs on the various options examined in this impact assessment report were submitted to Small and Medium Size Enterprises (SMEs) during the last quarter of 2012 via the Enterprise Europe Network. The aim of this consultation was to ensure that the specific concerns of SMEs involved in the production and/or marketing of fertilising products could be considered. 61 companies in 10 Member States participated in the consultation. In summary, the replies show that SMEs are in favour of a flexible regulatory approach to allow an easy access to the market of safe products. In line with the Commission Communication on Industrial Policy "to ensure that all policy proposals with a significant effect on industry undergo a thorough analysis for their impacts on competitiveness", a consultant team was mandated to further deepen the economic analysis of the effects of the various options on business competitiveness – hereinafter referred to as ‘the Competitiveness Proofing’ – in several key sectors. Annex IV (SME test and competitiveness proofing) summarises the results of the SMEs survey as well as the analysis of impacts on competitiveness. In the course of 2012, the Commission organised 13 meetings of four ad-hoc technical working groups composed of representatives of competent authorities, the fertilising products industry and NGOs to discuss a broad range of technical issues related to the implementation of the different options identified in the Fertiliser Study. The overall structure of a possible proposal, definitions of the various categories of products, agronomic and safety criteria as well as labelling and enforcement issues were addressed. A summary of the main outcomes of the stakeholders consultations carried out since 2012 is available in Annex XII. In 2013, the Commission mandated an external consultant to carry out an analysis of existing regulatory approaches in the Member States and third countries for plant biostimulants and agronomic fertiliser additives. Although there are grounds and support from the technical working groups to cover these product categories in a future proposal, some details about information on safety and quality requirements needed to be further worked out in cooperation with representatives of the industry and Member States. The various consultations conducted as part of the preparation of this impact assessment report have been carried out in compliance with the Commission's minimum standards on consultation. Since mid-2010, all the relevant target groups have been consulted. In each consultation, the Commission has allowed sufficient time for participation. All the opinions expressed in writing and/or orally during the consultation procedure have been considered by the Commission. During the consultation period, DG GROW made an extensive use of the Fertilisers Working Group as an open platform for Member States, industry and NGOs to collect feedback on various issues relating to the revision and in particular on the content of the various options (see Annex XII). An open public consultation to help the Commission to better identify and define the main barriers to the development of a more circular economy was organised mid 2015. The outcomes of that consultation regarding the market of secondary raw materials for fertiliser use are reported in Annex XII. 1.4.Scrutiny by the Commission Impact Assessment Board The Impact Assessment Board of the European Commission assessed a draft version of the present impact assessment and issued its first opinion on 22 January 2014. The Impact Assessment Board made several recommendations to improve the quality of the report Therefore a revised draft impact assessment report: –Better showed the magnitude of the problems related to the fragmentation of the internal market, mutual recognition of fertilisers and weaknesses of the Fertilisers Regulation (amendments to section 3, Annex II, Annex XI); –Better demonstrated that diverging national rules create adverse consequences in terms of trade within the EU and competition distortions in different segments of fertilisers' market (amendments to sections 2, 3.1, Annex II); –Better presented the operational set-up of the various options and clarified the content of their safety and quality requirements (amendments to section 5 and Annex VII); –Clarified how the proposed maximum limit values for contaminants were selected and how they relate to the current values in commercialised products and limit values in national legislation (amendments to section 3.3, Annexes VI and XI; –Improved the assessment of the economic, environmental and social impacts of the proposed limit values for contaminants and clarified any significant international impacts ( amendments to sections 3.5, 3.6 and 5, Annexes VI); –Explained how stakeholders' concerns as regards the preferred option have been addressed and described the results of the consultations carried out in view of the preparation of the revision. The Impact Assesment Board issued its second opinion on the revised report on 16th July 2014. In light of the recommendations in the second opinion, this final report: –Provides more evidence regarding the extent of the market fragmentation, the role of the diverging national rules as a driver and the size of environmental and public health concerns (amendments to Sections 3.1, 3.2.1, 3.3.1, 6.3.3); –Better defines the content of each option, the need for harmonised standards, transitional provisions and the intervention logic (amendments to Section 5 and Annex VII);

–Explains the reasons for setting the proposed limit values for contaminants, how a consensus was achieved and under which conditions Member States can deviate from them under Article 114 TFEU (Amendments to Sections 3.3.1, 6.3.3 and 3.7.2); –Explains in deeper details the order of magnitude of key impacts (Amendments to Section 6 and Annex XIII); –Better justifies the assumptions underpinning the calculations of the development costs of harmonised standards (Annex III); –Better presents stakeholders views throughout the report 2.Regulatory context Regulation (EC) No 2003/2003 of the European Parliament and of the Council of 13 October 2003 relating to fertilisers only covers inorganic fertilisers listed in its Annex I. Other fertilising products are – if at all – currently governed by national legislation in the Member States. The Fertilisers Regulation replaced Council Directive 76/116/EEC which covered inorganic fertilisers and had been amended several times. The Fertilisers Regulation intended to harmonise the inorganic fertiliser market and to reduce the complexity of the regulatory environment in the pre-2003 period in line with the SLIM initiative (‘Simpler Legislation for the Internal Market’). According to the ex-post evaluation, the Fertilisers Regulation has effectively contributed to this objective by removing the various procedures required by national legislation, thus eliminating the former trade barriers for 60 to 70% of inorganic fertilisers although the marketing of national inorganic fertilisers is still permitted. It has also facilitated the import of inorganic fertilisers from third countries as reported by the European Fertilisers Importers Association (EFIA). Still, such a benefit from the Regulation is not able to counterbalance the generally negative trend in the EU exports of fertilisers (See Annex I, Section 2) during the last decade that reflects, primarily, the lower production costs in certain non-EU countries (e.g. Russia, North African countries) due to the availability of cheaper raw materials (gas, phosphate rocks) in those regions. The Fertilisers Regulation (See Annex X) lays down rules for ‘EC Fertilisers’ with regard to their agronomic efficacy and information about their nutrient content to farmers. However the result of the consultations described under section 1.3 indicates that there is a need to strengthen the environmental and human health protection aspects in the Fertilisers Regulation, in particular through setting limit values for potential contaminants in inorganic fertilisers (for more details see section 3.3 below). The Fertilisers Regulation does not affect fertilising products placed on the market in Member States in accordance with national rules which consist of a basic law supplemented by technical annexes that are subject to regular updates as confirmed by notifications under Directive 98/34. Around 50% of the fertilising product market value is out of the scope of the Fertilisers Regulation. In general, Member States' fertilising product laws are not limited to inorganic fertilisers but cover a broader range of fertilising products. As confirmed in the ex-post evaluation, national rules diverge with regard to; inter alia, definitions and scope, forms of national registration and authorisation procedures, environmental or safety requirements, labelling, national standards for control and market surveillance. National regulatory approaches for domestic organic and secondary raw materials differ also as regards the origin of the authorised waste materials used for their production as well as regards the limit values for contaminants and product standards applying to them. Lastly, some rules can be contained not only in fertilising product law but also in legislation pertaining to waste, water protection or chemical legislation. (See Annex XI for more details on the scope of national laws and evidence showing their divergences and Annex II for examples of additional compliance costs due to the current regulatory framework). Fertilising products legally placed on the market according to national rules should circulate freely within the internal market according to the mutual recognition principle. This concept is based on the assumption that Member States are applying equivalent criteria for the protection of the environment and human health so that a product lawfully produced and marketed in one Member State enjoys a basic right to free movement in another Member State. However, as described in Section 3.2 and in Annex II, there are indications that mutual recognition is not functioning well for fertilising products covered by national rules. Several Member States are already engaged in the development of a local market for fertilising products in line with the objectives of the circular economy action plan on the use of recycled nutrients. However, the current regulatory context, i.e. the non-functioning mutual recognition of national authorisations makes the access to the entire EU market for the producers of such products often prohibitively expensive. The resulting lack of critical mass for such fertilising products limits their visibility for end users and hampers investment in the sector. The problem is of particular importance for producers established in Member States with a small domestic market compared to the surplus of organic, secondary raw materials (typically manure) of which they dispose. 3.Problem definition 3.1.Lack of awareness about nutrient recycling Further efforts to manage the nutrient cycle in a more resource-efficient, sustainable and cost-effective way are required under the General Union Environment Action Programme to 2020 'Living well, within the limits of our planet'. Global competition for resources is increasing worldwide. Concentration of phosphorus mines and gas fields outside the EU makes the EU fertilising product industry and the European society dependent and vulnerable on imports, high prices of raw materials as well as the political situation in supplying countries. The transition to nutrient recycling would therefore be a key element to increase the European food security. The production of inorganic fertiliser is high energy intensive. It has been estimated that 2% of the world's energy production is devoted to the production of inorganic nitrogen fertilisers (Source: International Fertilisers Industry Association - IFA). In 2007, the global inorganic fertiliser industry (including nitrogen and phosphorus fertilisers) generated 465 million tons of CO2 (Source: IFA). Nutrient recycling would contribute to mitigation of climate change via less energy demanding technologies which can combine sometimes the production of alternative energy sources (e.g. digestion of bio-wastes generating bio-gas and heat) thereby contributing to a transition towards a low-carbon and more sustainable economy. Disrupted nutrient recycling is a problem for Europe and all over the world. Phosphorus and nitrogen are lost across environmental media during food production or are wasted instead of being used for plant nutrition. The leaks of nitrogen and phosphorus from human activities have led to ecological deterioration of surface water via eutrophication and "dead-sea" bottoms in coastal oceans along the EU coastlines close to mined phosphorus factories. The total losses to water and landfill are substantial and would account for 30% to 35% of the annual usage of phosphorus fertilisers (Source: The European Sustainable Phosphorus Platform). By maintaining the value of the raw materials and energy used in products from extraction to recycling, the transition towards a more circular economy can promote innovation, increased competitiveness in the sector and lead to job creation (See also annex VIII Section 3.1.1 for more details).

Possibilities to stimulate further substitution of inorganic phosphate fertilisers by alternatives have been examined in the Commission Communication on future steps in bio-waste management in the EU as well as in the Consultative Communication on sustainable use of phosphorus. Priority actions include rigorous enforcement of the targets on diverting bio-waste away from landfills as well as proper application of the waste hierarchy and other provisions of the Waste Framework Directive to introduce separate collection systems as a matter of priority. Progress in this regards can be accelerated with initiatives such as the technical report supporting the End of Waste criteria for biodegradable waste (e.g. compost and digestate) finalised by the Joint Research Centre in January 2014 (hereinafter 'the JRC EoW report'). Several other EU legislations are also regulating the safe use of fertilising products to ensure the protection of water resources and air quality. Annex V contains a list of relevant existing EU legislations with information on their relation to fertilising products. 3.2.Lack of internal market The internal market only exists for a majority of inorganic fertilisers and several types of liming materials. Fertilising products derived from the recycling of bio-wastes and biomass do not have access to the internal market due to the existence of diverging national rules and standards. Inclusion in the current Fertiliser Regulation of such products is challenging. This Regulation as it stands is clearly tailored for well characterised, inorganic fertilisers from primary raw materials. The current Regulation lacks robust control mechanisms and safeguards necessary for creating trust in products from inherently variable composition. As illustrated in Annex II and in Table 22 of Annex III, the multiplicity of diverging national rules leads to additional compliance costs for non-harmonised products which discourage economic operators to find new markets. For example, a company active in the production of organic fertilisers mentioned that total compliance costs to five national legislation can amount up to EUR 90 000. Given the low profit margin of the sector (around 10%), the investment would be only paid off after 10 years. The lack of an internal market can also be illustrated by the costs of marketing fertilising products in various Member States. According to an EU fertiliser association, prices of similar organic fertilisers can vary by a factor of two between Member States. A maximum price difference of 60% for organo-mineral fertilisers between Member States was also reported. Table 52 of Annex IV shows that the costs of registration, compliance check and labelling are the top three identified costs for SMEs. A range of estimated compliance costs per type of requirements is also described in table 52. This situation hampers intra–EU trade of organic fertilisers although there is a growing interest from industry to find new markets as mentioned in Section 3.2 and Figure 16 of Annex IV which shows that around 80% of SMEs supports the harmonisation process. It is however difficult to assess the impacts of the lack of harmonisation as there is no information about the number of companies that were discouraged to trade because of the complex legal environment. The lack of an internal market concerns products derived from various types of organic materials such as some organic fertilisers or organic soil improvers for which, according to some national legislation, users need an environmental permit from waste management authorities to dispatch the material. However, compost or digestate for example that do not require a permit or an exemption under waste law but are recognised as organic fertiliser or organic soil improver can be used at lower costs. The UK's Quality Protocol for compost, for example, allows the use of compliant compost in England and Wales without having to pay an exemption fee related to waste status. The avoided costs were estimated at more than GBP 2/tonne of compost (The Composting Association, 2006). It has also been reported that farmers are hesitant to use materials classified as waste as it may be perceived as causing adverse impacts to the environment and agricultural produce. In that case, compost price for example is often very low compared to its actual agricultural benefits. In fact, it is likely that the agronomic value of compost is higher than the price paid for it when it is considered as a waste . The recycling of organic materials (organic waste, animal by-products, sewage sludge, by-products from the agro-food industry…) generates market development opportunities for European manufacturers by using domestic feedstock to produce either organic or inorganic fertilisers. Such products could make the EU less dependent on inorganic fertilisers produced in non-EU countries with finite resources (e.g. phosphorus) or intensive energy consumption (e.g. nitrogen fertilisers). For example, some initiatives to recover nutrients from animal manure have emerged in Member States where the high amount of animal manure produced each year becomes an environmental problem. As animal manure has a low market value, it should be processed into a tradable good before being exported to other Member States. However, the complex regulatory framework (multiplicity of national rules regarding the treatment of animal by-products, difficulty to apply for mutual recognition of fertiliser, varying implementation of the Waste Framework Directive) prevents economic operators to develop further the market of secondary raw materials and the trade of fertilisers stemming from them across the EU. National authorities still use national or even regional analytical test methods. The diversity of such national testing standards hampers the recognition of fertilising products sourced from domestic resources or lead to additional compliance costs notably as regards labelling. The issue of the existence of diverging national standards could be addressed by developing harmonised EN standards. Moreover, as reported in the ex-post evaluation, national producers often lack knowledge on the legal situation in other Member States and are unsure whether they should adapt their products to the requirements of the Member State of destination by modifying the product (which means additional costs) or if they can rely on Mutual Recognition procedures (which may cause delay for access to the market and costs of prior authorisation procedure in some Member States). According to the ex-post evaluation, although trade barriers have been removed for about 60 to 70% of the inorganic fertiliser sector, economic operators still have to comply with diverging national rules for the remaining part of the inorganic fertilisers sector in particular with respect to limit values for contaminants. 3.3.The impacts of mutual recognition of fertilisers covered by national laws The free movement of goods is one of the fundamental pillars of the EU, and is being upheld by the principle of mutual recognition deriving from the case law of the Court of Justice of the EU. According to that principle, Member States may not prohibit the making available on their market of any product (including fertilisers) that is lawfully placed on the market of another Member State, unless they can demonstrate that there are specific legitimate reasons (i.e., in the case of fertilisers, mainly protection of the environment and of human health) against accepting the product. Regulation (EC) No 764/2008 on Mutual Recognition (hereinafter 'MRR') regulates the application of that principle. According to the MRR, a Member State intending to impose such a prohibition on a product based on a technical rule shall notify the economic operator wishing to market the product. After the expiry of the time limit for the receipt of comments from the economic operator, the Member State shall take a decision and notify the economic operator thereof. The MRR also obliges Member States to designate Product Contact Points ('PCPs'), whose task is, i.a. to provide information to operators upon request. The ex-post evaluation found that in 2009, the year of entry into force of MRR, an annual average of no more than 5 to 10 fertilising products had been placed on the market under the application of the procedures for mutual recognition in most Member States. Since then, the yearly reports of the Member States on the implementation of the MRR show that 20 Member States out of 27 specifically mentioned issues relating to fertilising products. They are reported as one of the product categories for which economic operators submit many information requests to PCPs, which means that there is a significant interest in intra-EU trade, but that economic operators are uncertain about the requirements applicable in different Member States (See Annex II for more details). In February 2010, DG ENTR published a guidance document on the application of the MRR to prior authorisation procedures. The yearly reports on the implementation of MRR do not show that this guidance document has eased the difficulties of economic operators in this regard. Some Member States have continuously indicated encountering particular difficulties with the implementation of the MRR for products subject to prior authorisation procedure in general, and fertilising products in particular.

The ex-post evaluation has identified three main areas of concern for Member States and industry: 3.3.1.Lack of trust in MRR by economic operators For a few operators, the use of the Mutual Recognition Regulation provides a suitable alternative as a way to overcome the lengthy registration procedures of the Fertilisers Regulation or the various registration procedures and tests required in the different Member States. However, the ex-post evaluation (See a summary of the report in annex XII) shows that a large majority of operators doubt the effectiveness of the MRR in the area of fertilising products. During the survey organised for the ex-post evaluation industry complained about the lack of clarity of the European legislation on mutual recognition, and argued that this tool is not suitable for creating uniform market conditions for fertilising products in the EU. The high technical complexity and diversity of national rules applying to a large range of products/ingredients (sometimes captured in positive lists) and the uncertain outcome of procedures invoked by Member States on the grounds of human health or environment protection deter economic operators from applying for mutual recognition. In addition, several Member States apply prior authorisation procedures which the MRR has explicitly left out of its scope. Such procedures discourage economic operators from marketing their products in Member States where the procedures are in place. This conclusion is not altered by the fact that the Court of Justice of the European Union has defined certain conditions to be fulfilled for such procedures to be justified with regard to the free movement of goods. 3.3.2.Divergences in environmental and human health safety standards Member States are concerned that the MRR may jeopardise their national requirements to protect the environment (in particular their national soil and water standards) and/or human health. For example, one Member State reported 4 cases of requests for mutual recognition in 2010, where all four products exceeded the limit on heavy metals that it had imposed nationally. There are also concerns that inappropriate or low quality products will enter the market. For example, one Member State stated that some recycling companies, which are not fertilising products producers, may try to put low quality products (in terms of agronomic efficacy and contaminants levels) on the market to get rid of potentially dangerous waste or ineffective by-products as fertilising products. This would be achieved by lawfully placing them on the market in a Member State where no environmental or quality criteria for such products apply, and benefit from the mutual recognition procedure to make them available in other, more stringent, Member States. 3.3.3.Additional costs for Member States The view that the MRR does not have the potential to create a functioning internal market for fertilising products was repeatedly expressed by almost all Member States during the various consultations. The burden of proof in justifying the measures adopted according to the MRR lies entirely with the Member States, and not with the economic operators. Member States need to comply with strict rules regarding the production of evidence that national technical rules are required to ensure that overriding public interest for health and environment are respected. The application of the MRR therefore imposes administrative costs on Member States. In particular, Member States mentioned that many enquiries for mutual recognition were outside the scope of the MRR (sometimes more than 50% of questions) which in their view creates useless administrative costs on national competent authorities. This is seen as resulting mainly from the complexity of the legislations in place and the confusion of economic operators with regard to the concept of 'legally placed on the market in another Member States. According to the Fertilisers Study, the annual costs for competent authorities to analyse requests for mutual recognition is around EUR 420.000 (See Annex III p 46). Member States' authorities have also expressed strong concerns to the Commission that their administrations might be overwhelmed if many fertilising products lawfully placed on the market in other Member States with different technical requirements were to be placed on their markets over a short period of time. National authorities would not be able to react within the short period of time provided for by the MRR (maximum 40 calendar days). This could lead to a situation where products lawfully marketed in another Member State would be marketed in their territories as well, without giving the receiving Member State any possibility to challenge the assessment of their potential risks for health and the environment. In addition, Member States do not necessarily use the same analytical methods for control purposes. This can lead to administrative costs for authorities who verify with their own methods that the fertilising product complies with the requirements for human health and the environment applicable in another Member State. In addition to the direct costs, reliance on mutual recognition is likely to have significant opportunity costs. The large number of information requests to PCPs indicates that there is willingness to trade within the EU across national borders. Regulatory uncertainty and hurdles, in particular in the form of national pre-marketing authorisation schemes, have been reported in the ex-post evaluation. The current regulatory framework discourages fertiliser producers using domestic resources from expanding their markets beyond national borders. This limits competition, which in turn implies that farmers may be paying higher prices for fertilising products. The potential costs hereof have not been included in the quantitative impact assessment, due to the difficulty to estimate its magnitude, but must not be disregarded. 3.4.Weaknesses of the current EU Fertilisers Regulation 3.4.1.Lack of consideration for environmental and public health concerns In recent decades, interests have moved from solely providing extensive information about the nutrient content of fertilisers to also addressing environmental concerns. The current provisions are however lagging behind in this respect as no limits for contaminants are specified. The Fertilisers Regulation is therefore perceived as providing a lower level of protection of the environment and public safety than national legislation and, from the information collected from Member States, can even be used as a means to circumvent some national safety provisions by selling inorganic fertilisers containing harmful substances as EC Fertilisers. In fact, Article 14 (c) of the Fertilisers Regulation requires that “a fertiliser type may only be included in Annex I if under normal conditions of use it does not adversely affect human, animal or plant health or the environment”. It is therefore the responsibility of the Commission and the Fertilisers Committee to check that a fertiliser type is not harmful before it is included in Annex I of the Fertilisers Regulation. However, several Member State authorities argued that the information required in the technical files for the registration of new fertilisers as EC Fertilisers is not clearly stipulated. According to these Member States, the nature of the information to be provided and how this information should be presented should be specified more precisely. Moreover, the evaluation of these technical files should be given to a scientific committee of technical experts covering the whole range of relevant disciplines, which are not necessarily represented in the Fertilisers Working Group/Fertilisers Committee. In addition, the Inter Service Steering Group has highlighted that the absence of contaminants limits for EC fertilisers is an issue for other pieces of EU legislation and policy:

As regards the protection of surface water, EU Environmental Quality Standards (EQS) for several contaminants in rivers, lakes and other surface waters have been adopted under the Water Framework Directive 2000/60/EC and there is an obligation for Member States to progressively reduce and in some cases completely phase out emissions, discharges and losses of those substances to the aquatic environment. Recent research suggests that the EQS for cadmium may not be sufficiently strict to properly protect the aquatic ecosystem. Mined inorganic phosphate fertilisers are identified as the main contributor to soil cadmium inputs and surface water inputs through runoffs. As regards groundwater, specific measures also have to be taken under the Water Framework Directive to prevent and control groundwater pollution and achieve good groundwater chemical status. Directive 2006/118/EC on the protection of groundwater against pollution and deterioration includes criteria for assessing the chemical status of groundwater and for identifying trends in pollution of groundwater bodies. Under this Directive the Member States are required to establish threshold values for a so-called minimum list of pollutants in case they identify risks of pollution. This list includes arsenic, cadmium, lead, and mercury which are found in mined phosphate fertilisers. The Groundwater Directive also includes a European quality standard for nitrates based on the Nitrate Directive. The presence of nitrates in groundwater is mainly due to an excessive use of inorganic nitrogen fertiliser and manure. Contaminants in food are regulated by Regulation (EC) No 1881/2006 setting maximum levels for certain contaminants in foodstuffs. The Regulation provides an increased level of protection of consumers from listed pollutants (nitrate, lead, cadmium, mercury, PCBs and PAHs). Several recent scientific opinions and exposure reports demonstrated the need to further reduce dietary exposure to heavy metals such as cadmium and lead. Food is the major source of human exposure to lead and it accumulates in the body and most seriously affects the developing central nervous system in young children. EFSA has recommended reducing the dietary exposure to lead in food by lowering existing maximum levels and setting additional maximum levels for lead in relevant commodities. On cadmium, EFSA concluded that the current exposure to Cd at the population level should be reduced as well. (See Section 6.3.3 and Annex VI for more details). Except for the use of sewage sludge in agriculture, which is regulated by Directive 86/278/EEC, there are no standards for soil contaminants at EU level. Nevertheless, the Soil Thematic Strategy advocates for action at source to prevent diffuse soil contamination. There is evidence that contaminants inputs from anthropogenic sources (including fertilising products) affect the natural background concentration of such contaminants in arable soils. For example, the French Environment and Energy Management Agency (ADEME 2007) estimated that approximately 4,500 tons/year of copper and zinc are added to agricultural soils in France mainly due to animal manure spreading on farm fields. Chromium, nickel and lead have inputs ranking between 500 to 1,000 tons/year and approximately 150 tons of arsenic, 50 tons of cadmium and 12 tons of mercury are added each year to French soils from 7 different sources. Fertilising products (inorganic fertilisers, soil improvers, liming materials, animal manure) contribute to more than 50% of the inputs mentioned above and their intensive use leads to difficulties for Member States to correctly enforce the Directives on water protection and the Regulation on the maximum values for contaminants in foodstuffs. Plastic mulch films offer a wide range of advantages for farmers. For example, it reduces the amount of water, energy and chemicals used for crop production. However, 68% of the plastic mulch films used in EU agriculture (Annex I contains some information on the size of this market) are not recycled and end up in landfills, incinerators or are left on soils which lead to reduced crop yields . Finally, urea-based fertilisers are an important source of ammonia emissions, an important air pollutant, and the review of the Fertilisers Regulation should also include appropriate solutions to minimise such emissions. Urea-based fertilisers represent about 20% of total inorganic fertiliser use in the EU but due to higher volatility compared to other sources of nitrogen, they are responsible for about 50% of the ammonia emissions deriving from fertiliser use. Compared to the total ammonia emissions from agriculture overall, urea-based fertilisers represent approximately 10% of these emissions. In conclusion, the compliance with the very stringent limits for contaminants in water and food becomes more and more difficult because of the presence of contaminants in the environment brought by anthropogenic interventions such as farming activities. This confirms the need for an overall action to limit further contaminants inputs to arable soils through the use of fertilising products which remain important contributors to soil contamination. 3.4.2.Market access problems for new products The inorganic fertiliser industry is a mature industry. Novelty is limited compared to the chemicals industry, and even more so compared to the plant protection product industry. It is mainly concentrated on the development of agronomic fertiliser additives that modify the nutrient release pattern. The impact of the Fertilisers Regulation on innovation in inorganic fertiliser is nevertheless an important source of concern for industry.The key problem is the lengthy procedure for the listing of a new product type in Annex I to the Fertilisers Regulation. It takes on average 4-5 years to get a new type included in Annex I during which time the related products cannot be marketed as an EC Fertiliser. Most companies believe that this duration is not in pace with the innovation cycle in the inorganic fertiliser industry, which is of the order of 1-2 years. The main reasons for this unduly long approval period are the time required for the development of European Standards for test methods to ensure market surveillance for the new EC Fertiliser type and the lengthy discussion in the Fertilisers Working Group/Fertilisers Committee where decisions on the relevant technical files are taken. The provisions of the current Fertilisers Regulation are tailored for conventional fertilisers, typically inorganic or chemically produced, from well characterised primary raw materials. These provisions are not adapted to new fertilising products produced from organic or otherwise unknown materials, such as animal by-products or recycled waste. In particular the robust control mechanisms and safeguards necessary for creating trust in such products are missing, and the links with existing legislation on animal by-products and waste are not clear. This distortion of competition turns in favour of conventional inorganic fertilisers and hampers the investment in new fertilising products from domestic organic or secondary raw material, in particular in Member States with a small domestic fertiliser market compared to their organic matter surplus. Moreover market dynamics have evolved since the entry into force of the Fertilisers Regulation which covered only inorganic fertilisers. EU farmers are increasingly demanding more products allowing for new combinations of fertilising products not in the scope of the current Fertilisers Regulation and tailored to the needs of their crops. 3.5.Drivers of the problem –The market for fertilising products is evolving. More focus on the recovery of nutrients is already well recognised in some Member States but not yet at EU level. –The regulatory framework for the EU fertilising product market becomes increasingly complex. Member States have adopted national measures with different scopes, authorisation procedures, limits for contaminants, labelling requirements, and control measures that entail extra compliance costs for industry and for authorities themselves. Moreover, there is a general lack of confidence among the Member States in the mutual recognition of fertilising products because of diverging levels of stringency in national legislation. This complex regulatory framework is not conducive to innovation in the whole sector and emerging products are thus not available throughout the Union market (See Annex XI) in particular for domestic organic and secondary raw materials. –Member States and industry suffer from that complexity. There are growing expectations and demands from various industry segments for a better integrated EU regulatory framework with faster procedures to favour the emergence of more fertilising products sourced from domestic resources (See the summary of the SMEs consultation in Annex IV). –Member States do not have the necessary human resources to ensure sufficient market surveillance activities for products placed on their market in accordance with the MRR. For example, the Italian authorities reported during the ex-post evaluation that Mutual Recognition of national fertilisers harms the process of market surveillance as the Italian system is based on a system of registration of companies. –Expectations from farmers and society in general in terms of protection of the environment, human health and better use of natural resources (including lands) are also expanding. The absence of maximum limits for contaminants at EU level is perceived to be a clear limitation of the Fertilisers Regulation and an area where Member States would like to see specific harmonised provisions put in place. Limited awareness among farmers and a general lack of information about the potential release of ammonia from urea-based fertilisers contributes to negative health impacts through increased concentrations of secondary particulate matter and increased nitrogen deposition and acidification (See Annex VI and Annex VIII Section 3.3 for more details). 3.6.Who is affected, in what ways and to what extent?

In the current situation, the stakeholders listed below are affected by the identified weaknesses of the Fertilisers Regulation, the shortcomings of the application of the Mutual Recognition Regulation, and trade barriers caused by the diverging requirements of the Member States' national laws: European fertilising products manufacturers (in particular SMEs), importers, distributors, traders and retailers who, without a harmonised market for new products sourced from local raw materials have to comply with different rules throughout the Union and thereby continue to face extra compliance costs. This hampers the recycling of nutrients from bio-wastes, hence the development of the circular economy and makes the EU more vulnerable to imports from non-EU countries. Inorganic fertiliser producers have difficulties to market new products due to the lengthy procedures for inclusion of new fertiliser types in Annex I to the Fertilisers Regulation. Private and public recovery operators (such as operators of waste water treatment plants or of waste management plants producing compost or digestates) want to valorise their outputs and at the same time will face, due to the revised waste legislation under preparation in the framework of the Circular Economy Package, increasingly difficult disposal regulations and recycling targets (landfill ban of organic wastes by 2025 and 70% recycling of municipal solid waste by 2030). National competent authorities have difficulties enforcing their national limit values for contaminants due to their obligations to accept the free circulation of EC Fertilisers which do not specify any limit value for contaminants and the mutual recognition of fertilising products. This situation undermines the efforts made by some Member States to impose stringent rules to protect their environment and/or human health. Food safety authorities face difficulties in the implementation of safe maximum levels of contaminants in foodstuffs without unduly restricting the supply of food commodities that are beneficial and essential to human health (fruits, vegetables, cereal…). These limits are set taking into account the recommended daily intake but also considering the current load of contaminants in the environment. The general population has no access to a wide variety of new fertilising products sourced from domestic resources. Some parts of the population are affected by the presence of contaminants in fertilising products. According to EFSA, exposure of the general population to cadmium and lead needs to be reduced (See Section 3.3.1 and Annex VI Section 5 for more details). Such safety concerns are not equally addressed by the Member States. EU farmers, professional gardeners and the general public currently do not benefit from an internal market for fertilising products because of existing trade barriers between Member States, which limits competition. Access to a broad range of valuable domestic raw materials (e.g. compost) is currently hampered by their classification as waste or variations in the implementation of waste legislation in Member States. New agri-environmental climate measures are in place under the Rural Development Programs to promote the use of organic fertilisers with the aim to increase the organic matter content of arable soils. Phosphate producing companies in non-EU countries and the European inorganic fertiliser industry currently have no incentives to develop and implement technologies that are able to remove cadmium during the production of inorganic phosphate fertilisers. The underlying drivers of the problem and the direct and indirect consequences are summarised in Figure 2. Figure 2: Drivers, problems and consequence of the lack of internal market for fertilising products Fragmentation of the internal market and related administrative costs for industry and Member States Lack of trust in new products, in particular those deriving from waste DRIVERS Barriers to trade for fertilising products Potential danger for human health and the environment over the longer term Barriers to new and more sustainable products in line with the Circular Economy No limit for contaminants in the EC Fertilisers Regulation Diverging labelling and control requirements for national products hampering comparison of products Mutual recognition of new types of fertilising products does not work well PROBLEMS Difficult to enforce safety maximum levels for contaminants in food, water, air and soil Lack of market dynamism and European scale production for new types of fertilising products CONSEQUENCES More sensitivity of farmers and general public towards better environmental, sustainability and health protection Member States have difficulties to cope with the market dynamics of fertilising products Regulatory challenges for fertilising products become increasingly complex 3.7.Expected evolution of the problem If no action is taken, legal and administrative divergences between Member States will increase leading to a more fragmented internal market for fertilising products. Consequently, operators proposing alternatives to conventional inorganic fertilisers to support the circular economy would remain confined to their national markets which will not help to reduce the dependance of the Union on critical raw material such as phosphorus or on imports of important volumes of natural gas for the production of inorganic nitrogen fertilisers. The Bio Based Industries Joint Undertaking has identified phosphorus recycling for fertiliser production as an emerging and economically promising new value chain from organic waste. Easy access to the internal marketfor such fertiliser would be a pre-conditon for achieveing this goal and bringing results from research to the market. Member States will continue to take national legislative action to reduce the potential negative impacts of the presence of contaminants in fertilising products which will further increase the fragmentation of the market. As there would be less market opportunities to export organic fertilisers made of processed animal manure, Member States would continue to request derogations under the EU Nitrate Directive to allow farmers to apply raw manure in vulnerable zones leading to increase risk of eutrophication of water bodies. Municipalities would have increasing difficulties to valorize the outputs of waste treatment plants as market opportunities would remain limited in particular in densely populated areas. If the number of requests for mutual recognition increases with the increasing fragmentation of the market, national competent authorities wishing to enforce stringent limit values to avoid soil contamination, and thereby food and water contamination, will have increasing difficulties to review such requests in accordance with the requirements of the MRR. In the absence of limits for contaminants in EC Fertilisers, accumulation of contaminants (particularly heavy metals) in the soil will continue, contrary to the objectives of the Soil Thematic Strategy, and Member States wishing to enforce national limit values for EC Fertilisers would have to request derogations based on Article 114(5) TFEU. This would create administrative burdens for Member States – examples from the past have shown that gathering the necessary data requires significant resources for the requesting Members States as well as for the Commission in order to evaluate and decide on the requests. The objectives of a Commission communication on a new Clean Air Programme for Europe will be more difficult to achieve unless ammonia emission from urea-based fertilisers is specifically addressed in EU legislation. EU consumers would not be equally protected against exposure to heavy metals such as cadmium and lead through the food chain as some Member States may not wish to enforce limit values for contaminants in fertilising products. EU farmers, professionals and citizens would have limited access to efficient and innovative products at competitive prices because of extra compliance costs that fertilising products producers currently face due to the complex regulatory framework. 3.8.EU right to act 3.8.1.Legal basis

The legal basis for action is Article 114 of the Treaty on the Functioning of the European Union (TFEU), which is also the legal basis of the current regulation. The objective of Article 114 is to establish an internal market while ensuring a high level of protection of human health and the environment. 3.8.2.Subsidiarity and Proportionality From the point of view of the operators diverging national measures have led to an incoherent regulatory framework that does not provide a level playing field for all manufacturers and leads to increased compliance costs. These existing market barriers in the form of diverging national regulatory frameworks can only be removed though EU action. Pursuant to Article 31(2) of the Fertilisers Regulation, requests have been submitted to include fertilising products made of secondary raw materials in its Annex I. Such requests have been so far rejected on the grounds that the current Fertilisers Regulation does not provide the necessary regulatory procedures to ensure the safety of such products. Consequently, the competition between more sustainable fertilising products in line with the circular economy and inorganic fertiliser produced in line with a linear economy model is currently tilted in favour of the latter. The weaknesses of the current Fertilisers Regulation and the problems that they cause cannot be resolved by Member States alone, as a revision of the regulation requires EU action. As the amount of fertilising products applied on arable soils depends on the crop grown and soil and climatic conditions in each Member State, this impact assessment report will only concern the placing on the market of fertilising products, while it will continue to be left to Member States to regulate the use of such products (e.g. amounts that can be applied per hectare). In addition, a future framework would have to provide flexible tools to address emerging concerns from Member States relating to safety by providing an appropriate procedure for managing fertilising products presenting a risk. According to Article 114 (4) and (5) TFEU, Member States may maintain or introduce national limits for contaminants based on the evaluation of risks for the environment and human health under certain strict conditions and after authorisation by the Commission. As one of the general policy objective of the initiative aims at reaching a critical mass for fertilising products made of domestic secondary raw materials through the development of an internal market for such products, product harmonisation should not go beyond what is necessary for providing the regulatory certainty required to incentivise large scale investment in the circular economy while imposing a high level of protection of health and the environment. The proportionality of possible options will be discussed in more details in later sections of this report. 4.Objectives 4.1.General policy objective The general objective is to incentivise large scale fertilising products production in the EU from domestic organic or secondary raw materials by creating a regulatory framework granting such fertilisers access to the internal market and to address the well-recognised issue of soil contamination by contaminants present in fertilisers. 4.2.Specific policy objectives In order to achieve the general objectives and address the identified problems, the following specific objectives have been identified: –To ensure an improved functioning internal market and a level playing field for manufacturers and importers of fertilising products in particular for those made of domestic and secondary raw materials in line with the Circular Economy model; –To reduce the administrative burden resulting from diverging national rules and incomplete application of the mutual recognition of fertilising products; –To improve the safety of fertilising products as regards the protection of the environment and human health (in particular soil, water, air and food quality); –To ensure coherence with other existing EU legislation to support investments into new economic opportunities for public and private operators. 4.3.Operational objectives –To remove trade barriers for the intra-EU trade of fertilising products;

–To limit pollutants levels in fertilising products; –To reduce administrative burdens for economic operators, Member States authorities and the Commission, improve the overall cost efficiency and simplify the regulatory framework; –To facilitate innovation and allow a quicker access to the market for more sustainable products, in particular for organic products issued from the recycling of nutrients from biomass, in accordance with the objectives of a European Circular economy. –To streamline the information obligations requirements as regards quality parameters for all product categories in order to allow farmers and consumers to easily compare products and address the information gaps for users concerning urea-based fertilisers as regards their impact on the environment. 4.4.Consistency with other policies and objectives Consistency with other EU policies and stated priorities has been sought in the development of the policy options. Policies particularly considered include: –'Europe 2020', notably in relation to its smart, sustainable and inclusive growth priorities and associated flagship initiative on 'Resource Efficient Europe'. An internal market for organic fertilising products would help to support a partial substitution of inorganic fertilisers for which the EU is highly dependent on imports thereby contributing to the circular economy. The main ideas on how to do more with less are being taken further in the EU's Environment Action Programme to 2020. –"Closing the loop – An EU action plan for the circular economy" recently adopted by the Commission has identified the Fertilisers Regulation revision as a key legislative proposal to boost the market for secondary raw materials. The Commission Communication calls for new measures to facilitate the EU wide recognition of organic and waste-based fertilisers, thus stimulating the development of an EU-wide market. –The EU raw material strategy includes phosphorus in the critical raw materials list. Since its publication in 2010 the list of critical raw materials has proven to be an important tool for the Commission to raise awareness, determine priority actions and open up funding opportunities under the Horizon 2020 (e.g. the research activities launched under the Societal challenges 2 - "food security, sustainable agriculture and forestry, marine and maritime and inland water research and the bio-economy" and 5 – "climate action, environment, resource efficiency and raw materials) which aim at providing technological solutions for recycling more efficiently and safely bio-wastes and encouraging researchers to deliver innovative products in compliance with the market and societal needs. –The Small Business Act as the proposal accompanied by the impact assessment report addresses issues (e.g. barriers to trade, compliance costs and innovation) faced by numerous SMEs that are involved in the manufacture of fertilising products. –EU policies related to the protection of the environment, in particular soil (as defined in the Soil Thematic Strategy), water (as set out in the Water Framework Directive and in particular the Nitrate Directive), air (the new Clean Air Policy Package tabled in December 2013) and to the protection of human health, in particular with regard to contaminants in foodstuff. This initiative is undertaken with the objectives of the Commission's Communication on Smart Regulation in the European Union in mind. The problems to be addressed by the initiative are based on the ex-post evaluation of the existing legislative framework for fertilisers. 5.Policy options Based on the weaknesses identified during the evaluation of the current Fertilisers Regulation, the Commission developed eight possible policy options which could address the identified problems. 5.1.Possible options which have been discarded at an early stage 5.1.1.Improvement of the Mutual Recognition without harmonisation The Commission concludes from the explanation given in Section 3.2 and further detailed in Section 2 of Annex II that the internal market for non-EC Fertilisers has not substantially progressed since the existence of the MRR despite a comprehensive body of case law and guidance and that further progress cannot be expected. Increased enforcement activities of the MRR by Member States are also not a promising alternative in view of the distrust of most EU companies for the mutual recognition of fertilisers. The ex-post evaluation showed that neither economic operators nor national authorities were of the opinion that mutual recognition could be an effective tool for ensuring free movement of fertilisers, a product category for which legitimate product quality, environmental, and public safety concerns warrant stringent rules. Moreover, the problems stemming from the Fertilisers Regulation itself would not be addressed by this option. This option has therefore been discarded. 5.1.2.Voluntary agreement by industry

On top of the existing Fertilisers Regulation and other applicable EU legislation, fertilising products manufacturers and importers would need to agree to voluntarily establish quality procedures and standards for all the categories of fertilising products to ensure a certain level of harmonisation of the market. This would include safety and quality elements (limits on contaminants and agronomic efficacy criteria), good manufacturing practices based on best available techniques, self-control activities, and certification schemes. Although self-regulation by industry to improve the quality and safety standards of its products generally leads to a market with fewer barriers to trade, it is unlikely that the Member States would repeal their existing national legislation. Also, while such voluntary commitments have already been adopted in some Member States and for specific product types (for instance, the “Quality Assurance Scheme for Compost” adopted by the members of the European Compost Network – ECN), a meaningful EU-wide commitment would be difficult to achieve as partners would not necessarily have the same economic interests. As a result, several private commitments could be generated and create a multitude of monitoring systems and enforcement problems. Representation of SMEs in the preparation of such voluntary scheme could also be an issue. Finally, this option is clearly rejected by all stakeholders as this would not bring the same level of legal certainty compared to regulatory harmonisation, especially in the long run. 5.1.3.Withdrawal of the EU legislation on fertilisers and reliance on other relevant existing EU legislations to ensure the safety of fertilising products The Fertilisers Regulation would be repealed and only the requirements of other existing EU legislation (i.e. REACH, CLP, Animal By-Products Regulation…) would apply to ensure the safety of the products placed on the market. There would be no harmonised limit values for heavy metals or organic pollutants at EU level. Member States would, in line with the provisions of the Treaty, be free to maintain or introduce national legislation. Manufacturers would have to comply with national provisions or apply the provisions of the Mutual Recognition Regulation to market their products. This would increase the fragmentation of the internal market for fertilising products and uncertainty for producers and market surveillance authorities. The costs of managing national legislation would increase as Member States would have to convert existing EC Fertilisers into ‘national’ fertilisers which would further increase the compliance costs for operators. REACH and CLP do not properly cover the issues at stake concerning the presence of contaminants in fertilising products and their scope is currently not adapted for the categories of fertilising products outside inorganic fertilisers and liming materials deriving from industrial by-products. The Animal By-Products Regulation is addressing hygienic safety issues relating to the use of such materials in the composition of organic fertilisers or soil improvers but not environmental issues such as the presence of heavy metals except for each consignment of raw manure which is subject to prior acceptance by the Member State of destination. This option is not considered as a viable option by Member States and industry as they favour a dedicated instrument to ensure a level playing field for economic operators and the safety of fertilising products placed on the market. 5.2.Description of the examined options For each option (except option 1), two possible variants would be examined for implementation: 1)Full harmonisation: if this variant were to be applied to the options 2 to 5 described below, the scope of harmonisation would be extended to all fertilising products (including the EC fertilisers) placed on the market in the EU. All existing national legislation would have to be repealed. 2)Optional harmonisation: under that variant, which could be applied to either of the options 2 to 5, the scope of harmonisation would be extended to all fertilising products (including EC fertilisers) on an optional basis. Operators interested to get products CE-marked for easy access to the EU-wide internal market would have the option of ensuring that their products comply with the harmonised requirements. However, non-harmonised products could still remain on the national markets, subject to any applicable national requirements and mutual recognition. This variant would also be more flexible in defining the scope and the level of the legal requirements of a future regulation depending on the level of political ambition of the circular economy. 5.2.1.Option 1: the current EU legislation governing the placing on the market of fertilisers remains unchanged (baseline scenario) In this baseline option, the existing EU legislation framework would be maintained. The Fertilisers Regulation would continue to apply to inorganic fertilisers. There would be no specific EU legislation for other fertilising products – instead national fertiliser laws and mutual recognition would continue to apply albeit with a number of problems as identified above. As regards safety, no maximum limits for heavy metals in inorganic fertilisers would be adopted at EU level. Member States having established limit values for heavy metals for national or EC Fertilisers (where authorised – see 3.7.2) will maintain them, whilst others might introduce them in the future. 5.2.2.Option 2: creation of an internal market for fertilising products in the format of the current Regulation, i.e. listing individual product types The option (as the options 3 to 5) would imply the extension of the current scope to organic fertilisers, organo-mineral fertilisers, soil improvers, growing media and plant biostimulants as defined in the introduction. All technical details such as minimum nutrient content and quality criteria, description of manufacturing procedures, specific labelling obligations would be fully described in fertilising product types. Maximum limit values for contaminants for each product category would be defined. Specific quality criteria would apply to each product category. Labelling requirements would apply to each product category in accordance with its specific characteristics. In order to list a new fertilising product type, producer would have to follow a procedure including the submission of an application dossier containing safety and agronomic data and an evaluation of such data involving all Member States (Variant 2A) or an EU Agency i.e. ECHA –Variant 2B or EFSA – Variant 2C before a decision for inclusion by the Member States and the Commission would be taken (See Annex III for details). As regards the safety criteria limit values for contaminants will be proposed. The values are selected on the basis of an extensive stakeholder consultation after peer-review of available studies (soil contamination and human health studies) with the aim to limit as far as possible further accumulation of contaminants in EU soils from the use of fertilising products. More detailed justification for the proposed limit values can be found in Annex VI. Information on how these limits relates to the current values in national legislation can be found in Annex XI. European standards relating to test methods (nutrient content, organic matter content, quantity, density…) would be developed and referenced in an annex to the legislation to facilitate the control of all products. The verification of the compliance of the products to the requirements of a future regulation would continue to be carried out by manufacturers during production and by market surveillance authorities during controls. Apart from informing users about the characteristics of the product, labelling provisions will also have the objective of increasing awareness about environmental aspects, such as cadmium levels (particularly relevant for phosphate fertilisers – See IAR on cadmium for further details).

In case of full harmonisation, sufficiently long transitional provisions (e.g. 10 - 15 years – See examples from the Biocidal product regulation) would be required to allow fertiliser producers and importers to register their established products in the EU authorised list of fertilising product types. 5.2.3.Option 3: creation of an internal market for fertilising products by listing authorised ingredients Permitted ingredients allowed in the manufacture of fertilising products would be listed in the annexes of a new regulation repealing the current Fertilisers Regulation. A detailed description of fertilising product types would no longer be needed and the central rule to place a product on the market would be that it results from combination of authorised ingredients only. Maximum limit values for contaminants (the same as under option 2) for each product category would be defined in a future proposal. Minimum quality criteria would apply to each product category. Labelling requirements would apply to each product category in accordance with its specific characteristics. To be listed in an annex, new ingredients would have to follow the same procedure as described under option 2 i.e. submission by the producer of the ingredient of an application dossier containing safety and agronomic data and evaluation of such data involving all Member States (Variant 3A) or an EU Agency i.e. ECHA – Varian 3B or EFSA – Variant 3C. European Standards relating to test methods and labelling requirements would apply to final products. A shorter transitional period could be envisaged as the number of ingredients for fertilising product production would be less than the number of product types. 5.2.4.Option 4: creation of an internal market for fertilising products using the ‘New Legislative Framework - NLF This framework aimed to be less prescriptive and restrict the content of legislation to ‘essential requirements’ leaving technical details to European Harmonised Standards. The objective of the NLF is to facilitate the functioning of the internal market for goods and to strengthen and modernise the conditions for placing a wide range of products on the EU market. It builds upon existing systems to introduce clear EU policies which will strengthen the application, monitoring and enforcement of single market legislation. The NLF objectives are to ensure that products available in Europe meet a high level of protection to public interests like health and safety, consumer protection or environmental protection and to ensure the free movement of products. Legal requirements with regard to safety (including the same limit values for contaminants that would be proposed under options 2 and 3), product quality and other specific rules appropriate for the placing on the market of safe and efficient fertilising products would be specified for each product category. There would be no listing of ingredients or types and hence no need for frequent adaptations to technical progress. Maximum limit values for contaminants (the same as under option 2) for each product category would be defined in a future proposal. Minimum quality criteria would apply to each product category. Labelling requirements would apply to each product category in accordance with its specific characteristics. Harmonised EN Standards would be developed and published in the Official Journal to allow demonstrating conformity of the products to the legal requirements of the legislation. Producers would have to declare conformity with the legal requirements, or, alternatively, notified bodies designated by Member States would have to confirm compliance with the legal requirements. This would range from self-certification (Variant 4A) to various levels of third party certification (Variant 4B: verification of the compliance of products to the legal requirements by notified bodies - Variant 4C: verification of the compliance of products to the legal requirements by notified bodies plus regular tests on specific aspects –Variant 4D: verification of the compliance of products to the legal requirements by notified bodies plus random testing on specific aspects). More detail on the content of the various variants of option 4 is available in section 3.4 of Annex III. Shorter transitional provisions (e.g. 3 years) could be envisaged provided that the necessary harmonised standards are available in particular under variant 4A. Under the other variants of option 4, a reasonable delay (e.g. 3+1 years) could be foreseen to allow Member States to notify the bodies that will be tasked to certify the compliance of products. 5.2.5.Option 5: creation of an internal market for fertilising products and additives by adopting different variants of option 4 for different types of fertilising products As under option 4, harmonisation of the EU market for fertilising products is achieved through the 'New Legislative Framework'. However, third party involvement in the assessment of conformity with the legal requirements varies between product categories, and is highest for fertilising products sourced from waste and other secondary materials with potentially variable composition. The regulatory regime for the different categories of fertilising products would look as follows: Inorganic fertilisers as well as liming materials would be mostly regulated by variant 4A (self-certification) as these products have constant composition and are deriving from well-known chemical processes. A limited number of inorganic fertilisers and liming materials (those derived from industrial by-products) would be regulated under Variant 4B (third party certification regarding the composition of the final product and its fulfilment of legal requirements) as they could contain some contaminants such as heavy metals. Ammonium nitrate fertilisers would need to be more strictly regulated under Variant 4C (third party certification regarding the composition of the final product and its fulfilment of legal requirements plus detonation tests) for security reasons. However it has to be noted that these stringent requirements for ammonium nitrate are already described in the current Fertilisers Regulation and would be also covered by the other options envisaged in this impact assessment. A future regulation would ensure that such products are periodically and evenly controlled by authorised laboratories across Europe. The coexistence of three different certification procedures for inorganic fertiliser is feasible as the different product types are easily identifiable by market surveillance authorities. Growing media would also be regulated under variant 4A (self-certification) as the stakeholders consulted in 2012 agreed that most of the ingredients used in growing media present limited risks to the environment or human health that could be easily addressed with generic safety criteria. The organic matter used in the production of organo-mineral fertilisers will have to be of high quality to ensure the effectiveness of the end-product. As only source segregated materials could be used to achieve this high quality target, it is proposed to regulate those products under variant 4B. Many organic fertilisers and organic soil improvers derive from bio-wastes. As opposed to mined fertilisers, the nature of potential contaminants in fertilisers from waste cannot be easily predicted, which creates problems of market acceptance. For fertilising products sourced from waste, it is therefore necessary to lay down essential legal requirements not only for the composition (including contaminants) of the end-product, but also – as a means of excluding potential contaminants – for the origin and treatment of the input-materials. For the purpose of establishing the necessary trust and confidence in waste-based fertilising products, it is therefore also necessary to establish harmonised rules for processing and traceability, and to include third-party-certification in the conformity assessment procedure. Although the Commission can take inspiration of the JRC report on biodegradable waste subject to biodegradation of January 2014 to establish such criteria for compost and digestate, similar EU criteria should be developed in the future for other fertilising products deriving from waste. In order to address their wide variety in composition and use patterns, plant biostimulants – unless they are currently exempted - such as microorganisms and certain plant extracts – and agronomic fertiliser additives would be subject to REACH registration. Microbial plant biostimulant will have to be recognised as safe and be listed in a table annexed to the proposal to be modified by a Commission delegated acts taking into account available scientific assessment such as the Qualified Presumption of Safety developed for clearing the safety of biological agents which are intentionally added at different stages into the food or the feed chain. No functionality or biostimulant effect may be claimed on the label without having been proven by the producers. Application of a plant biostimulant on a crop may not lead to residue exceeding the limit of quantification, in order to limit the risk of contamination of the food chain. If the actual level found on a given crop would be higher than this limit of quantification, maximum residue level shall be set at a level ensuring the appropriate protection of human health resulting from the consumption of the treated crops.

Table 47 in Annex III summarizes the type of regulatory option that is proposed for each category of products. Maximum limit values for contaminants (the same as under option 2) for each product category would be defined in a future proposal. Minimum quality criteria would apply to each product category. Labelling requirements would apply to each product category in accordance with their specific characteristics. Under a full harmonisation scenario, all national rules on fertilisers would need to be repealed and there would be no more need for recourse to mutual recognition as the new Regulation would apply to all kinds of fertilising products currently governed by national rules. The safety criteria relating to fertilising products would be more easily adaptable to new scientific evidence or any modification to the list of priority substances in relevant environmental legislation. A transitional period of maximum 3 years is envisaged. Products considered as safe will get a quick access to the market as they will follow the self-certification procedure. More risky products (i.e. products deriving from animal by-products or waste) will have to wait the designation of notified bodies by the competent authority. More information on the content of the options is available in Annex VII. 6.Analysis of impacts 6.1.Descriptions of impacts and their corresponding assessment criteria Based on the main drivers and causal links identified in Section 3.4 and the EU over-arching policies on promoting the safety of products and the sustainable development of SMEs, the impacts of the possible options have been analysed. The merits of each option have been assessed with the help of assessment criteria. Annex VIII explains the methodology to set up these criteria and where relevant how they are linked to the policy objectives of this initiative. Economic impacts Criterion 1: do the policy options achieve a better level playing field for products? (Qualitative) Criterion 2: do the policy options lead to administrative simplification? (Qualitative) Criterion 3: do the policy options minimise administrative and compliance costs? (Quantitative) Criterion 4: do the policy options support innovation by facilitating access to the market and by minimising the time to market new products? Could the option lead to significant trade impacts? Is the option compatible with WTO obligations? (Qualitative) Social impacts Criterion 5: can the options effectively contribute to the reduction of contaminant inputs to agricultural soil at EU level and hence decrease contaminant exposure of human beings via the food chain and drinking water? (Qualitative) Criterion 6: can the options lead to the creation of jobs and economic growth? (Qualitative) Environmental impacts Criterion 7: can the various options foster significantly the recycling of nutrients and contribute to the circular economy? (Qualitative) Criterion 8: can the options effectively contribute to the reduction of contaminant inputs to agricultural soil at EU level and hence improve soil function? (Qualitative) Criterion 9: will the options ensure that farmers are correctly informed about the potential release of ammonia from different inorganic fertilisers in order to choose the optimal type of fertiliser and/or implement remediation measures? (Qualitative)

6.2.Option 1: no action For the baseline scenario, the problems identified in Section 3 would persist and the objectives of this initiative would not be achieved. An internal market would only exist for part of the inorganic fertiliser market, which would not favour the emergence of alternatives to inorganic fertilisers deriving from waste. There would be no improvement in the safety of EC Fertilisers, and therefore no expected benefits for the environment and human health. Farmers would not be informed about the possible release of ammonia from urea-based fertilisers. Producers of non-harmonised products would continue to suffer from the absence of a level playing field with the related compliance costs. Total annual costs for all stakeholders together are estimated at EUR 43-44 million. Of this amount, EUR 26 million are representing annual compliance costs for businesses (mainly stemming from the inclusion of new products in Member States positive lists) and more than EUR 17 million are linked to annual costs for EU and national authorities (mainly for managing the current regulatory system) (see comparison table in chapter 7 for an overview and explanations in Annex III for more details). The problems linked to the mutual recognition would continue, and increase over time as new types of products enter national markets. The fragmentation of the internal market, and the complexity of the regulatory environment, would not be conducive to innovation. Stakeholders’ opinion The current situation is clearly no longer supported by Member States and industry except for two national inorganic fertiliser associations which fear a loss in market share if more domestic secondary raw materials are allowed in the production of CE-marked fertilising products. Producers of soil improvers, plant biostimulants, organic and organo-mineral fertilisers are requesting urgent harmonisation of the rules at EU level (see also results of SME test in Annex IV). 6.3.Option 2: creation of an internal market for fertilising products by listing individual product types 6.3.1.Economic impacts 6.3.1.1.Impact on the functioning of the EU fertiliser market and simplification potential Criterion 1: contribution to the creation of a level playing field for products. In case of full harmonisation, Option 2 would clearly improve the functioning of the internal market for all fertilising products not yet harmonised but only after a long transitional period due to the huge number of product types that would need to be listed in the Annex(es) of a future Regulation. There would be a transition cost for the products currently put on the market as national fertiliser that would need to be registered at EU level. In the longer term, there would be no national rules on fertilisers anymore and the uncertainty concerning the procedures of mutual recognition would disappear. This would significantly reduce compliance costs for companies (See criterion 3 (e)). If optional harmonisation is envisaged, option 2 would improve the functioning of the internal market for a broad range of fertilising products while allowing other products to remain on national markets. The uncertainty concerning the procedures of mutual recognition would not disappear as national rules would remain. However, compared to the current situation, the number of requests for mutual recognition would be expected to seriously decrease as harmonised legislation would be available to market products across the EU. Criterion 2: does the policy option lead to administrative simplification? The full harmonisation under Option 2 for a wide range of product categories would require constant efforts to adapt the annexes of a regulation to technical progress, which would put significant demand on resources in the Member States, the Commission (possibly also ECHA or EFSA) and industry itself. The current regulation contains around 100 product types. This could be easily tripled if the new regulation is extended to organic based fertilising products. The lengthy adoption process of a new product type is due to the detailed nature of technical dossier required to demonstrate that the product type is safe and effective. This, combined with the decision making process including a qualified majority voting in the Regulatory Committee on fertilisers, rendered in many cases the current Annexes of the EU legislation difficult to implement. Option 2 would generalise those difficulties to all fertilising products including those which are currently present on national markets. This will create severe market disruption for these national fertilisers if no sufficiently long transition period is foreseen. This would also lead to administrative complication with regard to the mutual recognition of products in particular during this necessary long transition period where a co-existence of a European list of types with national products is unavoidable. Optional harmonisation would reduce the number of requests to include new fertiliser types in the Annex(es) of a future Regulation. Small companies would still be allowed to market products for local needs without trade disruption. Optional harmonisation could therefore be considered as better achieving the objective of administrative simplification for industry in the short term. However, it would fail to achieve this objective for national public administration which will have to maintain national provisions in place. 6.3.1.2.Administrative costs Compared to the baseline, many more type designations for fertilising products (see Annex III) would have to be listed in several annexes to a regulation, in particular for the categories of products falling outside the scope of the current Fertilisers Regulation. Several variants of this option have been analysed with different roles allocated to the public ‘bodies’ (e.g. public administration and EU agencies – ECHA or EFSA) involved in the risk assessment of newly harmonised fertilising products. Variant 2A: only Member States and the Commission would review applications for listing types in the Annexes of a new regulation. Variant 2B: the peer-review process for applications would be managed by the European Chemicals Agency (ECHA). An opinion would have to be delivered for each entry proposed.

Variant 2C: the peer-review process for applications would be managed by the European Food Safety Agency (EFSA). As for variant 2B, an opinion for each en