Working Report, 23/2006 – Strengthening Environmental Integration in the EU

Reflecting the Treaty requirement to integrate environmental concerns into other EU policies a product-oriented approach should form part not only off the high-level EU strategies discussed in the last chapter, but also of more specific and concrete policy items.

4.1 The Broad Economic Policy Guidelines^[11]

4.1.1 Introduction

The BEPGs lay down the EU’s medium-term economic policy strategy. The 2003-2005 guidelines focus on the contribution that economic policies can make to achieve the EU’s strategic Lisbon goal and are concentrated around:

The BEPGs make both general and country-specific recommendations. The guidelines cover three years and a full review is foreseen for 2006. In the meantime, changes are only expected to take account of major new developments.

The BEPGs are adopted by the Economic and Financial Affairs (ECOFIN) Council, in line with Article 99 of the EC Treaty and on the basis of a Commission recommendation. The BEPGs build on an annual cycle of policy discussion that is initiated by the EU Economy Review^[12] and experience with the implementation of the previous BEPGs.

Amongst other aims, the BEPGs are to promote sustainable development through the integration of environmental aspects into economic policy. This means that they also serve as the ECOFIN Council’s ‘Cardiff strategy’.

An annual implementation report summarises the Commission’s findings in monitoring economic developments and the conduct of Member State’s economic policies. The implementation report provides an overall assessment of the implementation of the BEPGs of the preceding year, including an assessment of the implementation of the country specific guidelines in last year's BEPGs.

The report is thus part of the Commission’s economic surveillance and policy co-ordination activities. It serves as input for the next Commission recommendation on the BEPGs.

An important Committee in the annual cycle of policy discussion is the Economic Policy Committee (EPC), which provides support in the formulation of the BEPGs and in the general preparations of the Spring Summits. The Committee’s main task is to contribute to the preparation of the work of the Council of co-ordinating the economic policies of the Member States and of the Community, and to provide advice to the Commission and the Council. The EPC is composed of two members^[13] from each Member State, generally senior officials from national ministries of finance or economics, and from national central banks. The Commission’s DG ECFIN and the European Central Bank also second two members.

The EPC coordinates opinions with the Employment Committee, the Social Protection Committee and with the Education Committee, which also contribute to the Spring Summit Process every year in relation to their respective policy areas. As discussed, no similar committee structure exists for the environment policy.

4.1.2 The Environment in the BEPGs

The 2003-2005 BEPGs include a small number of recommendations on (environmental) sustainability, notably encouraging the use of economic instruments/incentives to achieve efficient resource use and to decouple economic growth from environmental degradation. The emphasis is on economic instruments in general, and on energy, transport and the Kyoto target in particular (see Box 2).

reduce sector subsidies, tax exemptions and other incentives that have a negative environmental impact and are harmful for sustainable development. Ensure, inter alia through the use of taxes and charges, that pricing of the extraction, the use and, if applicable, the discharge of natural resources, such as water, adequately reflects their scarcity and all resulting environmental damage;
reduce subsidies to non-renewable energy and promote market instruments, further broaden the coverage, and ensure appropriate differentiation of energy taxation;
adjust the system of transport taxes, charges and subsidies to better reflect environmental damage and social costs due to transport, and increase competition in transport modes;
renew efforts to meet commitments under the Kyoto protocol and implement the EC greenhouse gas emissions trading scheme and set up systems to report on those policies and measures and their prospective effects on emissions. Take measures to reach the targets set by subsequent European Councils, notably on energy efficiency, renewable energy and bio fuels.

Source: Communication from the Commission on the implementation of the 2003-2005 BEPG. COM(2004) 20, 21.1.2004.

Interestingly, the 2004 implementation report concludes that progress towards environmental sustainability in 2003 was disappointing. Moreover, it tries to assess the source of or reason for some of the problems. There is special focus on the issue of climate change and a distance-to-target indicator for the Kyoto protocol is included, highlighting that even with the implementation of the new emissions trading Directive and other existing and planned policies and measures, most Member States will not reach their targets, unless they improve implementation. The report also concludes that while several Member States have declared their intention to use the flexible mechanism of the Kyoto protocol in addition to domestic and European policies, still only a few have explicitly made provision for the budgetary resources necessary for this.

The Kyoto indicator is however an exception as recommendations related to the environment in general are very broad and not country specific. However, the use of economic instruments in environmental policies could be an important part of the BEPGs. It would be useful to include more environment-related targets like the Kyoto targets – e.g. targets such as to remove coal subsidies by 2007. This would be a way of strengthening the Commission’s position in issuing country specific recommendations. The idea of country specific environmental recommendations has been put forward in the Cardiff stocktaking, which suggests they should be considered for the BEPGs for 2005 onwards, where the situation poses a substantial economic challenge or has implications for economic policy.

The Commission needs to have a comparable basis of information in order to make balanced country-specific recommendations on environmental issues, therefore it is important that environment ministries ensure that they are involved when the annual reports are sent to the Commission to ensure that environmental issues are covered. The environment ministries could also contact their finance and economic counterparts and ensure full involvement in the drafting of the BEPGs.

Using the BEPGs could be a way of using OMC on an environmental issue without jeopardising the legal base of environment policy. For example the Commission might recommend minimum rates for a green tax base, or minimum investment rates for investment in environmental technologies or in research for environmental technologies.

4.2 Economic Instruments for the Environment

One of the five principles in the IPP Communication is ‘Working with the market’ by setting incentives so that the market moves in a more sustainable direction and encourages the supply and demand of greener products.

As stated in the Communication, ‘getting the prices right’ means that the price paid by a consumer for a product includes the costs of all the environmental impacts that it creates. If designed appropriately, market based instruments (MBIs) could play an important role in advancing the IPP concept in other policies.

There has recently been progress with market based instruments in EU legislation – the Emissions Trading Directive is one example of legislation that sets objectives and gives flexibility to Member States or market players to select the instruments or options to achieve them. Such legislation increasingly offers scope, and in places encouragement, for the use of economic instruments at national level. More national environmental taxes and charges have been used, and emissions trading schemes are becoming ‘acceptable’ options.

In addition, the European Council in its March 2003 Conclusions has urged ‘the Council (ECOFIN) to encourage the reform of subsidies that have considerable negative effect on the environment and that are incompatible with sustainable development’.

According to the Environmental Technology Action Plan, the OECD will by the end of 2004 develop a framework to help identify and measure environmentally harmful subsidies, the Commission will then in 2005 work with Member States and regional governments, using as far as possible the OECD methodology, to identify the most significant subsidies that have a negative effect on the environment. A forthcoming Commission Communication is likely to discuss possible further steps at EU level to encourage this process of phasing out environmentally harmful subsidies.

A forthcoming Communication^[14] on Economic Instruments for the Environment is foreseen in the Commission’s legislative and work programme for 2004. The communication will have a broader scope than the previous (’97) Communication in terms of coverage of instruments. It will be an information and guidance document, which can hopefully contribute to the increased use of these instruments in the environment field.

However, while the EU institutions and Member States increasingly make reference to the polluter pays principle and ‘getting the prices right’^[15], progress with implementing these principles, e.g. through new environmental taxes, is less evident. But there is a move towards environmental tax reform as countries change their tax base by reducing labour related taxes and broaden the number of taxes and charges on environmental pollution, resources and services, but progress is slow (Eurostat, 2003).

To go beyond the general wording of ‘getting the prices right’, the debate has to turn towards concrete areas where economic instruments could contribute to ensure that prices on products and services better reflect their environmental impacts. One such area could be aviation services and more concretely, the product aviation fuel. This could be done by either charging for aviation emissions, or by taxing aviation fuel.

4.2.1 Aviation

The use of economic instruments to address the environmental impacts of aviation is not common, though examples do exist (see box 5 below). Part of the problem is that the Chicago Convention, which is the fundamental treaty on international civil aviation, prohibits the imposition of taxes or charges on fuel kept on board aircraft and consumed on international flights. This is often misunderstood to mean that taxes on aviation fuel are prohibited by international law, but this is not the case. The 1944 Chicago Convention only prohibits a State to apply taxes and charges on fuel already on board of aircraft arriving from another State, so no taxes are charged on international flights (Skinner and Fergusson, 2003, and Article 24 of the Convention).

Box 3: Examples of taxes and charges being applied to aviation in Europe for environmental reasons.

Zurich airport has operated a system whereby an emissions surcharge is added to the landing fee of an aircraft. The charge was introduced to encourage use of cleaner aircrafts and to accelerate the use of the best available technology. The revenues are used to fund emission reduction measures at the airport.
Sweden, in 1998 introduced a similar tax at a number of its airports – to ensure that the tax remained revenue neutral, landing fees were reduced.
Norway, in 1995 introduced a ‘green tax’ on domestic tickets for those routes where rail offered a suitable alternative, as well as for all international flights. In 1999, Norway also introduced a CO2 tax on kerosene for all domestic and international flights, although it later withdrew the tax relating to international flights under pressure from the aviation industry and neighbouring countries.

A Communication^[16] adopted by the Commission in March 2000 says that the taxation of air travel should be more closely aligned to the environmental costs of air travel. It recommends that Member States, in co-operation with the Commission, intensify work within the framework of the International Civil Aviation Organisation for the introduction of taxation of aviation fuel at the global level. This recommendation has been endorsed by the Council and the European Parliament.

However, bilateral Air Services Agreements (ASAs) between specific countries often go further than the requirements of the Chicago Convention and therefore some of these may impose further restrictions on the use of taxes in aviation. Through ASAs many States have agreed bilaterally, and on a reciprocal basis, to exempt fuels supplied to each others’ aircraft when engaged in international air transport services.

This used to be reflected in Community law through the 92/81 Directive on the harmonization of the structures of excise duties on mineral oils, where Member States were obliged to exempt kerosene for commercial flights from taxation. This however, changed on 1 January 2004, when the new Directive on restructuring the Community framework for the taxation of energy products and electricity (2003/96/EC) came into effect. The new Directive maintains the exemption of aircraft fuel but modified it by allowing Member States to waive it and tax national flights and - on the basis of bilateral agreements - intra-EU flights.

The new Energy Products Directive does provide opportunities that the Member States could take. However, it might be more appropriate for actions to be taken at EU level. The aviation industry is well aware of the increasing pressure to adopt instruments to tackle the growth in air transport and increased pollution. Hence, industry has been discussing voluntary initiatives – such as a voluntary trading programme for emission (Andersen, 2001).

The 33rd Assembly of the International Civil Aviation Organisation (ICAO) in 2001 endorsed the development of an open emissions trading scheme for international aviation, and requested the ICAO Council to develop, as a matter of priority, the guidelines for open emissions trading, focusing on the structural and legal basis for aviation's participation. The UK, which has the Council Presidency in the second half of 2005, is supporting this work and would prefer to see aviation in an emissions trading scheme^[17].

Aircraft fuel is clearly a product that does not include the costs of all the environmental impacts it creates, including e.g. emissions and noise. In accordance with the IPP principle of working with the market, it would make sense to introduce some economic instruments to ensure that prices better reflect the environmental damage caused.

4.3 Funding for the Environment

4.3.1 The EU Structural Funds^[18]

The biggest source of EU financial support for environmental investments is the Structural Funds. The principal purpose of the Structural Funds is to promote the economic and social development of disadvantaged regions, sectors and social groups within the EU and to ‘contribute to the harmonious, balanced and sustainable development of economic activities, the development of employment and human resources, the protection and improvement of the environment, and the elimination of inequalities, and the promotion of equality between men and women’.

The Structural Funds comprise the European Regional Development Fund (ERDF), the European Social Fund (ESF), the European Agricultural Guidance and Guarantee Fund (EAGGF) (Guidance section), and the Financial Instrument for Fisheries Guidance (FIFG). During the current programming period (2000-2006), resources available to the Structural Funds amount to €195 billion at 1999 prices, around 16% of which are expected to be spent on environment-related projects. In addition, a further €18 billion is available to the poorest EU Member States through a separate Cohesion Fund, 50% of which is set aside for large environmental infrastructure projects. Altogether, ‘cohesion’ expenditure accounts for over one-third of the Community’s annual budget, and so is an important lever in influencing developments in the EU’s Member States and regions.

Support from the Structural Funds is currently focused on three main ‘Objectives’. The first two are focused on specific geographical areas, while the third applies throughout the EU’s territory:

In addition, there are a number of so-called ‘Community Initiative’ programmes, which give the European Commission a bigger say in identifying priorities and recipients. From an environmental point of view, the most significant of these is INTERREG III, which focuses on cross-border and transnational co-operation on joint projects between Member States and regions. This is described in more detail in Annex III.

All of the Structural Funds have made significant direct contributions to environmental projects where these contribute to economic development – Box 4 gives an indication of the sort of projects, which have already received assistance. Beyond this, however, environment and sustainable development are one of three horizontal themes, which should be ‘mainstreamed’ across all vertical priorities, measures and projects in Structural Funds programmes.

Environmental infrastructure (e.g. water treatment, waster management)
Environmental enhancement for business (e.g. new business parks on derelict land)
Supporting the development of green technologies (See Box 4)
Developing new environmental services (e.g. recycling, repair, re-use, energy conservation)
Advisory services (e.g. environmental management systems)
Habitat management
Environmental training to support any of the above, through ESF

Revised Commission Guidelines issued to Member States by the Commission in 2003 for the period until the end of 2006 emphasise the importance of using the Structural Funds to advance the strategic objectives of the Lisbon Process (which seeks to make the EU the most competitive, knowledge based economy in the world by 2010) (European Commission, 2003). The Guidelines also refer to the EU SDS, and stress that financial support through the Structural Funds should support more than one dimension of development at the same time – examples include investments in eco-tourism leading to economic development as well as environmental improvement. In the field of energy conservation, for example, the Structural Funds may co-finance measures in Member States to implement Directive 2002/91 on improving the energy performance of buildings by up to 20% by 2010, through technical improvements in the heating, cooling and lighting of private and commercial buildings. Moreover, Structural Fund-supported ‘innovative actions’ in the field of research and development, the information society and sustainable development were in place in 122 of the EU’s 156 regions in 2003. Box 5 highlights a number of current Structural Fund projects aimed at encouraging environmentally-friendly production.

4.3.2 Future Structural Fund Regulations

The current Structural and Cohesion Fund Regulations expire at the end of 2006. Until then, finance can be committed for projects under the current rules, and the money can be spent up until 2008. The Commission’s proposals for revised Regulations for the period 2007-2013 were published in July 2004, and will be negotiated within the Council and European Parliament over the coming months. This gives an opportunity to ensure that IPP-related opportunities are given a higher profile in Structural Funds spending than at present.

The Commission’s Third Cohesion Report^[19] gave some indication of the Commission’s thinking on the future of the Structural and Cohesion Funds. The proposed €336 billion package will be even more closely focused on strategic EU policy priorities. Environmental projects will be given a higher profile – including support for investments related to NATURA 2000 sites. A major stakeholder consultation event to discuss the Commission’s blueprint – the Third Cohesion Forum – was held in Brussels in May 2004. This gave strong support to the Commission’s proposals – in particular that the priorities of Lisbon and Gùteborg should be reflected in national and regional priorities, with the overall objective of advancing sustainable development.

However, the pattern of Structural Fund spending is ultimately determined by programmes developed at Member State – or, more usually, regional – level, so there will be considerable discretion in setting national spending priorities and defining regional beneficiaries.

Action under the first two priorities will be closely tailored to three EU policy strategies:

The Commission therefore proposes the following three cross-cutting themes, which both of these priorities will need to ‘mainstream’:

Under Environment and Risk Prevention, there will be opportunities for direct support for environmental investments, especially in the poorest ‘Convergence’ countries. However, support for initiatives in IPP and the Environmental Technologies Action Plan (ETAP) should be available under all three cross-cutting themes. Indeed, the Commission cites as examples: support for promoting clean technologies in SMEs; sustainable urban public transport; and the development and use of renewable energy.

The new draft Structural and Cohesion Fund Regulations set out only the overall framework. More detailed guidance to Member States about priorities and eligible projects will be contained in EU Strategic Guidelines on Cohesion. This is expected to be adopted sometime in 2005 by the Council (General Affairs) after consulting the European Parliament, at the latest three months after the formal adoption of the new Structural Fund Regulations. The EU Strategy Paper will be more binding on the Member States than the Commission’s current Guidelines, so this will be an important document.

All Member State governments will be required to follow the EU Strategy Paper on Cohesion Policy in developing their own thematic and regional priorities in National Strategic Reference Frameworks to be negotiated with the Commission. These national strategy documents would then set the framework for more operational national and regional programmes.

It is important therefore for support for initiatives related to IPP and ETAP to be given prominence in these documents, but particularly in the EU Strategic Guidelines on Cohesion. For example, it could include guidance on green public procurement through Structural Funds spending; support for extending the take-up of environmental management systems such as EMAS; and the establishment and support through the European Territorial Co-operation priority of IPP networks to exchange experience and identify good practice. Capacity-building (e.g. regarding eco-design and environmental technologies) through the use of consultancy, research and training could also be supported through the Regional and Social Funds.

The final text of the new Structural Funds Regulations and the EU Cohesion Strategy paper will depend on agreement to a new overall Financial Perspective for 2007-2013. The Commission has proposed a budget considerably greater than that favoured by six Member States, and forthcoming negotiations in the Council could see some reduction in the draft Financial Perspective. This could have knock-on effects on the nature, size and distribution of the Structural Funds, but the major priorities outlined above are unlikely to change.

4.3.3 Other sources of finance

The Structural Funds offer the greatest scope for supporting IPP initiatives, but there are also alternative (but smaller) sources of funding. These include LIFE – the EU’s Financial Instrument for the Environment. This has supported a number of demonstration projects related to the development of clean technologies and the promotion of IPP. However, the budget for LIFE is very small, and competition for funding is fierce. Proposals for a new programme post 2006 – called LIFE+ - are expected from the Commission later in 2004.

Opportunities for collaborative research are also available through the current Sixth RTD Framework Programme. Proposals for a 7^th programme are also in the early stages of development.

Using this website as a source, authorities wishing to secure EU finance for IPP-related initiatives would be advised to put together a Funding Strategy, drawing support as appropriate from a range of programmes to reflect their location and specific priorities.

4.4 State Aid Guidelines^[20]

Apart from opportunities for advancing IPP through the EU Structural Funds, Member States may also give state aids for a range of environmental protection initiatives. However, these are constrained by EU guidelines designed to ensure fair competition and the integrity of the internal market.

Article 87 of the EC Treaty states that: ‘Any aid granted by a member state or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member states, be incompatible with the common market.’

Article 88 of the EC Treaty sets out the procedures to enforce this. In cooperation with Member States, the Commission reviews all systems of aid existing in those States, and proposes to the latter any appropriate measures required by the progressive development or by the functioning of the common market.

However, the EC Treaty also provides (in Article 6) that environmental considerations must be integrated into all other Community policies - including competition policy. However, when putting in place environmental initiatives EU governments and industry also have to respect competition law including not establishing forms of collaboration, rules or practices that would constitute unjustified obstacles to competition. State aid in general falls under the remit of the DG Competition.

Community guidelines on those national state aids for environmental protection that are permissible were last revised in 2001 (OJ C37 3.2.2001). The general approach of the guidelines is to allow State aid when necessary to ensure environmental protection and sustainable development without having a disproportionate effect on competition and growth. In each case, Member States have to notify the Commission of the proposed measures. Permitted aids focus particularly on the encouragement of energy efficiency measures; support for the development of renewable sources of energy, including combined heat and power (CHP) systems; and aid for the management of waste. Varying levels of national financial support – or exemption from national taxes - are allowed in particular for:

There is currently no specific reference in the Guidelines to support for firms seeking to apply IPP to their activities, but support for IPP initiatives could fall within any of these categories. The Guidelines have to be revised at the latest by December 2007 – and this is likely to be based on a review of Member State experiences in applying them.

In addition to Community guidelines on state aids for environmental protection, there are also sector-specific guidelines in respect of aids for e.g. transport, agriculture, energy and fisheries, which are determined by their respective DGs. There are also guidelines in relation to regional aids aimed at improving areas lagging behind in economic development. These are also subject to periodical review, and also could provide scope for advancing IPP initiatives.

4.5 Multiannual Programme for Enterprise^[21]

The current Multiannual Programme for Enterprise and Entrepreneurship^[22] (2001-2005) is a framework plan of activities targeted in particular at small and medium enterprises (SMEs). The priorities of the programme are:

In managing the Programme, the Commission is assisted by the Enterprise Programme Management Committee, composed of the representatives of the Member States. Discussions are starting on a new programme, since the present programme expires at the end of 2005.

4.5.1 Beyond 2005

A new Programme on the Competitiveness of Enterprises is to be adopted in 2005, replacing the current Multiannual Programme. The new programme is to stretch from 2006 to 2010.

A public consultation on the possible elements for the new enterprise programme took place in spring 2004. The Commission is to adopt its proposal for the new programme subsequent to the stakeholder consultation later in 2004. The Competitiveness Council and the European Parliament would then negotiate during 2005. The new programme should start on 1 January 2006.

In the Commission’s consultation document, Sustainable Development Strategies are mentioned among the guiding policy priorities for the new programme.

The proposal contains 18 ‘Actions’, a number of which could potentially have relevance for IPP and environment policy. The following actions have been assessed to be of particular interest to this project:

Among the proposals for Action 7 on access to finance for enterprises, particularly SMEs, there is no clear indication on how and if environmental concerns will be addressed, although the Environmental Technologies Action Plan is mentioned in a footnote. Similarly, under Actions 12, 13 and 14 there is no mention of how these activities will contribute to implementing the Environmental Technologies Action Plan, contribute to IPP or take into account other environmental concerns.

4.5.2 Why is the programme important for the Environment?

The programme is particularly targeted towards SMEs. While very few quantitative data on the contribution of SMEs to environmental problems exist, several studies have indicated that SMEs contribute substantially to the contamination of the environment and there seems to be enough proof to consider SMEs as an important contributor to the environmental impact of European industry (European Commission, 2004).

According to the Environmental Technologies Action Plan, the Commission will promote information exchange on training and education for procurers and users of environmental technologies. The ETAP also suggests that training programmes could, for example, be specifically targeted at SMEs on subjects like public procurement, IPP or EMAS. This idea is however, not fully reflected in the Enterprise programme.

According to a report, the European Commission (2004) carried out in the context of the ETAP, literature provides some practical recommendations for promoting environmental technology among SMEs. Good results can be expected from education and awareness-raising, aiming at making entrepreneurs aware of the environmental impact of their business and the benefits of environmental improvement. The report considers that financial support should be spent on the implementation of management tools and/or on incentives for the purchase of environmental technology.

Scope for promoting IPP concepts and environmental concerns
The IPP Communication states that ‘win-win situations need to be found where environmental improvements and better product performance go hand in hand and where environmental improvements support long-term industrial competitiveness’ and ‘This is what IPP seeks to achieve’.

Though the Commission proposal for the new enterprise programme contains an action for the promotion of corporate social responsibility and sustainable production, this is not substantially supported by the other suggested actions in the programme. One argument against earmarking a certain part of programme funding to address environmental concerns is that this kind of earmarking could encourage earmarking of certain sector policies as well. However, since integrating environment into other policies is a Treaty requirement, there seems to be an opportunity missed if the new programme does not in any way promote the environment.

In promoting the IPP approach and broader environmental concerns in this programme, one could therefore imagine that for Action 7 a part of the financial support to SMEs could be earmarked to activities aimed at improving the environmental aspects of product design, life-cycle assessment and marketing of green products and services. There could also be support for SME-activities related to implementing the Environmental Technologies Action Plan. Actions 12 and 13 could be used to support the development, diffusion, and transfer of environmental technology. Action 14 could support IPP and promote e.g. the EU’s Eco-Management and Audit Scheme (EMAS).

4.6 Thematic Strategies

The thematic strategies arising from the 6EAP represent a new approach to policy development in relation to a number of cross-sector themes. Ideally they bring together all relevant directorates-general and stakeholders, and consider a range of options and policy instruments for addressing them. As such, they represent a parallel approach to environmental integration to that represented by the Cardiff process, which has had a more sector orientation.

The development of each of the Thematic Strategies is being led by DG Environment, with varying levels of involvement of other DGs. Work on all the strategies is being co-ordinated by the Strategic Planning Unit of DG Environment.

Originally, there were to be seven of these strategies to be presented at the latest within three years from the adoption of the 6EAP thus by mid-2005, covering the areas of soil, pesticides, marine, air, natural resources, waste recycling, and urban. There are ongoing discussions on whether the ‘status’ as thematic strategies will also apply to the work ongoing on Biodiversity and on Health and Environment.

4.6.1 The link between IPP and the Thematic Strategies

The two Thematic Strategies, which seem most relevant for IPP are the Natural Resources Strategy and the Waste Prevention and Recycling Strategy. IPP is to be one of the main delivery tools for these.

The Commission Communication Towards a Thematic Strategy on the Sustainable Use of Natural Resources^[23] explores the linkages between the two strategies and IPP. Better knowledge of the overall life-cycle impacts of resources and products is needed to enable the EU to identify priority areas for intervention in relation to resource use and waste management. For example, there can be trade-offs between different phases in the life-cycle of resources and products: measures adopted to reduce environmental impacts in one phase can increase impacts in another phase. The aim should be to ensure that environmental impacts are minimised and environmental benefits maximised throughout the entire life-cycle. Sometimes very visible and dramatic impacts may be overestimated in comparison with more subtle long-term damage. For example, in relation to the manufacture of car tyres, the highly visible environmental impacts connected to the raw materials (rubber plantations, mineral oil extraction, refining etc) are actually small in comparison with the potential for reducing CO₂ emissions through more efficient tyre design.^[24]

Therefore, the two thematic strategies and IPP are complementary and need to be developed in conjunction with each other. The setting of targets in relation to the use of particular resources and in what quantities, and a ranking in importance of different categories of environmental impact, should be defined in the Resources thematic strategy. For its part, the IPP approach can reduce impacts at the waste stage, through consideration of such issues as design, industrial process and markets for recycled materials. Parallel implementation of the three initiatives will allow frequent feedback between them, helping to gradually improve the overall approach through an iterative learning process.

^[11] DG Economic and Financial Affairs (ECFIN) is responsible for drafting the BEPG and discussions in the Council takes place in the Economic and Financial Affairs formation.

^[12] Annual publication of DG ECFIN on recent and prospective economic developments and studies on specific topics which are judged of particular interest for economic policy making. The Review is also the starting point of an annual cycle of European economic policy discussion.

^[14] The Communication is a shared responsibility of DG Environment and DG Taxation and Customs Affairs.

^[18] Structural Funds are dealt with by DG Regional Policy (REGIO) and the General Affairs and External Relations Council.

^[20] State aid in general falls under the remit of the DG Competition and is dealt with in the Council formation for Competitiveness.

^[21] The MAP falls under the remit of DG Enterprise and is dealt with in the Competitiveness Council.

^[24] Resource Use, Products and Waste Policies: Three Facets of an Impact-based approach to Environmental Policy – Background Paper, Informal Environment Council, Waterford, Ireland 14-16 May 2004, p.2.

4 Specific Policy Items

4.1 The Broad Economic Policy Guidelines[11]