Packaging levy puts directive to test

Date: 11/07/1996

By Michael Mann

LUXEMBOURG has been warned that its plans to introduce an 'eco-tax' on packaging could undermine the internal market and break EU law.

In a crucial test case for member state efforts to put the infamous Packaging Directive into national law, the Commission has told Luxembourg that proposed measures to reduce waste from drinks packaging could discriminate against imports and cannot be justified on environmental grounds.

But the decision was not made without a lengthy internal dispute within the Commission which has delayed its opinion on the draft measures for almost three months.

While Directorates-General III (industry) and XV (internal market) insisted that the proposed laws must be examined very closely to ensure they did not constitute an unfair barrier to trade, officials claim that DGXI (environment) took the opposite view, believing Luxembourg could argue that its system was supported by environmental arguments.

After a number of meetings between the different services, the former view has prevailed, although Environment Commissioner Ritt Bjerregaard and the Commission's legal service have succeeded in getting the language of the original 'detailed opinion' watered down.

The finishing touches are now being put to the opinion which will be sent to Luxembourg, in what one industry expert described as “a major victory” for Industry Commissioner Martin Bangemann's Cabinet.

Luxembourg must now provide the Commission - as well as France, Italy and the UK, who have expressed similar concerns - with detailed evidence that its measures are proportional to achieve the proposed environmental goals and are based on sound scientific evidence. Otherwise it could face legal action.

The plan envisaged by Luxembourg would establish two systems, one for deposits on refillable drinks packaging and a second for recovering recyclable packaging. Anyone who failed to respect set quotas for refillable and recyclable packaging would be subject to a financial sanction in the form of an eco-tax.

The Commission stresses that the outcome of this case will set “a significant precedent for the evaluation of similar cases”.

According to John Robinson of Robinson Linton Associates, the Commission's action is an important signal “for those who say that governments cannot be allowed to go ahead and introduce such measures on environmental grounds that have not been proven”.

Germany has already run into trouble with the Commission for its insistence on favouring refillable packaging over recyclable containers.

Luxembourg has told the Commission that its refillable quotas are based on the same unpublished German study on which Bonn based its disputed packaging quotas.

The Luxembourg case differs from the German model in its use of an eco-tax. A spokesman for Bangemann insisted that the Commission had nothing against eco-taxes, but added: “We must ensure they are proportional and non-discriminatory against products from other member states.”

According to the Commission, 90&percent; of drinks produced in Luxembourg are marketed in refillable containers, while only 35&percent; of imported drinks containers can be refilled.

As 70&percent; of all drinks consumed in the country are imports, the Commission believes a legal requirement to sell a set percentage of each type of drink in refillable containers could amount to discrimination against imports, “imposing supplementary costs on products not bottled on the Luxembourg market or close by”.

It points out that milk, the one product produced in Luxembourg in large volumes in non-reusable packaging, is exempted from the plans.

Bangemann's officials suspect that it is not possible to prove that refillable packaging always has clear environmental advantages over recyclable bottles and cartons. Instead, each product must be considered on a case-by-case basis.

With Germany apparently determined to defend its corner against charges that its own Packaging Ordinance is an illegal barrier to trade, many in the sector are watching to see how the Commission proceeds in the Luxembourg case.

Bob Schmitz of Beverage Can Makers Europe believes the most important thing is to “know exactly what the rules of the game are and have the full facts at our disposal”.

He also highlights the apparent unwillingness of Internal Market Commissioner Mario Monti to involve himself in such obvious threats to the smooth running of the single market. “The German file has not been closed, but it has apparently been handed over to DGXI,” he said.

The result of the current dispute is likely to have a major bearing on other member states as they struggle to put the Packaging Directive on to their statute books.

They were supposed to have notified what measures they planned to take by 1 July, but Commission officials confirmed they had, as yet, received no notification from Italy, Greece, the UK, Finland or Sweden.