Explanatory Memorandum to COM(2003)219 - Amendment of Directive 2002/96/EC on waste electrical and electronic equipment

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dossier COM(2003)219 - Amendment of Directive 2002/96/EC on waste electrical and electronic equipment.
source COM(2003)219 EN
date 29-04-2003
1. Introduction

Contents

1.

1.1. Overview of the financing obligations under the Directive on waste electrical and electronic equipment


The European Parliament and the Council recently adopted Directive 2002/96/EC on waste electrical and electronic equipment (WEEE) i. This directive provides for the collection and environmentally sound treatment of WEEE.

The financing of collection i, treatment, re-use, recovery and environmentally sound disposal of WEEE is to be provided by producers of electrical and electronic equipment. The Directive distinguishes between household and non-household waste on the one hand and new and historical waste, on the other hand. New waste is waste from products put on the market after 13 August 2005. Historical waste is waste from products put on the market before that date.

For the financing of new waste, producers are responsible on an individual basis. This applies both to household and non-household sources i.

For the financing of historical waste, there is a difference between household and non-household sources.

- For historical household waste, the financing is to be provided by "... all producers, existing on the market when the respective costs occur, contribut[ing] proportionately, e.g. in proportion to their respective share of the market by type of equipment. i"

- For historical waste from non-household sources, "the financing of the costs shall be provided for by producers. Member States may, as an alternative, provide that users other than private household also be made, partly or totally, responsible for this financing. Producers and users other than private households may, without prejudice to this Directive, conclude agreements stipulating other financing methods. i"

This means that for historical household waste, collective schemes apply where producers of new products pay for the financing of old products. For historical waste from non-household sources, in principle an individual system applies where producers of old products pay for the financing of their products put on the market in the past i.

The following sections only concern historical waste from non-household sources.

1.2. The effects of the financing rules on historical waste from non-household sources.

The take-back obligation for waste equipment put on the market in the past creates a retroactive liability for which no provision was made. The burden will vary depending on the volumes of equipment companies sold in the past. It will particularly heavy for companies which sold high volumes and whose sales are going down. New companies will not bear any obligation.

Concern has been expressed that, depending upon the size of the liability, companies already in difficulties might be forced into insolvency. Any such liability will be reflected in the accounts of the companies concerned.

2.

2. The debate in the European Parliament and the Council


The original Commission proposal i left the financing of historical waste from non-household sources to 'agreements between producers and users of the equipment at the time of purchase.' During the first reading, this provision was changed into a formulation stipulating that 'the financing of the costs of management shall be provided for by producers.' At that time, this was acceptable to all institutions.

Only during the final stages of the adoption of the WEEE Directive was the attention of the institutions drawn to the financing implications of Art. 9 of this Directive. As no second reading amendment was made on this article, it was impossible to change the text at that stage. However, the European Parliament, the Council and the Commission agreed on a Joint Declaration i:

"Noting that concerns have been raised about the possible financial implications for producers of the present wording of Article 9, the European Parliament, the Council and the Commission declare their common intention of examining these issues at the earliest opportunity. Should these concerns prove to be founded the Commission states its intention to make a proposal to amend Article 9 of the Directive. The Council and the Parliament undertake to act expeditiously on any such proposal in accordance with their respective internal procedures."

This proposal follows up this declaration.

3.

3. Timing of this proposal


The Council, Parliament and Commission underlined the need to examine this issue at the earliest opportunity. This urgency is based on the need to adopt this revision before the WEEE Directive is transposed into Member States legislation, i.e. before 13 August 2004. Otherwise, all national legislation adopted by then would have to be revised. This urgency is also one of the reasons why the Commission did not undertake a separate study.

4.

4. The proposed revision


5.

4.1. Scope of the revision


This proposal is limited to clarifying the rules applying to the financing of historical waste from non-household sources in Article 9, so as to avoid the concerns raised in relation to the implications. The proposal does not alter any of the rules applying to household sources nor the individual responsibility applying to the financing of new waste from non-household sources nor any other aspect of the WEEE Directive.

6.

4.2. Content of the revision


The proposal changes the responsibility to finance historical waste from non-household sources from producers of the waste equipment to producers supplying a new product, where such a new product exists. For historical waste that is not replaced by new products, the users other than private households shall be responsible. This is done by amending the first sentence of the second paragraph of Article 9 of the WEEE Directive, as adopted by the European Parliament and the Council to read as follows.

"Member States shall ensure that, by 13 August 2005, for WEEE from products put on the market before 13 August 2005 (historical waste), the financing of the costs of management is as set out in the [following two] subparagraphs.

For historical waste being replaced by equivalent products or by products fulfilling the same function, the financing of the costs shall be provided for by producers of those new products when supplying them. Member States may, as an alternative, provide that users other than private households also be made, partly or totally, responsible for this financing.

7.

For other historical waste, the financing of the costs shall be provided for by the users other than private households."


8.

4.3. Reasoning for the proposed revision


At the time of conciliation, the main argument brought forward by industry was that accounting rules may have the effect of requiring accruals reflecting the financing obligation to be settled in the future as historical equipment becomes waste. Fears were expressed that this might endanger the financial viability of companies already in difficulty. It should be noted that the recognition of accruals (or not) will not affect the actual cash flows resulting from the financing obligations. These are fixed by the obligations and not by the subsequent accounting, which merely reflects the obligations that exist. Accordingly, it is these financing obligations which are the focus of this proposal.

In order to eliminate a disproportionate burden on some companies with a large market share in the past, the responsibility for financing the take back of historical equipment has been revised and no longer lies with the producer of the waste equipment.

In this proposal, this is done by changing the responsibility from the producer of the waste equipment to the producer of new equipment when selling a new product that replaces products of equivalent type or fulfilling the same function. This will limit the financing implications for producers to the costs for waste equipment taken back when a new product is sold. Therefore, these costs will only occur if companies sell new products. In addition, there may also be historical waste for which there is no replacement by new products. In this case, the users other than private households will be responsible for financing the take back costs. These changes will also eliminate the problem of orphan waste from companies which no longer exist.

This change of responsibility may be perceived as being in contradiction to the polluter pays principle. It should be noted, however, that at the time when historical waste was put on the market, there was no legislation implementing the polluter pays principle in the sense of the rules for new equipment of Directive 2002/96/EC. Therefore, it may be correct that the past legislative situation was in contradiction to the polluter pays principle. However, it is difficult to distinguish whether the producer or the user is the polluter. It is therefore debatable whether attributing a liability to the producer of original equipment is a correct implementation of the polluter pays principle. Whatever view is taken on this, it will be impossible to correct this situation without creating a retroactive liability with all consequences described above. In summary, the proposal is no more against the polluter pays principle than the past legal situation and the choice is either to accept this historical bias or to create a retroactive liability with all the consequences described above.

The proposal will not have any impact on design incentives as it only covers waste from products already sold and in use before the financing obligations of the WEEE Directive take effect.

9.

4.4. Subsidiarity


The proposal leaves the detailed arrangements to Member States. This also includes the possibility for Member States to set more detailed rules on the responsibilities of users to prepare the collection of equipment. As long as the general principles of financing are harmonised, no major distortions of competition within the Internal Market are expected. Therefore, the principle of subsidiarity should apply.

10.

5. Economic, environment and social implications of the directive


11.

5.1. Evaluation of economic costs and benefits and impacts on business


The proposed revision is expected to lower the costs of implementing the WEEE Directive slightly by eliminating the disproportionate financial burden that companies with a declining market share might face as a result of their obligations under the current version of Article 9.

The overall cost of financing the collection, treatment, re-use, recovery and recycling of historical waste from non-household sources is unlikely to change substantially. In the original Commission proposal i, the costs for these operations were estimated at around 100-200 million EUR per year for the EU 15. Assuming an average lifetime of 10 to 20 years, liabilities under Art. 9 of the current version of the WEEE Directive could amount to between 1 and 4 billion EUR. It should be underlined, though, that this is a rough estimate as there is very little information on the collection and recycling costs of non-household equipment.

12.

5.2. Evaluation of environmental benefits


The environmental benefits will not change compared to the current version of the WEEE Directive. This is because the proposal will only affect the way financing is provided for historical waste from non-household sources.

13.

5.3. Social aspects


The proposal might avoid the potential loss of employment which might be the indirect effect of disproportionately burdensome obligations for companies which had a larger market share in the past.

14.

5.4. Evaluation of impacts on Acceding and Candidate Countries


The Directive is expected to reduce economic and social costs of Directive 2002/96/EC in Acceding and Candidate Countries in the same way as for the current Member States. It is expected to be neutral for environmental aspects.