Revision of the Industrial Emissions Directive (IED): will the EU bodies be able to find a compromise?

The European Parliament and the Council have now adopted their respective positions on the European Commission’s Proposal for a Directive amending Directive 2010/75/EU on industrial emissions (the “IED”) and Directive 1999/31/EC on the landfill of waste (the  “Commission Proposal”) and “trilogues” negotiations can now start.

The Proposal was published on 5 April 2022 (see our previous blog post). 

Although the EU institutions have divergent positions on crucial elements of the Proposal, we expect negotiations to wrap up with a political agreement by the end of 2023.

Key takeaways 

• The scope of the IED will be extended to certain extractive activities, but it is still unclear how it will apply to livestock farms.
• The IED will include incidents or accidents that significantly affect human health (in addition to the environment) and in-scope operators would have to put in place an environmental management system.
• There is an increased focus on private and public enforcement.
• The Parliament and the Council did not support the Commission’s proposal to reverse the burden of proof in favour of the victims of breaches of IED permits.
• The Parliament supported the Commission’s proposal to impose significant penalties for non-compliance calculated based on the operators’ annual turnover in the relevant Member State or in the EU.

Context

The IED is the main EU instrument regulating pollutant emissions from Europe’s large-scale industrial installations, as well as of livestock farms (agro-industrial installations). 

It currently requires around 52,000 installations (such as power plants, refineries, waste treatment and incineration, production of metals, cement, glass, chemicals, pulp and paper, food and drink, and the intensive rearing of pigs and poultry) to have integrated permits granted by the authorities of Member States, which include, among other things, emission limits. 

The IED also requires operators to immediately take measures to limit the environmental consequences of any incident or accident significantly affecting the environment and to prevent further possible incidents or accidents. 

The main amendments proposed by the Commission concern the introduction of a right for individuals to claim compensation for health damage caused by breaches of industrial plants' IED permits. The Commission proposes to reverse the burden of proof in favour of the victims of such breaches (see our previous alert). The Commission Proposal also specifies minimum penalties in case of infringement of the IED.

The Parliament adopted its position (“Parliament Position”) on the Proposal on 11 July 2023 (see press release). 

The Council had already adopted its general approach on 16 March 2023 (“Council Approach”) (see press release).

The Parliament’s plenary session vote took place amidst a climate of increased pressure from both within and outside the Parliament that seeks to water down ‘green initiatives’. Indeed, echoing the French President Emmanuel Macron's and the Belgian Prime Minister Alexander De Croo’s public calls for a regulatory break (see here for instance), the European People’s Party – which is the largest group in the European Parliament – has called for a moratorium on new environmental legislation. This recent movement has also had its toll on several other Commission proposals, including in respect of the Nature Restoration Law proposal. 

Council and Parliament positions on key aspects of the Proposal

Scope of application of the IED

The Commission suggested bringing the extraction of industrial and metallic minerals, as well as large installations undertaking the manufacturing of batteries, within the scope of the IED - as well as adding more livestock farming and industrial activities, including all cattle, pig and poultry farms with over 150 livestock units.

The Council is generally aligned with the extension of the scope, although with some amendments such as exclusion of certain mining activities and raising the application barrier for livestock farming and industrial activities. 

The Parliament refused to extend the current rules on livestock farms (thus leaving the requirements to apply to major farms only) and would also like to exclude cattle farming from the scope of the IED all together, as this was seen as too controversial.

Limiting the consequences of incidents or accidents

As mentioned above, the current IED requires operators to limit the consequences of and prevent future incidents or accidents that significantly affect the environment. Now, the three EU bodies propose to amend Article 7 so as to include incidents or accidents that significantly affect human health as well.

In addition, the three EU bodies would require operators to put in place an "environmental management system" (“EMS”), which should include at least:

• environmental policy objectives for the continuous improvement of the environmental performance and safety of the installation;
• objectives and performance indicators in relation to significant environmental aspects;
• for installations covered by the obligation to conduct an energy audit or implement an energy management system, inclusion of the results of that audit or implementation of the energy management system;
• a chemical inventory of the hazardous substances present in or emitted from the installation;
• measures taken to achieve the environmental objectives and avoid risks for human health or the environment; and
• a transformation plan.

Public access to IED permits

In its Proposal, the Commission suggested that Member States should ensure that a summary of each permit granted pursuant to the IED is made available to the public. 

This suggestion was backed by the Parliament. However, the Council does not agree with this insertion.

Private enforcement

The Commission’s revision of the IED seeks (among other things) to ensure access to justice for private individuals and civil society (including effective redress) in relation to permitting, operation and control of these regulated installations by introducing a new Article 79a. This would include the right to claim and obtain compensation from the relevant operator and, where appropriate, from the relevant competent authorities responsible for the breach. 

The Parliament supports this but the Council proposed to delete the right to claim and obtain compensation from competent authorities.  

Legal standing of civil society organisation

Under the Commission Proposal, civil society organisations should also be empowered by Member States to engage in proceedings to represent the individuals affected and to bring collective actions for compensation.

The Parliament wants to go further and grant legal standing to any sub-national public authority whose territory or population could be adversely affected by the failure to comply with the IED. 

The Council, however, does not agree and wants to delete the relevant provision.

Reversal of the burden of proof 

The Commission Proposal provides that, where an individual can provide sufficiently robust evidence to give rise to a presumption that the violation of the IED is at the origins of the damage caused to their health, or has significantly contributed to it, it should be for the defendant to rebut that presumption in order to escape liability.

Much ink has been spilled on this reversal of the burden of proof. However, neither the Council nor the Parliament were convinced. 

The Council Approach no longer contains this reversal of the burden of proof. 

And the Parliament suggests that Member States would have to ensure that clear and consistent scientific data that demonstrate a causal link between the damage and the infringement of the IED are recognised in their national laws as evidence. Courts and administrative authorities would be able to request relevant information from the defendant.

Time limitation period

Finally, the Commission and the Parliament would require Member States to ensure that the limitation periods for bringing actions for compensation are not shorter than five years and that such periods do not begin to run before the infringement has ceased and the person claiming the compensation knows or can reasonably be expected to know that he or she suffered damage from the breach.

This is generally supported by the Council, with the important nuance that the latter would leave it to the Member States to decide the limitation period and would not impose a minimum period of five years.

Public enforcement

As per the Commission Proposal and the Council Approach, competent authorities would be granted the power to suspend permits in situations where a breach of permit conditions causes a danger to human health or significant adverse effects upon the environment. The Parliament would also grant this power to competent authorities where a breach of permit conditions causes an immediate danger to drinking water intake.

Amendments are also made by the Commission and the Parliament to Article 79 of the IED to specify minimum penalties. The Parliament supported the Commission’s proposal on fines proportionate to the turnover of the operator. 

The Commission suggested that the maximum amount of such fines should be at least 8% of the operator’s annual turnover in the Member State concerned, while the Parliament proposed to cap the fines at 4% of the operator’s annual turnover in the EU. 

Both bodies would also make clear that such penalties are without prejudice to Directive 2008/99/EC on the protection of the environment through criminal law (see our previous blog post). 

The Council would rather leave the size of the fines to the discretion of Member States - as long as the penalties are effective, proportionate and dissuasive, and take into consideration the nature, gravity and extent of the infringement, the population or the environment affected by the infringement and the repetitive or singular character of the infringement.

Legal standing in review procedures 

The three EU bodies agree to amend the IED  to ensure that a person is able to challenge the validity of an environmental permit regardless of whether it participated to the permit procedure at an earlier stage.

Next steps 

The Parliament and the Council can now start the "trilogues" to try and reach a political agreement. We expect negotiations to wrap up with a political agreement before the end of 2023 (during the current Spanish presidency of the Council).

Once a political compromise has been reached, the co-legislators would then need to formally adopt the Directive. Once published in the Official Journal of the EU, Member States would have 18 months (or, in the Council’s view, 24 months) to transpose the Directive into their national laws. The Council also suggests a transitional period for different types of activities. 

Linklaters will continue to monitor these developments closely.

If you would like to discuss any aspect of this proposal, please reach out to the contacts on this post, or to your usual Linklaters contact.