Commission staff working document accompanying the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Sustainable Consumption and Production and Sustainable Industrial Policy Action Plan - Summary of the impact assessment {COM(2008) 397 final} {SEC(2008) 2110}
Date: 2008-06-25
Institutions: European Commission
Subjects: consumption, energy policy, environmental protection, environmental standard, impact study, industrial policy, sustainable development

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.7.2008 
SEC(2008) 2111 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the  

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

on the Sustainable Consumption and Production and Sustainable Industrial Policy 
Action Plan 

SUMMARY OF THE IMPACT ASSESSMENT 

{COM(2008) 397 final} 
{SEC(2008) 2110} 

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This  impact  assessment  report  accompanies  the  Proposal  for  a  Communication  on  a 
Sustainable Consumption and Production and Sustainable Industrial Policy Action Plan. This 
Action  Plan  is  the  overarching  element  of  a  package  of  measures  that  will  also  include 
concrete legislative proposals. This impact assessment focuses on a proposal for an extended 
Integrated  Package,  which  could  improve  the  environmental  performance  of  the  European 
Union  through  the  promotion  of  production  and  consumption  of  environmentally  better 
performing products. 

The IA identifies several market failures that EU policy currently already addresses or where 
there could be a need for some form of public intervention: 

•  Environmental  externalities  resulting  from  prices  not  reflecting  the  negative 

environmental impacts of the production or consumption of products, 

•  Information  asymmetries  due  to  high  transaction  costs  for  consumers  to  obtain 
relevant  information  on  product  characteristics  that  influence  environmental 
performance, 

•  Bounded  rationality  meaning  that  even  well  informed  consumers  do  not  always 
act  rationally  in  the  sense  of  taking  a  long  term  view  when  making  purchasing 
decision, 

•  Principal  agent  problems  as  a  result  of  a  misalignment  of  incentives  between 

economic actors , 

•  And negative effects of these market failures on innovation. 

In  addition  there  are  what  can  be  described  as  regulatory  failures  as,  for  example,  some 
Member  States'  actions  in  the  area  of  procurement  or  incentives  can  fragment  the  internal 
market for products. 

Although  there  are  already  policies  in  place  on  greenhouse  gas  emissions,  air  and  water 
quality,  waste,  product  policy,  energy  efficiency,  etc.  that  address  these  market  failures, 
several problems remain. The analysis shows that some environmental externalities could be 
avoided  without  incurring  additional  costs.  More  important  however  is  evidence  that 
information asymmetries are not being addressed sufficiently by existing tools and that even 
when  they  are,  there  is  evidence  that  without  updating  the  information  provided  by  labels 
(such as the energy efficiency label) they lose their informational value, and thus usefulness, 
over  time.  Moreover,  there  is  evidence  to  suggest  that  even  if  consumers  have  all  the 
necessary information to make purchasing decision based on what is in their best private and 
social interest, they fail to do so because of short-sighted behaviour. Principal agent problems 
persist in the area of housing and existing policies related to energy performance of buildings 
cannot reduce them substantially in the near future. Due to the existence of remaining market 
failures, incentives to innovate are less than socially optimal.  

Furthermore,  a  multitude  of  diverging  national  criteria  exists  with  respect  to  Green  Public 
Procurement  rules  and  incentives.  This  leads  to  fragmentation  of  the  internal  market  that 
should be avoided. Finally, the policies in place are not sufficiently aligned and linked with 
each  other  to  realise  synergies  but  send  conflicting  signals  and  have  gaps  that  lead  to  a 
fragmented regulatory framework rather than a consistent one. 

The general objective of the action plan is to render the EU’s product policy more effective, 
thus contributing to the goals of the Lisbon Strategy and those of the Reviewed Sustainable 
Development Strategy.  

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to  raise  dynamically 

More  specifically: 
the  market  share  of  products  with  more 
environmentally  performing  features;  to  provide  consumers  with  relevant  information  on 
product  performance;  to  help  overcome  problems  caused  by  a  misalignment  of  incentives 
without  prejudice  to  the  rules  of  the  Treaty,  in  particular  State  aid  rules,  and  to  reduce  the 
potential  for  suboptimal  outcomes  as  a  result  of  myopic  consumer  behaviour;  to  avoid 
fragmentation  of  incentives  and  stimuli;  to  remove  barriers  to  trade  to  ensure  that 
Environmental  Industries  can  benefit  from  the  advantages  of  the  Internal  Market;  and  to 
maximize the environmental contribution of the EU's standards internationally whilst ensuring 
that the possible short run incidence on the competitive position of EU industry is addressed, 
where necessary. 

Three  options  were  considered  to  address  these  objectives:  no  further  action  or  the  baseline 
scenario (no change of existing policies) and two alternative packages of measures.  

The  no  further  action  option  would  imply  that  the  identified  market  and  regulatory  failures 
would not be addressed.  

The  first  alternative  package  is  mostly  focused  on  enhancing  the  role  of  the  voluntary  eco-
label scheme and linking it with other policies. This option would promote a combination of 
instruments that would reinforce voluntary actions (Eco-label, Open Method of Coordination 
for the use of incentives, without prejudice to the rules of the Treaty, in particular State aid 
rules),  promote  Environmental  Management  and  Audit  Scheme,  Green  Public  Procurement 
and  identify  internal  market  barriers  for  eco-industries  (competitiveness  screening).  The 
different market and regulatory failures would essentially be addressed through the provision 
of  information  and  the  development  of  voluntary  incentives.  The  co-ordination  of  existing 
policies would be done within the existing framework.  

The  second  alternative  package  consists  of  a  set  of  measures  that  are  centred  around  an 
extended Integrated Package. This option would integrate a set of instruments to extend the 
scope  of  mandatory  actions  (Eco-design  Directive  for  Energy  Using  products,  Energy 
Efficiency Labelling Directive, including mandatory level of product performance for public 
procurement)  and  link  them  with  voluntary  actions  (Eco-label,  Green  Public  Procurement, 
Environmental  Management  and  Audit  Scheme).  The  use  of  incentives  by  Member  States 
would be further harmonised without prejudice to the rules of the Treaty, in particular State 
aid rules, and internal market barriers for eco-industries would be identified (competitiveness 
screening). The difference to option 2 is that this option places greater emphasis on mandatory 
requirements.  

The  analysis  of  the  impacts  of  each  option  presents  a  qualitative  assessment  of  the  positive 
and  negative  impacts.  It  gives  an  indication  on  the  extent  to  which  each  of  the  options  can 
resolve the remaining market and regulatory failures established in the problem definition as 
well as indications of potential drawbacks or costs. A quantitative estimation of the effects on 
product prices, resource use, life-cycle costs and CO2 emissions are provided for a number of 
product  categories  for  which  data  is  available.  The  analysis  is  indicative  only  since  a 
comprehensive quantitative assessment would require large amounts of detailed data, which is 
not  currently  available,  and  complex  modelling  that  would  go  beyond  the  scope  of 
proportionality for this impact assessment.  

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Given  that  the  Action  Plan  does  not  represent  a  concrete  legislative  proposal  and  that  the 
detailed  impacts  of  any  measures  that  may  subsequently  be  adopted  will  be  analysed  in 
separate impact assessments, the level of analysis is deemed proportionate. Individual impact 
assessments  will  be  carried  for  each  of  the  envisaged  measures  and  more  detailed  analysis 
will be provided for these. 

The  conclusion  for  this  impact  assessment  is  that  the  second  package  of  measures  is 
preferable, which rests on an extended Integrated Package based on the Ecodesign Directive 
and  a  more  harmonised  use  of  criteria  for  Public  Procurement  and  incentives  across  the 
European  Union.  This  option  would  enable  substantial  improvements  in  resource  efficiency 
and reduce environmental externalities. 

The  action  plan  will  be  regularly  monitored  in  order  to  adapt  the  actions  and  optimise  the 
impacts in a cost-effective manner.  

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