The polluter pays principle : inconsistent application across EU environmental policies and actions. Special report No 12, 2021.
Date: 2021-09-06
Institutions: European Court of Auditors
Subjects: EU environmental policy, cost of pollution, decontamination, environmental liability, performance audit, polluter pays principle, pollution, report, waste management

EN 

2021 

1 

12 

Special Report  The Polluter Pays Principle: 

Inconsistent application across EU environmental 
policies and actions 

 
 
Contents 

Executive summary 

Introduction 

The origins of the Polluter Pays Principle 

The PPP in the EU 

Policy framework 

EU funding 

Audit scope and approach 

Observations 

The PPP underlies EU environmental legislation 

The PPP applies to the most polluting installations but the cost of residual 
pollution to society remains high 

Waste legislation reflects the PPP, but does not ensure polluters cover the 
full cost of pollution 

Polluters do not bear the full costs of water pollution 

No overall EU legislative framework to protect against soil pollution 

The Commission’s action plan to improve the operation of the 
ELD did not achieve the expected results 

Following the evaluation of the ELD, the Commission adopted an action plan 
to address the gaps identified 

Key ELD concepts remain undefined 

Some Member States require industrial companies to insure against 
environmental risks 

The EU has financed environmental remediation projects 

EU funds have been used to clean orphan pollution 

EU funds were also used when national authorities failed to enforce 
environmental legislation and make the polluters pay 

Lack of financial security to cover environmental liability increases the risk 
that costs are borne by taxpayers 

2 

Paragraph 

I-V 

01-14 

03-05 

06-14 

06-09 

10-14 

15-18 

19-68 

19-41 

20-25 

26-31 

32-38 

39-41 

42-62 

43-48 

49-55 

56-62 

63-68 

65-66 

67 

68 

 
Conclusions and recommendations 

Annex 

Annex I – Sectors covered by the Industrial Emissions Directive 

3 

69-74 

Acronyms and abbreviations 

Glossary 

Replies of the Commission 

Audit team 

Timeline 

 
 
 
4 

Executive summary 

I The Polluter Pays Principle is one of the key principles underlying the European 
Union’s (EU) environmental policy. Application of the principle means that polluters 
bear the costs of their pollution including the cost of measures taken to prevent, 
control and remedy pollution and the costs it imposes on society. By applying the 
principle, polluters are incentivised to avoid environmental damage and are held 
responsible for the pollution that they cause. It is also the polluter, and not the 
taxpayer, who covers the cost of remediation. 

II This report focuses on whether the principle was well applied in four EU 
environmental policy areas: industrial pollution, waste, water, and soil. We assessed 
whether the Commission’s actions related to the Environmental Liability Directive for 
regulating environmental damage from economic activity brought results. Finally, we 
assessed whether the Commission and Member States protected the EU budget from 
being used to bear expenses that polluters should have paid. Over the 2014-2020 
period, the planned EU budget on cohesion policy and the LIFE Programme amounts to 
about €29 billion on projects aimed specifically at protecting the environment. We 
examined EU spending and action over the 2014-2020 Multiannual Financial 
Framework. 

III We decided to audit this subject because: 

o 

o 

o 

o 

Pollution represents a significant cost for society and is a key concern for EU 
citizens; 

The Polluter Pays Principle is a key tool for delivering Europe’s environmental 
objectives in an efficient and fair manner; 

This report identifies opportunities for improved integration of the principle into 
future environmental legislation and in EU funding of environmental remediation 
projects; and 

Its conclusions and recommendations are also relevant to the Parliament and 
Council scrutiny of all environmental legislation and the Commission’s evaluation 
of the Environmental Liability Directive, to be finalised in 2023. 

 
5 

IV Overall, we found that the Polluter Pays Principle is reflected and applied to 
varying degrees in the different EU environmental policies and its coverage and 
application was incomplete. With regards to environmental liability, the Commission’s 
actions to support Member States’ implementation of the Environmental Liability 
Directive had not solved key weaknesses, such as unclear key concepts and definitions 
and the absence of financial security in cases of insolvency. The EU budget is 
sometimes used to fund clean-up actions, that should under the Polluter Pays Principle 
have been borne by polluters. 

V We recommend the Commission to: 

o 

o 

o 

assess the scope for strengthening the integration of the Polluter Pays Principle 
into environmental legislation; 

consider reinforcing the application of the Environmental Liability Directive ; and 

protect EU funds from being used to finance projects that should be funded by 
the polluter. 

 
 
 
6 

Introduction 

01 The European Union’s (EU) environmental policy aims to ensure that all EU 
citizens live in a healthy environment where natural resources are managed 
sustainably, and biodiversity is protected1. In recent decades, emissions of pollutants 
into the air, water and soil have fallen significantly2, yet pollution and environmental 
damage remain a significant challenge. 

02 Across the EU, 26 % of groundwater bodies are yet to achieve “good chemical 
status”, and around 60 % of surface waters (rivers, lakes, and transitional and coastal 
waters) are not in good chemical and ecological status3. There are some 2.8 million 
sites in the EU that are potentially contaminated, primarily by industrial activity and 
waste disposal4. Air pollution, the greatest environmental health risk in the EU, also 
damages vegetation and ecosystems5. 

The origins of the Polluter Pays Principle 

03 The Organisation for Economic Co-operation and Development (OECD) first 
introduced the Polluter Pays Principle (PPP) in 19726. It stated that the polluter should 
bear the expenses of carrying out the pollution prevention and control measures 
introduced by public authorities, to ensure that the environment is in an acceptable 
state. Policymakers can use this principle to curb pollution and restore the 
environment. By applying it, polluters are incentivised to avoid environmental damage 
and are held responsible for the pollution that they cause. It is also the polluter, and 
not the taxpayer, who covers the costs created by pollution. In economic terms, this 
constitutes the “internalisation” of “negative environmental externalities”. When the 

1  Based on the vision presented in the General Union Environment Action Programme to 

2020. 

2  General Union Environment Action Programme to 2020, “Living well, within the limits of 

our planet”, p. 14. 

3  EEA, EEA 2018 water assessment. 

4  EEA, Contamination from local sources, 2020. 

5  EEA, Air quality in Europe, 2019. 

6  OECD, Recommendation of the Council on Guiding Principles concerning International 

Economic Aspects of Environmental Policies, 2020. 

 
                                                      
7 

costs of pollution are charged to the polluter, the price of goods and services increases 
to include these costs. Consumer preference for lower prices will thus be an incentive 
for producers to market less polluting products7. 

04 Since 1972, the scope of the PPP has gradually increased (Figure 1)8. The principle 
initially focused solely on pollution prevention and control costs but was later 
extended to include the costs of the measures authorities took to deal with pollutant 
emissions. A further extension of the principle covered environmental liability: 
polluters should pay for the environmental damage they caused, irrespective of 
whether the pollution giving rise to the damage was below legal limits (termed 
“allowable residual pollution”) or accidental9. 

Figure 1 – Expansion of the PPP 

Source: ECA. 

05 In 1992, the United Nations Declaration on Environment and Development 
(commonly known as the “Rio Declaration”10) included the PPP as one of the 
27 guiding principles for future sustainable development. 

7 

Jans, Jan H. and Vedder, Hans H. B., European Environmental Law, 2008. 

8  OECD, The Polluter-Pays Principle, Analyses and Recommendations, 1992. 

9  OECD, Recommendation of the Council concerning the Application of the Polluter-Pays 

Principle to Accidental Pollution, 1989. 

10  UNCED, Rio Declaration on Environment and Development, 1992. 

 
 
                                                      
8 

The PPP in the EU 

Policy framework 

06 The PPP underlies the EU’s environmental policy. Article 191(2) of the 2007 
Treaty on the Functioning of the European Union (TFEU)11 states that: “Union policy on 
the environment (…) shall be based on the precautionary principle and on the principles 
that preventive action should be taken, that environmental damage should as a priority 
be rectified at source and that the polluter should pay”. EU legislators are not bound by 
the principle when enacting EU policy in areas other than that of the environment, 
even when they might have a significant environmental impact, e.g. transport, 
fisheries, or agriculture policy. 

07 The European Commission is responsible for drafting proposals for environmental 
legislation that shall be based on the PPP, while Member States are responsible for 
transposing, applying and enforcing EU environmental directives and regulations. EU 
and national legislators have various instruments to apply the PPP, as shown in 
Figure 2. 

11  Treaty on the Functioning of the European Union. 

 
                                                      
Figure 2 – Instruments for implementing of the PPP 

9 

Source: ECA, adapted from the European Commission’s “Principle of EU Environmental Law, The Polluter 
Pays Principle”. 

08 Over the past decades, the EU has adopted a broad range of environmental 
legislation. Policies cover environmental issues, such as biodiversity, forestry, soil and 
land use, water and air. Other policies specifically target sources of pollution, such as 
chemicals, industrial pollution, and waste. Relevant pieces of environmental legislation 
for the application of the PPP include: 

o 

o 

The Industrial Emissions Directive 2010/75/EU (IED) sets emission limits based on 
a permit system for around 52 000 large industrial installations in the EU. The IED 
is based on an integrated approach so that the permits must take into account 
the whole environmental performance of the plant, covering e.g. pollutant 
emissions, the use of raw materials, energy efficiency and restoration of the site 
upon closure. 

The Waste Framework Directive 2008/98/EC covers waste management. Other 
legal instruments address specific issues and types of waste, such as packaging 
waste, single-use plastic, electrical and electronic equipment, batteries and 
accumulators, end-of-life vehicles, mining waste, landfill and waste shipment. 

 
 
10 

o 

o 

o 

o 

The Water Framework Directive 2000/60/EC (WFD) covers water policy, together 
with associated Directives including the Urban Waste Water Treatment Directive 
91/271/EEC and the Drinking Water Directive (EU) 2020/2184, as well as the 
Floods Directive 2007/60/EC. Other sector-specific legislation cover pollution 
affecting water, such as the Pesticides Directive 2009/128/EC or the Nitrates 
Directive 91/676/EEC. 

The Environmental Liability Directive 2004/35/EC (ELD) sets the EU framework for 
environmental liability. Environmental liability means that economic operators 
who damage the environment are responsible to pay for its remediation, and thus 
incentivised to avoid damage. Under the ELD, when significant environmental 
damage to land, water, and biodiversity results from an economic activity that is 
considered risky (as detailed in Annex III of the ELD), the operator responsible is 
required to undertake all necessary remediation measures at its own expense. For 
economic activities that are not considered environmentally risky, including 
farming, the ELD requires operators to remedy the damage to biodiversity only 
when they are at fault or negligent. 

Companies storing dangerous chemicals are also subject to the Seveso Directive 
2012/18/EU, which aims at the prevention of major accidents involving dangerous 
substances. 

The Birds Directive 2009/147/EC and the Habitats Directive 92/43/EEC, termed 
the “Nature Directives”, form the backbone of EU biodiversity policy. The Nature 
Directives require Member States to protect natural habitats. Member States can 
use EU funding to do so. The Habitats Directive explicitly states that the PPP has 
limited application for nature conservation. The ELD covers significant damage to 
protected species and habitats. 

09 There is no single EU framework legislation dealing with soil pollution. However, 
around 35 EU legislative, strategic policy and funding instruments were identified as 
being potentially relevant to soil protection12. 

12  Ecologic Institute, Updated Inventory and Assessment of Soil Protection Policy Instruments 

in EU Member States, 2017. 

 
 
                                                      
11 

EU funding 

10 Pollution generates significant costs for EU citizens. There is no comprehensive 
assessment of the full cost of pollution to society. One recent study done for the 
Commission estimated that the failure to meet the requirements of EU environmental 
legislation amounts to around €55 billion per year in costs and foregone benefits13. 

11 A significant share of the EU budget is dedicated to achieving the EU’s climate 
change and environment-related objectives. During the 2014-2020 period, the EU 
committed to spend at least 20 % of its total budget on climate action. The EU 
integrates environmental objectives in many of its funding programmes. For example, 
the Commission classified €66 billion of common agricultural policy and €1 billion of 
fishery spending during 2014-2020 as benefitting biodiversity, although a recent report 
shows that this figure was overestimated14. 

12 The EU budget supports projects for the cleaning-up of polluted sites and 
environmental protection principally through the cohesion policy funds (i.e. the 
European Regional Development Fund and the Cohesion Fund), under the broad 
theme of “Environment and Resource Efficiency”, and the LIFE programme (LIFE). 
These support the cost of the infrastructure needed for wastewater treatment and 
waste management in certain Member States, and measures to monitor the state of 
the environment and develop green infrastructure15. 

13 LIFE16 is an EU programme addressing environment and climate change. For the 
period 2014-2020, the Multiannual Financial Framework made €2.6 billion available for 
the environment sub-programme under LIFE. 

14 Over the 2014-2020 period, the planned EU budget on cohesion policy and LIFE 
amounts to about €29 billion on projects aimed specifically at protecting the 
environment (Figure 3). 

13  The costs of not implementing EU environmental law, Final Report, 2019. 

14  Special report 13/2020 - Biodiversity on farmland: CAP contribution has not halted the 

decline. 

15  Commission’s information on Environment and Resource Efficiency under Cohesion Policy. 

16  Regulation (EU) 1293/2013. 

 
                                                      
Figure 3 – Overview of the EU funds under the Cohesion policy and the 
LIFE environment sub-programme set aside for environmental projects 
(2014-2020, in billion euros) 

12 

Soil 
decontamination

Air quality

2.0

2.4

LIFE 
environment

Biodiversity and 
nature conservation

2.6

3.6

4.3

Waste 
management

14.2

Water 
treatment

Source: ECA, based on data extracted in April 2021 from the European Commission’s database of 
planned EU spending under EU Structural and Investment Funds and the LIFE sub-programme for the 
environment. 

 
 
13 

Audit scope and approach 

15 Pollution represents a significant cost for society and is a key concern for EU 
citizens. The Polluter Pays Principle is a key tool for delivering Europe’s environmental 
objectives in an efficient and fair manner. In previous reports, we found cases where 
the PPP was not applied17. However, we have not previously examined the PPP per se. 
This report identifies opportunities for improved integration of the PPP into future 
environmental legislation and in EU funding of environmental remediation projects. Its 
conclusions and recommendations are relevant to Parliament and Council for the 
scrutiny of all environmental legislation and the Commission’s evaluation of the ELD, 
which is to be finalised in 2023. 

16 We examined the EU policy framework for the PPP. We focused on whether: 

o 

o 

o 

the principle was well applied in four EU environmental policy areas: industrial 
pollution, waste, water, and soil; 

the Commission’s actions related to the ELD brought results; 

the Commission and Member States protected the EU budget from being used to 
bear expenses that polluters should have paid. 

17 We examined EU spending and action over the 2014-2020 Multiannual Financial 
Framework. We did not focus the audit on the energy and climate sector, and on air 
pollution, as we covered these topics in several other reports18. We excluded from our 
scope Member States’ environmental taxes. 

17  See for example ECA’s special reports 19/2018, 22/2016, 23/2015, 02/2015, 04/2014, 

23/2012, 20/2012. 

18  See for example special report 23/2018 - Air pollution: Our health still insufficiently 

protected, special report 18/2020 - The EU’s Emissions Trading System: free allocation of 
allowances needed better targeting, and special report XX/2021 on CAP and Climate. 

 
 
                                                      
14 

18 In our audit work, we: 

o 

o 

o 

examined Commission’s and relevant agencies’ reports and other actions related 
to the application of the PPP in EU policies; 

obtained explanations from national authorities responsible for implementing the 
ELD in Italy, Poland and Portugal. We selected these Member States based on the 
number of cases reported under the ELD and taking into account geographical 
balance; 

scrutinised 42 environmental remediation projects. We did so by selecting 
projects dedicated to restoring the environment worth €180 million from the 
Cohesion Policy Funds and LIFE, in Italy, Poland and Portugal, over the 2014-2020 
period. We selected these projects as they were funding decontamination work 
caused by human-made pollution. 

 
 
 
15 

Observations 

The PPP underlies EU environmental legislation  

19 We examined how the EU integrated the PPP in key legislative areas, such as the 
IED for industrial pollution, the Waste Framework Directive for waste, the Water 
Framework Directive for water pollution, and various directives and regulations related 
to soil pollution. We checked whether they contained provisions to apply the PPP and 
to which extent the polluters were responsible to pay for their pollution. 

The PPP applies to the most polluting installations but the cost of 
residual pollution to society remains high 

Figure 4 – Industrial pollution in brief 

Source: Eurostat and EEA. 

20 The IED covers 33 industrial sectors (Annex I). In some industrial sectors, it covers 
all installations. In others, it covers larger installations (for example, power stations 
with a total rated thermal input above 50 megawatts). 

21 Installations covered need a permit to operate, setting specific rules and emission 
limits based on “Best Available Techniques (BAT)” conclusions ). The associated BAT 
reference documents  provide technical solutions to limit pollution while keeping 
industrial installations economically viable. The Commission regularly reviews and 
updates BAT conclusions, all existing installations concerned must comply with them 
after a transition period of four years, and new installations must be immediately 
compliant. Member State authorities inspect installations covered by the IED, penalize 
non-compliant ones and close them in the most serious cases. 

 
 
16 

22 The Commission published, in 2020, an evaluation of the IED19, which showed 
that the cost of damage of all IED installations’ emissions to air had fallen by around 
50 % between 2010 and 2017. The Commission estimated the costs and benefits of the 
IED for certain sectors: for example, in the iron and steel sector, compliance with the 
IED costs around €90 million per year, while preventing pollution saves €932 million 
per year20. In its Communication on the European Green Deal21, the Commission 
announced that it will propose a revision of the EU measures addressing pollution from 
large industrial installations. 

23 The owners of the installations have to bear the cost of complying with the 
conditions of their IED permits. This includes taking measures to keep emissions within 
legal limits, meaning that they internalise the cost of pollution prevention and control. 
Public funds can however support actions going beyond existing standards22. If 
installations cause significant environmental damage, they are subject to the ELD 
(paragraphs 42-62), meaning that they have to pay for remediation. A majority (17) of 
Member States do not make installations liable when the environmental damage 
resulted from emissions allowed under their permit23, and the installation was not at 
fault or negligent. 

24 The IED covers the most polluting industrial installations as detailed in 
paragraph 20. The IED does not require installations to meet the cost to society of the 
impact of residual pollution. In 2014, the European Environment Agency (EEA) 
estimated that the cost to society of residual air pollution damage caused by 14 000 
major industrial facilities over the 2008-2012 period was between €329 billion and 
€1 053 billion24. 

19  European Commission, Evaluation of the Industrial Emissions Directive (IED), 

SWD(2020) 181 final. 

20  Ricardo Energy & Environment, Ex-post assessment of costs and benefits from 

implementing BAT under the IED, 2018. 

21  The European Green Deal. 

22  European Commission, Guidelines on State aid for environmental protection and energy 

2014-2020, OJ C 200, 2014. 

23  Article 8.4(a) and (b) of Directive 2004/35/EC. 

24  EEA, Costs of air pollution from European industrial facilities 2008–2012, 2014. 

 
                                                      
17 

25 Among the 42 environmental remediation projects we examined, we found a 
project aimed at dealing with the pollution generated by a large steel and iron plant, 
that did not comply with the IED (Box 1). 

Box 1 

Non-compliance with the IED led to significant pollution: the case of 
a large steel plant in Italy 

In 2005, the Supreme Court of Italy ruled that a company owning a large steel and 
iron plant was responsible for air pollution, dumping of hazardous materials, and 
emission of particles. In 2010, the municipality where the plant is located claimed 
that cleaning up the environmental damage would cost €2 billion and took legal 
action to obtain compensation. In 2011, the Court of Justice of the European 
Union (CJEU) found that Italy had not complied with the IED. In 2015, the company 
was taken over by the State. In 2017, criminal proceedings started by the judiciary 
against the previous owners of the plant resulted in an out of court settlement 
exceeding €1 billion. The money recovered is being used by the Italian State for 
decontamination activities. In 2019, an appeal court in Italy awarded 
compensation to the municipality but the company could not pay for the damage. 

A €375 000 EU-funded project was aimed at identifying and dealing with pollution 
and concerned another municipality located near the steel and iron plant. The 
project consisted in an environmental analysis and a risk assessment of an 
agricultural area of almost 6 000 hectares. The project identified a severe 
industrial contamination posing significant risks to health. 

Waste legislation reflects the PPP, but does not ensure polluters cover 
the full cost of pollution 

Figure 5 – Waste in brief 

Source: All data from Eurostat. 

 
 
18 

26 Waste is a source of pollution to air, water and soil. The EU’s waste legislative 
framework seeks to apply a “waste hierarchy” (Figure 6) to reduce waste and use 
unavoidable waste as a resource. 

Figure 6 – The waste hierarchy 

Source: Waste Framework Directive. 

27 The Directive requires Member States to meet binding targets25. For example, 
55 % of municipal waste should be prepared for reuse or recycling by 2025 (increasing 
to 60 % by 2030 and 65 % by 2035, with no more than 10 % being sent to landfill). 

28 The Waste Framework Directive requires that “in accordance with the PPP, the 
costs of waste management, including for the necessary infrastructure and its 
operation, shall be borne by the original waste producer or by the current or previous 
waste holders”. Member States decide whether the costs of waste management are to 
be borne by the end user (e.g. the consumer disposing of the waste) or partly or wholly 
by the producer of the product that has become waste. This is termed “Extended 
Producer Responsibility” (EPR). EPR is not the only way to implement the PPP. For 
example, the Plastic Bags Directive requires Member States to take measures, such as 
national reduction targets and/or economic instruments (e.g. fees, taxes). 

29 EPR schemes make producers responsible for managing their products once they 
become waste. The price paid by producers and consumers hence reflects the cost of 

25  The main binding targets for various waste streams are summarised in the ECA’s review 

No 4: EU action to tackle the issue of plastic waste. 

 
 
                                                      
19 

waste management, thereby reducing the cost to public authorities and taxpayers. 
They also incentivise producers to develop greener products that avoid unnecessary 
waste. EPR schemes are mandatory for certain waste streams, such as electrical and 
electronic waste, batteries, accumulators and vehicles, and will be required for all 
packaging waste, single-use plastic and fishing gear by 2024. 

30 Charges levied on citizens or businesses should be proportional to the waste 
generated and take account of environmental damage caused. One study on the 
financing of waste management26 stated that, “the evidence suggests that 
environmental externalities are only to a limited extent internalised in the user charges 
paid by households”. 

31 The EU budget planned to contribute, mainly through cohesion policy, €4.3 billion 
over the 2014-2020 period to finance waste management infrastructure for waste 
collection, sorting and treatment. 

Polluters do not bear the full costs of water pollution 

Figure 7 – Water in brief 

Source: All data from the EEA’s 2018 European waters assessment. 

32 The Water Framework Directive establishes a common framework for protecting 
all types of water in the EU and preventing further deterioration of water quality. It 
sets objectives for surface and groundwater bodies. 

26  Study on investment needs in the waste sector and on the financing of municipal waste 

management in Member States, 2019. 

 
 
                                                      
20 

33 The OECD estimated27 that Member States already spend around €100 billion per 
year on water supply and sanitation and that they will need (except Germany) to 
increase that amount by over 25 % to meet the objectives of EU legislation on 
wastewater treatment and drinking water. This does not include investments needed 
to renew existing infrastructure or meet the objectives of the Water Framework 
Directive and the Floods Directive. 

34 Article 9 of the Water Framework Directive requires Member States to “take 
account of the principle of recovery of the costs of water services, including 
environmental and resource costs, […], and in accordance in particular with the 
polluter pays principle”. Member States are required to ensure that the contribution 
from the industrial, agricultural and household sectors to the recovery of costs for 
water services is adequate relative to their water use. Figure 8 below shows water use 
by economic sector. 

Figure 8 – Water use by economic sector in Europe, 2017  

Source: ECA, based on EEA data for European Environment Agency member and cooperating countries. 

35 When setting their water pricing policy, Member States can take into account the 
social, environmental and economic effects of cost recovery. Therefore, they have 
discretion in deciding who should pay, how much, and for what service. Ruling 
C-525/12 by the CJEU confirmed that Member States do not necessarily have to apply 
the cost-recovery concept to all water use. 

27  OECD, Financing Water Supply, Sanitation and Flood Protection, 2020. 

 
 
                                                      
21 

36 In the EU, users pay on average for around 70 % of the cost of providing water 
services (through water tariffs), while the public purse finances the remaining 30 %, 
although there are considerable differences between regions and Member States28. EU 
households usually pay for most of the cost of water supply and sanitation services29, 
even though they consume only 10 % of water, as shown in Figure 8. Agriculture, the 
sector exerting most pressures on renewable freshwater resources30, contributes the 
least. A 2011 study estimated that in France additional expenses paid by households 
due to agricultural pollution were up to €494 per household per year for the most 
affected localities31. 

37 The Commission identified in 201932 that Member States needed to make further 
progress integrating environmental and resource costs into water pricing. While 
progress had been made in addressing specific pollutants, for many enterprises the 
price of water does not cover the full costs imposed by the pollutants they release into 
the water. 

38 The cost recovery principle is difficult to apply to pollution originating from 
diffuse sources, for example from agriculture, where it is difficult to identify the 
polluters. The agricultural sector is often not charged for wastewater treatment, 
because the majority of the water it uses is not discharged into sewage (and therefore 
the water is not treated). In the EU, diffuse agricultural pollution from nitrates and 
pesticides is the main cause of the failure of groundwater to achieve good chemical 
status. Nitrate pollution poses a great risk for the future of groundwater bodies, as 
experts have shown33 that vast quantities of nitrates are currently stored in the rocky 
layers between the soil and the groundwater body. As nitrates slowly travel through 
the rock, it can take a century or more for the pollutants to reach the groundwater 

28  OECD, Financing Water Supply, Sanitation and Flood Protection, 2020. 

29  Fitness Check of the WFD, SWD(2019) 439 final, p. 64. 

30  EEA, Use of freshwater resources in Europe, 2020. 

31  Assessing water pollution costs of farming in France, République Française, Ministère de 
l'écologie, Department for the Economics, Assessment and Integration of Sustainable 
Development, Studies and documents n. 52, 2011. 

32  Fitness Check of the WFD, SWD(2019) 439 final. 

33  Ascott, M.J., Gooddy, D.C., Wang, L. et al., Global patterns of nitrate storage in the vadose 

zone, 2017. 

 
                                                      
22 

body, which delays the impact of changes in agricultural practices on groundwater 
quality. 

No overall EU legislative framework to protect against soil pollution 

Figure 9 – Soil pollution in brief 

Source: EEA Signals 2019, JRC, Status of local soil contamination in Europe, Eionet National Reference 
Centre Soil. 

39 Various EU directives and regulations contribute to preventing and mitigating soil 
pollution, covering the sectors that most pressure soil, such as industry and agriculture 
(for example paragraphs 20-25 and 38). In 2006, the Commission proposed a “Soil 
Framework Directive” which covered the prevention of soil contamination and 
degradation and the identification, registration and remediation of contaminated sites. 
The European Parliament adopted a positive opinion on the proposal, but not the 
Council. The Commission withdrew the proposal in May 2014. 

40 There are no common EU-wide objectives related to soil pollution and 
remediating contaminated sites. A study34 funded by the Commission showed that 
some Member States had very comprehensive national legislation in place, while 
others lacked coordinated action on soil protection. 

34  Ecologic Institute, Updated Inventory and Assessment of Soil Protection Policy Instruments 

in EU Member States, 2017. 

 
 
                                                      
23 

41 Decontamination of polluted soils is expensive: the Commission estimated in 
2006 the total cost of cleaning-up contaminated soil in the EU at €119 billion35. Public 
budgets, including EU funds, fund more than 42 % of remediation activities36: many 
polluting activities took place a long time ago so that the risk is higher that polluters 
either no longer exist, cannot be identified, or are insolvent. Moreover, the PPP is 
difficult to apply in cases of diffuse soil contamination because of the inherent 
difficulty to attribute liability to specific polluters. 

The Commission’s action plan to improve the operation of the 
ELD did not achieve the expected results  

42 We reviewed the 2016 ELD evaluation and assessed whether the actions the 
Commission took in response to it have since addressed the identified gaps. 

Following the evaluation of the ELD, the Commission adopted an action 
plan to address the gaps identified 

43 The Directive required: 

o  Member States to submit to the Commission, by April 2013 data on all cases of 

environmental damage remedied under the ELD over the 2007-2013 period, then 
in 2022 and every five years thereafter; and 

o 

The Commission to report to the European Parliament and the Council, in 2014 
then in 2023 and on a five-year cycle thereafter. 

44 Member States reported 1 230 cases treated under the ELD during the 2007-2013 
period37. As shown in Figure 10, the number of cases varied significantly between 
Member States, with two countries, Hungary and Poland, reporting more than 85 % of 
the total number of cases. A Commission Staff Working Document concluded that the 

35  Estimate for the EU-25 (including the United Kingdom, excluding Bulgaria, Croatia and 

Romania), Impact Assessment of the Thematic Strategy on Soil Protection, SEC(2006) 620. 

36  JRC, Status of local soil contamination in Europe, 2018. 

37  SWD/2016/0121 final, p. 21. 

 
                                                      
24 

main reason for these major differences was the uneven application of the ELD across 
Member States38. 

Figure 10 – ELD cases reported by EU Member States for the 2007- 2013 
period 

2 %

Less than 5 cases per MS:
Belgium, Estonia, Cyprus, Lithuania, 
Romania, Portugal, Finland, Sweden 

10 - 60 cases per MS:
Germany, Greece, Italy,
Spain, Latvia

11 %

87 %

500+ cases per MS:  
Hungary, Poland

→ 0 case per MS: 
Bulgaria, Czechia, Denmark, Ireland, 
France, Luxembourg, Malta,
Netherlands, Austria, Slovenia, 
Slovakia

Source: ECA, based on Commission’s 2016 evaluation. 

45 The Commission’s 2016 evaluation of the ELD concluded that it remained 
relevant and that Member States progressed in achieving its objectives. However, it 
found that some issues, either from a policy design or implementation standpoint, 
hindered the efficiency and effectiveness of the liability regime: 

o 

o 

o 

o 

lack of consistent and comparable data on ELD implementation; 

poor stakeholder awareness of the regime; 

unclear key concepts and definitions; 

scope limitations due to exceptions and defences; and 

38  SWD/2016/0121 final, p. 37 and 70. 

 
 
                                                      
25 

o 

absence of financial security in cases of insolvency. 

46 Based on this evaluation, the Commission, in consultation with experts from 
Member States, adopted a Multi-Annual ELD Work Programme (MAWP) for the period 
2017-202039 to address the gaps identified. In 2020, the Commission approved a new 
work programme with actions for the 2021-2024 period40. 

47 One of the actions addressed data reporting. The evaluation concluded that the 
quality of the data reported was poor and prevented the Commission from reaching 
sound conclusions regarding the implementation of the ELD. The evaluation stated 
that, while some Member States submitted detailed and well-structured data, others 
did not provide all the information needed for a complete assessment. 

48 To improve the coherence and quality of the data, the Commission in 2017 
developed an ELD Information System. However, the system is not operational. The 
Commission plans to encourage the use of the information system, by holding 
discussions with Member States on how to organise data collection at national level. 
Given the differences in legal systems there is no assurance that this new system will 
support a consistent analysis across the EU. 

Key ELD concepts remain undefined 

49 The ELD defines three types of environmental damage that fall within its scope, 
i.e. to protected species and natural habitats, water, and land41. The Directive applies 
when such “environmental damage” is considered “significant”. The Directive does not 
specify criteria for assessing damage or determining the significance threshold for 
damage to water and land. 

50 The Commission’s 2016 evaluation suggested that the absence of clarity and 
uniform application of key concepts of the ELD (“environmental damage” and 
“significance”) had hampered the Directive’s objective of achieving a high level of 
environmental protection in the EU42. 

39  Multi-Annual ELD Work Programme (MAWP) for the period 2017-2020. 

40  Multi-Annual ELD Rolling Work Programme (MARWP) for the period 2021-2024. 

41  Article 2 of Directive 2004/35/EC. 

42  SWD/2016/0121 final, p. 60. 

 
                                                      
26 

51 The interpretation of what constitutes significant environmental damage and is 
therefore subject to the PPP under the Directive, varies significantly between Member 
States. An event that triggers application of the ELD in one Member State may not 
trigger it in another. In the specific case of the definition of what constitutes “land 
damage”, the ELD only refers to damage that creates a significant riskto human health, 
but not to the environment. 

52 Under the 2017-2020 MAWP, the Commission employed a contractor to draw up 
a “Common Understanding” document to provide further clarification on key ELD 
concepts. Neither the Commission nor the Member States endorsed it43. 

53 In 2017, the European Parliament stated that “the different interpretations and 
application of the ‘significance threshold’ for environmental damage are one of the 
main barriers to an effective and uniform application of the ELD”44. The European 
Parliament called on the Commission to revise the definition of “environmental 
damage” and clarify the concept of “significance threshold”. 

54 In 2019, an amendment to the ELD45 required the Commission to develop 
guidelines on the term “environmental damage”’ by the end of 2020. After 
consultations with the Member States, the Commission issued a notice in March 
202146 on its legal interpretation of the definition of “environmental damage”. The 
Commission’s interpretation is not binding and does not contain specific criteria or 
thresholds from which the ELD should apply as this would require a legislative change. 

55 The European Union Network for the Implementation and Enforcement of 
Environmental Law (IMPEL) identified the need for national practitioners to share 
experiences for the detection, identification and determination of environmental 
damage. To meet this need, IMPEL is developing a manual for stakeholders detailing 
criteria for assessing “environmental damage”, which it plans to publish in 202147. The 
Commission stated in its 2021 – 2024 work programme that it plans to “cooperate with 
the IMPEL project, and to use the outputs of the project as part of capacity building”. 

43  18th to 22nd ELD Government expert group meeting reports. 

44  Recital 9 of the European Parliament resolution of 26 October 2017. 

45  Regulation (EU) 2019/1010. 

46  Commission Notice 2021/C 118/01  

47  Terms of reference of the IMPEL project. 

 
                                                      
27 

The Commission has not planned any specific action on this in its 2021-2024 work 
programme. 

Some Member States require industrial companies to insure against 
environmental risks 

56 Where the remediation costs of environmental damage exceed an operator’s 
assets, in case of insolvency, the operator is unable to complete the remedial action, 
hence the costs fall to the public purse. 

57 Member States were not obliged to provide information on remedial costs for the 
2007-2013 reporting cycle. Twelve Member States provided information on such costs, 
96 % of the remediation projects costed below €1 million48. Our analysis of remedial 
projects whose costs were borne by the EU budget showed that these frequently 
concerned cases where remedial costs were considerable in relation to the operator’s 
financial capacity, and financial security was not in place (paragraph 68). 

58 The ELD requires Member States to “encourage the development of financial 
security instruments and markets in order to enable operators to use financial 
guarantees to cover their responsibilities”49. Financial security can take the form, 
among others, of an insurance policy, a contribution to an environmental fund, a bank 
guarantee, a bond, or an own reserve. Member States are not obliged to make this 
financial security mandatory. 

59 Seven Member States (Czechia, Ireland, Spain, Italy, Poland, Portugal and 
Slovakia) require financial security for some or all environmental liabilities, as shown in 
Figure 11. 

48  SWD/2016/0121 final, p. 35. 

49  Art. 14 of Directive 2004/35/EC. 

 
                                                      
Figure 11 – Financial security for ELD liabilities in the EU 

28 

Source: ECA, based on data from a report by Stevens & Bolton LLP. 

60 A study prepared for the European Parliament concluded that the problem of 
insolvency can be addressed through mandatory financial security. For example, 
Portugal imposes mandatory financial security for all environmentally risky activities 
identified in the ELD. Portugal accepts a wide range of financial security instruments, 
including insurance policies, bank guarantees, environmental funds and own funds. 
Portugal did not report any cases of insolvency that prevented the application of 
environmental liability50. 

61 As part of the 2017-2020 MAWP, the Commission funded a study on the 
availability of and demand for insurance policies in Member States51. It found that 

50  Fogleman, V., Improving financial security in the context of the Environmental Liability 

Directive, 2020, pp. 127-128. 

51  Fogleman, V., Improving financial security in the context of the Environmental Liability 

Directive, 2020. 

 
 
                                                      
29 

insurance policies for ELD liabilities, the most popular instrument for financial security, 
were not widely available across the EU, and did not exist in some Member States. It 
also found that availability did not necessarily correspond to demand, and that there 
were countries where availability was high, but demand was low. However, the study 
also showed that in Member States where financial security for ELD liabilities was 
mandatory, the obligation drove the development of insurance market. 

62 The Commission, in its 2021-2024 work programme, plans to conduct a follow-up 
study to examine “the overlaps between pre-existing national legislation on 
environmental liability and the application of the ELD in each Member State”. It also 
plans to encourage “Member States that have not introduced mandatory financial 
security for ELD liabilities […] to consider extending existing mandatory financial 
security requirements […] to include requirements for liabilities under the ELD” and “to 
consider imposition of secondary liability on other persons such as directors and 
officers and parent companies”52. 

The EU has financed environmental remediation projects  

63 Member State authorities should ensure that whenever possible, polluters bear 
the costs of their pollution. The EU guidelines on using public money for environmental 
protection53 specify the conditions under which such investment is possible in relation 
to the PPP: 

o 

o 

o 

For reducing pollution from industrial emissions, public funding is permitted when 
the investment is intended to exceed EU standards or increase environmental 
protection in the absence of any such standard (paragraph 23). Public funding is 
also permitted to prepare for future EU standards; 

For cleaning contaminated sites, public funding is permitted when the polluter 
has not been identified or cannot be held legally liable for financing the 
remediation; 

Public funding for waste management projects may not be used to allow an 
operator generating waste to be relieved of the cost of its treatment. 

52  Multi-Annual ELD Rolling Work Programme (MARWP) for the period 2021-2024, pp. 8-9. 

53  Communication from the European Commission, Guidelines on State aid for environmental 

protection and energy 2014-2020, 2014/C 200. 

 
                                                      
30 

64 To verify the application of the PPP when projects are co-financed with EU funds, 
we analysed 42 projects (Figure 12) worth €180 million of European Structural and 
Investment (ESI) and LIFE Funds. The projects were located in eight regions in three 
Member States - 19 in Italy, 10 in Poland and 13 in Portugal. We reviewed whether, 
when funding these projects, the responsible authority had considered the application 
of the PPP, notably by seeking to identify the polluter, requiring containment of the 
pollution and decontamination of the area concerned, and initiating procedures to 
recover the public money spent. 

Figure 12 – Selected projects 

Source: ECA. 

EU funds have been used to clean orphan pollution  

65 Orphan pollution is pollution that took place in the past and where the PPP 
cannot be applied because the polluter is either unknown, no longer exists, or cannot 
be made liable. The ELD recognises this and applies to pollution that occurred after 
2007. The most significant sources of orphan pollution are former industrial activities, 
which contaminated soils with metals, tars and other dangerous substances54. 

66 Twenty of the 42 projects we examined relate to orphan pollution (with a budget 
of €62.1 million). In these cases, the PPP could not be applied and public funds had 
been used, as illustrated in Box 2. 

54  EEA, Soil contamination: the unsettling legacy of industrialisation, 2019. 

 
 
                                                      
31 

Box 2 

Orphan pollution in Portugal and Italy where the PPP does not apply 

In 2011, Portugal listed 175 abandoned mines that required extensive 
decontamination because they contained metallic sulphides or radioactive 
minerals. We examined three projects financed by ESIF related to abandoned 
mines, and which operated between the nineteenth and twentieth centuries. The 
planned EU contribution is €9.1 million between 2015 and 2021. The projects 
involve rehabilitating mines and the surrounding areas. Since the mining activities 
took place decades ago, no operators can be held responsible, as they either no 
longer exist and they are no longer liable, or they had no legal obligation to 
decontaminate the land when they operated. 

We examined an ESI-funded project, worth €1.9 million, to decontaminate a piece 
of land in Puglia (Italy) formerly occupied by a gas power plant that operated 
between the middle of the nineteenth century and the 1960s. The plant 
contaminated approximately 20 000 m² of land and underground water with 
metals, hydrocarbons, asbestos and other harmful substances. The municipality 
owns the land and partially owned the company operating the plant. The Italian 
authorities conducted an environmental analysis between 1999 and 2004; 
afterwards, they cleaned the soil and they are currently cleaning the aquifer. No 
environmental legislation prevented the plant from polluting while it was 
operating. 

EU funds were also used when national authorities failed to enforce 
environmental legislation and make the polluters pay 

67 We identified eight projects in Campania in Italy that received €27.2 million of EU 
funds to clean pollution that occurred when EU environmental legislation was already 
in force. The operators responsible for landfill sites for municipal waste did not comply 
with the environmental legislation in force. The public authorities responsible for 
overseeing these sites did not oblige these operators to clean their pollution. This use 
of EU funding does not respect the PPP, as illustrated in Box 3. 

 
32 

Box 3 

Failure to enforce environmental legislation leading to non-
application of the PPP in an Italian region 

The CJEU55 ruled in 2007 that Italy had not, for a number of landfill sites, complied 
with EU rules on landfill waste over a prolonged period, causing significant 
damage to the environment. 

Municipalities or publicly owned utility companies operated the eight landfills we 
examined, out of which four covered by the above ruling, to collect solid urban 
waste between the 1970s and early 2000s. However, they did not respect EU 
environmental requirements in force, which caused serious environmental 
damage. The planned ESI Fund contribution to all eight landfill remediation 
projects in Campania in the 2014 – 2020 programming period was €27.2 million. 

For example, one of the landfills was not equipped to protect the soil, water table 
or air against pollution. The operator did not protect the site against illegal 
dumping of waste, including hazardous one, neither during operations nor after 
closure. The Italian authorities used €2.2 million of EU funds to decontaminate the 
site in 2017 and 2018, after which the Commission deemed the former landfill site 
compliant with EU environmental legislation. 

Lack of financial security to cover environmental liability increases the 
risk that costs are borne by taxpayers 

68 Where operators do not have sufficient financial security, they might not be able 
to cover the cost of remediating the pollution they caused (paragraphs 56-62). We 
found four such remediation projects, worth €33 million, where an operator, identified 
as the party responsible for the pollution, went bankrupt. As a result, public money 
had to be used to decontaminate soil and water. This does not respect the PPP, as 
illustrated in Box 4. 

Box 4 

Examples of lack of financial security leading to non-application of 
the PPP 

In 1995, a few years after having stopped production, a company producing 
asbestos products in Italy filed for bankruptcy. Before the liquidation procedure 

55  Judgement of the Court from 26 April 2007 in Case C-135/05. 

 
                                                      
33 

began, the company had started cleaning up the environmental damage caused by 
its production, at the Italian Ministry of the Environment’s request. However, as 
soon as the bankruptcy proceedings began, the bankruptcy administrator stopped 
financing the remediation. As a result, the regional public authorities continued 
the decontamination. The project we audited received €7.1 million of EU support. 
It involved demolishing buildings above ground-floor level and securing asbestos-
containing materials placed in storage underground. The authorities completed 
the work in 2019. They have launched legal proceedings to recover the funds used 
for the clean-up operation but they consider they may fail to recover money from 
a company undergoing bankruptcy proceedings. 

In Poland, environmental authorities found toxic substances in the groundwater 
and soil where a chemical plant was located. The groundwater pollution poses a 
risk to the health of the nearby residents and could spread to a Natura 2000 area. 
In 2000, the regional authorities started a remedial action procedure against the 
chemicals company that failed to decontaminate the site. In 2014, the company 
declared bankruptcy and started liquidation proceedings. The authorities lodged a 
claim in the course of the insolvency proceedings in 2016, but the bankruptcy 
administrator took no remedial action and sold parts of the installations that were 
preventing the release of chemicals. 

According to the authorities, the infrastructure is deteriorating further and the 
pollution continues to spread, and the legal decision imposing preventive or 
remedial measures might be impossible to enforce because of the bankruptcy. As 
a result, the authorities used public funds, including €17.3 million from ESIF, to 
remediate the environmental damage on a first area of 27 hectares. The 
authorities estimate that the pollution covers a few thousands hectares and that 
the total remediation cost could exceed €540 million. 

 
 
 
34 

Conclusions and recommendations 

69 The Polluter Pays Principle (PPP) underlies the EU’s environmental policy and 
requires that polluters should bear the costs of their pollution including the cost of 
measures taken to prevent, control and remedy pollution and the costs it imposes on 
society. 

70 We examined the EU policy framework for the PPP, focusing on its application to 
EU environmental policy areas, the Commission’s actions related to the Environmental 
Liability Directive (ELD), and whether the EU budget was protected from bearing 
expenses that polluters should have paid. 

71 Overall, we found that the PPP is reflected to varying degrees in the different EU 
environmental policies and its coverage and application was incomplete. The 
Commission’s actions to support Member States’ implementation of the ELD had not 
resolved key weaknesses. The EU budget is sometimes used to fund clean-up actions 
that should, under the PPP, have been borne by polluters. 

72 The PPP is applied differently across different EU environmental policies. As 
regards industrial emissions, we concluded that the PPP is applied to the most 
polluting industrial installations, which are covered by the Industrial Emissions 
Directive (IED). The owners of the installations have to bear the cost of complying with 
the conditions of their permits, including by taking measures to limit emissions below 
the emission limits. The IED does not apply to smaller installations and does not 
require installations to meet the cost to society of residual pollution (paragraphs 20-
25). Even though the EU waste legislation requires Member States to apply the PPP 
fully, the funding gap remains wide and significant public investments are needed to 
meet recycling targets (paragraphs 26-31). While progress had been made in 
addressing specific pollutants, for many enterprises the price of water does not cover 
the costs imposed by the pollutants they release into the water. The recovery of the 
cost of water services is difficult to apply to pollution originating from diffuse sources, 
for example from agriculture (paragraph 32-38). There is no overall EU framework to 
protect soil, although many pieces of legislation indirectly contribute to reduce 
environmental pressures (paragraphs 39-41). 

 
35 

Recommendation 1 – Assess the scope for strengthening the 
integration of the Polluter Pays Principle into environmental 
legislation 

The Commission should assess the regulatory and administrative changes and the 
overall cost-benefit of better applying the Polluter Pays Principle, in particular: 

(a) 

lowering emissions limits to further reduce residual pollution; 

(b)  dealing with diffuse water pollution from all sources, including agriculture. 

Timeframe: end of 2024 

73 The ELD establishes the EU’s framework for environmental liability, based on the 
PPP. We found that the ELD provides for a partial application of the PPP in the event of 
environmental damage. The latest data available on the ELD implementation, although 
incomplete, indicate gaps in the implementation of the ELD across Member States 
(paragraphs 44-48). The ELD does not clearly define some key concepts, resulting in 
different interpretations and applications at Member State level (paragraphs 49-55). 
The absence of mandatory financial security at EU level means in practice that 
taxpayers pay for remediation costs when an operator causing environmental damage 
becomes insolvent (paragraphs 56-62). We concluded that the Commission’s actions to 
date have not been able to address the shortcomings of the ELD. 

Recommendation 2 – Consider reinforcing the application of 
the Environmental Liability Directive 

We recommend that, through the evaluation of the Environmental Liability Directive 
due by April 2023, the Commission examine the scope to: 

(a) 

improve criteria for defining the environmental damage to which the Directive 
should apply; 

(b)  make more use of instruments providing financial security. 

Timeframe: end of 2023 

 
36 

74 We found EU funds projects that should have been paid for by the polluter 
(paragraph 63-68). In cases of orphan pollution, when the entity responsible could not 
be identified or made liable, the use of public funding was justifiable and necessary to 
remedy the situation (paragraphs 65-66). They are also used when responsible 
authorities failed to enforce environmental legislation in due time (paragraph 67). The 
absence of financial security to cover environmental liability also forced authorities to 
use public money to restore polluted areas, when the polluter was insolvent 
(paragraph 68). 

Recommendation 3 – Protect EU funds from being used to 
finance projects that should be funded by the polluter  

The Commission should:  

(a) 

in its supervisory capacity, make the use of EU funds for cleaning pollution 
conditional on checks, in collaboration with the Member States, that the relevant 
authorities took all the necessary steps to charge the polluter for the pollution 
they are responsible for; 

(b)  examine the scope for legislative changes to require the use of financial security 

for environmental risks for operators. 

Timeframe: 2025 

This Report was adopted by Chamber I, headed by Mr Samo Jereb, Member of the 
Court of Auditors, in Luxembourg on 19 May 2021. 

For the Court of Auditors 

Klaus-Heiner Lehne 
President 

 
 
 
 
 
  
 
37 

Annex 

Annex I – Sectors covered by the Industrial Emissions Directive 

The industrial Emissions Directive applies to the following sectors. In some sectors, it 
covers only installations above a certain size. 

o 

Energy industries: fuel combustion in installations, refining of mineral oil and gas, 
coke production, and gasification or liquefaction of coal and other fuels 
Production and processing of metals: metal ore roasting or sintering, production 
of pig iron or steel, and processing of ferrous and non-ferrous metals 
o  Mineral industry: production of cement, lime and magnesium oxide, and 

o 

asbestos, manufacture of asbestos-based products, and glass, melting of mineral 
substances, and firing of ceramic products 
Chemical industry: production of organic and inorganic chemicals, fertilisers, plant 
protection products or biocides, pharmaceutical products, and explosives 

o 

o  Waste management: disposal or recovery of hazardous waste, waste in 

incineration or co-incineration plants, and non-hazardous waste, and landfill 
management 
Production of pulp from timber or other fibrous materials, as well as paper and 
cardboard, and wood-based panels  
Pre-treatment or dyeing of fibres/textiles 
Tanning of hides and skins 
Animal slaughter, and the treatment and processing of food products from animal 
and vegetable raw materials 

o 

o 
o 
o 

o  Disposal or recycling of animal carcasses and waste 
o 
o 
o 

Intensive rearing of poultry or pigs 
Surface treatment of substances, objects or products using organic solvents 
Production of carbon or electrographite by means of incineration or 
graphitisation 
Capture of carbon dioxide streams for the purpose of geological storage 
Chemical preservation of wood and wood products 
Independent wastewater treatment under specific circumstances 

o 
o 
o 

 
 
 
38 

Acronyms and abbreviations 

BAT: Best Available Techniques  

EEA: European Environment Agency 

ELD: Environmental Liability Directive 

EPR: Extended Producer Responsibility 

ESIF: European Structural and Investment Funds 

IED: Industrial Emissions Directive 

IMPEL: Implementation and Enforcement of Environmental Law 

MAWP: Multi-Annual Work Programme 

OECD: Organisation for Economic Co-operation and Development 

PPP: Polluter Pays Principle 

WFD: Water Framework Directive 

 
 
 
39 

Glossary 

Best Available Techniques (BAT): Industrial technology, installation design and 
operational measures with the best environmental performance, as determined 
through an evaluation of best practices as they evolve over time. Used to set emission 
limit values and permit conditions.  

Climate action: Action to address climate change and its impact. 

Cohesion Fund: An EU fund for reducing economic and social disparities in the EU by 
funding investments in Member States where the gross national income per inhabitant 
is less than 90 % of the EU average. 

Common Agriculture Policy: The EU’s single unified policy on agriculture, comprising 
subsidies and a range of other measures to guarantee food security, ensure a fair 
standard of living for the EU’s farmers, promote rural development and protect the 
environment. 

Emission limit: The mass, expressed in terms of certain specific parameters, 
concentration and/or level of an emission, which may not be exceeded during one or 
more periods of time. 

Environmental liability: Economic operators who damage the environment are 
responsible to pay for its remediation. 

European Regional Development Fund (ERDF): An EU fund that strengthens economic 
and social cohesion in the EU by financing investments that reduce imbalances 
between regions.  

Extended Producer Responsibility (EPR): Approach which adds the post-consumer 
stage of a product’s life cycle, including recycling and disposal, to the producer’s 
environmental responsibilities. 

Fertiliser: Any substance (synthetic or organic) containing one or more plant nutrients, 
applied to soil to maintain or improve fertility. 

Financial security: Any financial instrument, such as an insurance policy, a contribution 
to an environmental fund, a bank guarantee, a bond, or an own reserve, which ensures 
that a company will be able to meet its financial obligation in the event of a liability. 

Internalisation: Measures taken so that unpaid benefits or costs are taken into 
account in the composition of the prices of goods and services. 

 
40 

LIFE: The financial instrument supporting implementation of the EU's environmental 
and climate policy through co-financing of projects in Member States. 

Polluter Pays Principle: Principle that requires that polluters should bear the costs of 
their pollution including the cost of measures taken to prevent, control and remedy 
pollution and the costs it imposes on society. 

 
REPLIES OF THE EUROPEAN COMMISSION TO THE EUROPEAN COURT OF 
AUDITORS SPECIAL REPORT:  
“THE POLLUTER PAYS PRINCIPLE: INCONSISTENT APPLICATION ACROSS 
EU ENVIRONMENTAL POLICIES AND ACTIONS” 

EXECUTIVE SUMMARY 

I. The Commission recalls that the European Green Deal stresses that only by making full use 
of pricing and well-designed tax reforms can Europe meet its environmental objectives in an 
efficient  and  just  way.  Reflecting  the  European  Green  Deal,  the  Commission  will  work  to 
strengthen  the  implementation  of  the  Polluter  Pays  Principle  (PPP)  in  European  Union  law 
and corresponding national policies in order to help deliver the EU’s zero pollution ambition 
for a toxic-free environment and to support climate, energy and circular economy policies. 

III. Fourth indent - The Commission considers that the conclusions and recommendations are 
relevant to the European Parliament and the Council as they have significant competence in 
applying the PPP and implementing Environmental Tax Reform (ETR). 

IV.  The  Commission  recalls  that  whilst  it  makes  efforts  to  apply  the  PPP  in  environmental 
policy,  one  of  the  main  instruments  to  achieve  this,  namely  taxes,  is  usually  subject  to 
unanimity in co-decision. Therefore, the full application requires the engagement of Member 
States.  

With regard to  the Environmental  Liability Directive (ELD),  a key Commission action, the 
adoption  of  Guidelines  on  a  common  understanding  of  environmental  damage,  was  only 
completed  in  March  2021  following  extensive  consultations.  It  is  therefore  premature  to 
conclude that it has failed to solve a key weakness. As for the absence of mandatory financial 
security,  the  Commission  agrees  that  the  issue  of  financial  security  remains  a  legitimate 
concern  and  it  will  be  looking  at  this  closely  in  the  context  of  the  evaluation  due  by  April 
2023. 

The EU budget is sometimes justified in its use to fund clean-up actions. 

V.  First  indent  -  The  Commission  accepts the  need  to  examine  how  the  PPP  is  applied  in 
delivering the European Green Deal commitments.The Commission accepts recommendation 
1.a, and partially accepts recommendation 1.b in relation to the competencies that falls under 
its responsibility. 

Second indent - The Commission accepts this recommendation. 

The evaluation of the ELD will examine the scope to better apply the PPP.  

Third indent - The Commission accepts this recommendation. 

The Commission will ensure that applicable EU law is respected in relation to the necessary 
steps  to  charge  polluters  for  the  pollution  that  they  are  responsible  for  and  will  ensure  that 
Member States are aware of their obligations in this respect. 

INTRODUCTION 

03.  The  Organisation  for  Economic  Co-operation  and  Development (OECD)  considers 
pricing instruments including environmental taxes an important tool for delivering the PPP. 

EN 

1 

  EN 

 
 
 
 
This  includes  charges,  taxing of pollution that is permitted, environmental liability, and the 
phasing out of environmentally harmful subsidies.  

04. The PPP also covers impacts on society and wellbeing. 

06. The Commission takes into account the application of the Polluter Pays Principle in other 
areas that affect the environment, e.g. transport, fisheries and agricultural policy. 

The  Commission  considers  that  the  PPP  is  implemented  in  the  Common  Agricultural  Policy 
(CAP)  through,  inter  alia,  the  sanction  system  of  cross-compliance1  where  reductions  of  CAP 
payments are applied when farmers do not respect applicable EU relevant law on the environment 
and climate including certain statutory rules (e.g. the Nitrates Directive). 

In  addition,  the  CAP  can  directly  support  practices,  investments,  etc.,  in  the  service  of  the 
environment  and  climate  that  compensates  only  for  action  going  beyond  relevant  legal 
obligations. 

07.  Member  States  have  significant  competence  in  deciding  whether  and  how  to  apply  the 
PPP in line with the principle of subsidiarity that implies that policy measures are decided at 
a  level  as  close  as  possible  to  the  citizen  and  so  at  Union  level  only  where  necessary.  The 
Commission is supporting Member States in tax reform and phasing out of environmentally 
harmful subsidies. 

08. Fourth indent - The Commission recalls that environmental damage includes not only the 
damage  to  the  natural  resource  itself  (i.e.  protected  species  and  natural  habitats;  water;  and 
land) but also the impairment of natural resource services provided by the resource. 

10. The Environmental Implementation Review (EIR) is a tool to improve implementation of 
EU environmental law and policy. It aims to address the causes of implementation gaps and 
try to find solutions before problems become urgent. 

11. The investment needs for delivering the green transition require additional investment to 
reach  the  EU’s  current  2030  climate  and  environmental  policy  goals  of  around  EUR  470 
billion per year1. 

12.  The  implementation  of  the  European  Structural  Investment  Funds  (ESIF)  follows  the 
principle of co-financing, in order to ensure the ownership of the policies on the ground.  The 
European Regional Development Fund (ERDF) and the Cohesion Fund co-finance inter alia 
activities  in  both  waste  and  water  sectors  to  meet  the  requirements  of  the  Union’s 
environmental acquis and beyond those requirements, investments in protecting and restoring 
biodiversity  and  soil  as  well  as  green  infrastructure,  and  investments  in  regenerating  and 
decontaminating  brownfield  sites.  In  addition,  the  scope  of  support  of  the  ERDF  includes 
investments  in  innovative  technologies  to  improve  environmental  protection  in  the  waste 
sector, water sector and with regard to soil.  

OBSERVATIONS 

21. The Industrial Emissions Directive (IED) allows competent authorities some flexibility to 
set less strict emission limit values (Art 15(4)). This is possible only in specific cases where 
an  assessment  shows  that  achieving  the  emission  levels  associated  with  Best  Available 

1 Identifying Europe’s recovery needs, COM(2020) 456 

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Techniques (BAT) described in the BAT conclusions would lead to disproportionately higher 
costs  compared  to  the  environmental  benefits  due  to  the  geographical  location  or  the  local 
environmental  conditions  or  the  technical  characteristics  of  the  installation.  The  competent 
authority shall always document its justification for granting such derogations. 

Furthermore,  Chapter  III  of  the  IED  on  large  combustion  plants  includes  certain  flexibility 
instruments (Transitional National Plan, limited lifetime derogation, etc.). 

23.  The  Environmental  Liability  Directive  (ELD)  applies  to  “environmental  damage”  the 
definition of which includes different references to significance. 

24. The Commission considers that the PPP is embedded in the whole IED approach and also 
cover pollution within legal limits, as those legal limits become stricter over time. Operators 
have to invest, i.e. pay in order to stay within the limits. The fact that permit conditions shall 
be  based  on  Best  Available  Techniques  (BAT),  and  that  these  BATs  are  periodically 
reviewed,  strengthened  and  updated;  leads  industrial  sectors  to  constantly  invest  in  better 
performing  and  less  polluting  equipment,  so  as  to  comply  with  more  stringent  emission 
limits.  

The  IED  does  not  require  installations  to  pay  the  impact  on  society  of  pollution  that  is 
allowed under a permit.  

35. Member States have to set up water pricing policies that have adequate incentives to use 
water  efficiently  and  that  include,  following  the  PPP,  an  adequate  contribution  of  different 
water uses to the cost recovery of water services (there is some margin of discretion which 
allows  to  take  into  account  social,  economic  or  environmental  elements,  e.g.  social  tariffs, 
tariffs that take into account water scarcity). 

36. The Commission considers that households bear the bulk of the cost of water purification 
(related to contamination by other activities, including agriculture), while agriculture uses a 
large  quantity  of  water  that  is  not  purified.  Water  pricing  application  for  cost  recovery  of 
services  (including  the  environmental  costs)  is  “erga  omnes”,  while  for  the  purpose  of 
sanctioning breaches, the polluter pays principle is applicable at the level of the polluters.  

38.  The  application  of  the  polluter  pays  principle  is  mainly  in  the  hands  of  the  Member 
States, which must integrate this principle in the national legislations. The application of fines 
is always at individual level due to the infringement of national or EU rules. 

39. The Commission is updating the EU Soil Thematic Strategy in 2021 to address soil and 
land degradation in a comprehensive way and to help achieve land degradation neutrality by 
2030. The new Zero Pollution Action Plan for Air, Water and Soil looks at soil pollution and 
remediation of contaminated sites, in particular. 

There  are  a  number  of  instruments  and  measures  in  the  current  CAP  contributing  to  the 
implementation of activities limiting soil pollution. 

40.  For  the  most  polluting  industrial  installations,  the  IED  provides  for  an  integrated 
approach  to  prevention  and  control  of  emissions  into  air,  water  and  soil,  to  waste 
management, to energy efficiency and to accident prevention. 

41. For polluting activities that took place a long time ago, the risk is higher that the polluter 
no  longer  exists,  cannot  be  identified  or  is  insolvent.  However,  it  is  possible  to  apply  the 
polluter-pays  principle  also  in  some  of  these  cases,  certainly  when  there  are  stringent  soil 

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contamination  laws  and  liability  schemes  in  place  at  national  level.  As  regards  the 
Environmental  Liability  Directive,  if  the  environmental  damage  derives  from  activities 
carried  out  “but  not  finished  before”  30  April  2007,  the  Directive  shall  apply  pursuant  to 
paragraph 34 of the judgment in Joined Cases C-379/08 and C-380/08. 

54. The Notice presents a very detailed analysis to help explain how the existing provisions 
are to be applied in practice.  

As  regards  the  legal  validity  of  the  notice,  the  Commission  stresses  that  only  the  Court  of 
Justice can provide a definitive interpretation of the ELD and underlines that it represents the 
Commission’s understanding of the correct legal interpretation of the ELD. 

56. The Commission considers the situation described by the European Court of Auditors as a 
serious risk. 

57. The Commission considers, similarly to the European Court of Auditors, that the greater 
the remedial costs, the greater the risk that the operator will not have the resources to meet 
these costs without accompanying financial security. 

60. The Commission considers, similarly to the European Court of Auditors, that mandatory 
financial  security  should  reduce  the  risk  of  costs  being  transferred  to  the  public  purse  by 
reason of insolvency. 

63.  Second  indent  -  Under  the  IED,  the  baseline  report  is  the  basis  to  assess  remediation 
activities to be undertaken by the operator upon definitive cessation of the activity. Pursuant 
to  the  Commission  ‘Guidance  concerning  baseline  reports  under  Article  22(2)  of  Directive 
2010/75/EU  on  industrial  emissions’  (2014/C  136/03),  where  relevant,  the  site  history  and 
historic  pollution  have  also  to  be  included  in  the  baseline  report;  and  thus  should  be 
remediated by private funding. 

CONCLUSIONS AND RECOMMENDATIONS 

71. The Commission is also acting to support Member States’ implementation of the PPP, but 
despite doing so, it is still not fully applied.   

72. It is for Member States to ensure that pollution within permitted levels is priced.  

For water, there is the resource cost and pollution cost associated with (over-) abstraction. 

Emissions  within  legal  limits  also  require  investments,  as  those  legal  requirements  become 
stricter over time.  

Certain  smaller  installations  are  covered  by  the  Medium  Combustion  Plant  Directive 
(MCPD) (EU) 2015/2193 on the limitation of emissions of certain pollutants into the air from 
medium combustion plants. It applies to combustion plants with a rated thermal input equal 
to or greater than 1 Megawatt and less than 50 Megawatt irrespective of the type of fuel they 
use.  Even  if  the  PPP  is  not  explicitly  mentioned  there,  installations  concerned  also  face  a 
price on pollution when bearing the costs of complying with the MCPD requirements. 

Recommendation 1 – Assess the scope for strengthening the integration of the Polluter 
Pays Principle into environmental legislation 

The  Commission  accepts  the  need  to  examine  how  the  PPP  is  applied  in  delivering  the 
European  Green  Deal  commitments  by  undertaking  an  evaluation  of  its  application  and 

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working with Member States on PPP implementation including pricing and the phasing out of 
environmentally harmful subsidies. 

The Commission accepts recommendation 1.a. 

The  Commission  will  propose  a  revision  of  EU  measures  addressing  pollution  from  large 
industrial installations in early 2022, as announced in the European Green Deal. The aims of 
the  revision  are  to  progress  towards  the  EU’s  zero  pollution  ambition  for  a  toxic-free 
environment and to support climate, energy and circular economy policies. 

The Commission partially accepts recommendation 1b. 

Within  the  framework  of  the  European  Green  Deal,  the  Farm  to  Fork  Strategy,  the 
Biodiversity  Strategy,  and  the  new  Zero  Pollution  Action  Plan  set  out  the  actions  the 
Commission will take to tackle water pollution.  The Commission reinforced conditionality in 
its proposal for the new CAP, which would better tackle diffuse pollution, and this is being 
considered under co-decision. The Commission accepts that it should consider the costs and 
benefits of the application of the polluter pays principle in its regulatory policies, in line with 
the 
its  Better  Regulation  Guidelines.  However, 
recommendation to consider the cost-benefit and the regulatory and administrative changes of 
specific measures where these are the responsibility of Member States. 

the  Commission  cannot  accept 

73. The ELD defines key concepts and related concepts are defined in other directives (such 
as the Water Framework Directive) closely linked to the ELD.  It has proved challenging to 
develop a common understanding of the full implications of the definitions of these concepts. 
The  Commission  Guidelines  adopted  in  March  2021  address  the  need  for  such  an 
understanding. 

Recommendation  2  –  Consider  reinforcing  the  application  of  the  Environmental 
Liability Directive 

The Commission accepts Recommendation 2 (a).  

The  Commission  accepts  that  there  is  indeed  an  absence  in  the  ELD  of  express  criteria  for 
assessing  damage  to  water  and  land  of  the  kind  that  Annex  I  of  the  ELD  provides  for 
assessing damage to protected species and natural habitats. Having legally binding criteria for 
water and land damage might indeed be useful and the Commission will consider this in the 
context of the evaluation. 

The Commission accepts Recommendation 2 (b).  

Recommendation 3 – Protect EU funds from being used to finance projects that should 
be funded by the polluter 

The Commission accepts the recommendation. 

Under shared management it is the responsibility of the Member States to select operations 
where the conditions recommended by European Court of Auditors should be applied. 

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a)  the  Commission  will  ensure  through  the  mechanisms  put  in  place  in  the  legal 
framework for cohesion policy that applicable EU law is respected in relation to the 
necessary steps to charge polluters for the pollution that they are responsible for and 
will ensure that Member States are aware of their obligations in this respect. 

b)  the Commission will examine this in relation to the context of Recommendation 2. 

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Audit team 

The ECA’s special reports set out the results of its audits of EU policies and 
programmes, or of management-related topics from specific budgetary areas. The ECA 
selects and designs these audit tasks to be of maximum impact by considering the risks 
to performance or compliance, the level of income or spending involved, forthcoming 
developments and political and public interest. 

This performance audit was carried out by Audit Chamber I Sustainable use of natural 
resources, headed by ECA Member Samo Jereb. The audit was led by ECA Member 
Viorel Ştefan, supported by Roxana Banica, Head of Private Office and Olivier Prigent, 
Private Office Attaché; Colm Friel, Principal Manager; Frédéric Soblet, Head of Task; 
Roberto Resegotti, deputy Head of Task, Georgios Karakatsanis, 
Katarzyna Radecka-Moroz, and Anna Sfiligoi, Auditors. Graphic design by 
Marika Meisenzahl. Cathryn Lindsay provided linguistic support. 

Viorel Ştefan

Roxana Banica

Olivier Prigent

Colm Friel

Frédéric Soblet

Roberto Resegotti

Katarzyna
Radecka-Moroz

Anna Sfiligoi

 
 
 
 
 
Timeline 

Event 

Date 

Adoption of Audit Planning Memorandum (APM) / Start of audit 

11.3.2020 

Official sending of draft report to Commission  
(or other auditee) 

26.3.2021 

Adoption of the final report after the adversarial procedure 

19.5.2021 

Commission’s (or other auditee’s) official replies received in all languages 

14.6.2021 

 
 
 
 
 
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PDF 
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ISBN 978-92-847-6308-5 
ISBN 978-92-847-6289-7 

1977-5679 
1977-5679 

doi:10.2865/590639  QJ-AB-21-014-EN-N 
doi:10.2865/896058  QJ-AB-21-014-EN-Q 

 
 
 
 
 
 
Pollution represents a significant cost for society and is a key 
concern for EU citizens. By applying the Polluter Pays Principle 
(PPP), polluters are incentivised to avoid environmental damage 
and are held responsible for the pollution that they cause. 
Overall, we found that the PPP is reflected and applied to varying 
degrees in the different EU environmental policies and its 
coverage and application was incomplete. The EU budget is 
sometimes used to fund clean-up actions that should, under the 
PPP, have been borne by polluters. We recommend strengthening 
the integration of the PPP into environmental legislation, 
reinforcing the environmental liability regime at EU level, and 
better protecting EU funds from being used to finance projects 
that should be funded by the polluter. 

ECA special report pursuant to Article 287(4), second 
subparagraph, TFEU.