The EPR Obligations of the New Urban Wastewater Treatment Directive—Key Questions and Next Steps for Member States

The EPR Obligations of the New Urban Wastewater Treatment Directive-Key Questions and Next Steps for Member States

December 13, 2024, Covington Alert

On December 12, the European Union has published a new (recast) Urban Wastewater Treatment Directive ("UWWTD") in the EU's official journal. The UWWTD imposes important new Extended Producer Responsibility ("EPR") obligations that will have a significant financial and administrative impact on companies marketing human medicines and cosmetic products in the EU. Member States must implement the new UWWTD by July 31, 2027 and must apply the new EPR obligations to in-scope companies by December 31, 2028.

In a previous blog, we discussed the new EPR obligations in detail. In this alert, we outline the key financial provisions of the EPR obligations and raise different questions concerning Member States' discretion when transposing the EPR obligations into their national laws.

Extended Producer Responsibility under the UWWTD

The UWWTD requires Member States to ensure the treatment of urban wastewaters to remove micropollutants (so-called fourth stage, or "quaternary" treatment). Article 9 of the Directive also requires Member States to ensure that producers that market products listed in Annex III (i.e., human medicinal products and cosmetic products) have EPR obligations and pay, via producer responsibility organizations ("PROs"), for the costs of the quaternary treatment of urban wastewater, for data collection, and for other costs required to exercise their EPR.

Specifically, Article 9 requires that producers subject to EPR obligations must cover:

• At least 80% of the costs associated with quaternary treatment of wastewater to remove micropollutants. This includes both capital investments for building or expanding urban wastewater treatment facilities and operational expenses for the treatment facilities.
• 100% of the costs for gathering data on the products they place on the market.
• 100% of other costs (e.g., administrative) required to exercise their EPR.

As noted above, Annex III currently lists human medicines and cosmetics as the product groups covered by the EPR obligations. However, the UWWTD requires the Commission to assess the possible expansion of that list and to make the related legislative proposals by December 31, 2033.

National Implementation: Some Questions

The EPR obligations of the UWWTD will only apply to producers once Member States implement them into their national laws. The Directive requires Member States to adopt their national implementing laws by July 31, 2027 and to apply the EPR obligations not later than December 31, 2028. Member States may choose to apply the EPR obligations earlier.

The UWWTD leaves Member States with some discretion as to how they implement the EPR obligations, and also allows Member States to impose stricter and broader requirements. Recital 3 of the Directive makes this clear, as it states that "[i]n line with Article 193 of the [TFEU] Member States can go beyond the minimum requirements set out in this Directive. Member States could consider for instance […] imposing additional requirements for, or broadening the spectrum of the application of, their national extended producer responsibility systems."

However, Member States' discretion is not unlimited. A Member State cannot contradict the UWWTD's requirements or its objectives, including that of "implementation of the polluter pays principle."

When monitoring and assessing the national implementation of the UWWTD's EPR obligations, companies may want to watch out for the following issues, among others:

• Whether Member States may apply the UWWTD's EPR obligations (i.e., make producers pay) early, prior to December 31, 2028 and/or before Member States ensure the quaternary treatment of their wastewaters. A related question is the extent to which Member States can make producers pay for the investments that take place before the entry into force of the UWWTD.
• Member States may extend the EPR obligations to other sectors. This should also mean that Member States may make other categories of producers contribute to "at least 80%" of the costs of the quaternary treatment and 100% of the other EPR costs.
• Member States must ensure that producers pay on "the basis of the quantities and hazardousness in the urban wastewaters of the substances contained in the products they place on the market." This requirement and the polluter-pays principle that the UWWTD implements should prevent the consideration of factors like turnover or the value of the products that a company markets.
• The extent to which Member States will be able to apply the EPR obligations in a manner that is fully consistent with the polluter-pays principle or will in practice take into account other considerations.
• Recital 21 of the UWWTD requires Member States to "take into consideration the possible impacts of the application of the requirements of the extended producer responsibility on the accessibility, availability and affordability of products at national level, in particular medicines, placed on the Union market." The Recital adds that Member States may address such issues by, for example, ensuring that "sufficient funds are available, including by financing part of the costs for the quaternary treatment," but arguably could also adopt other measures.
• The UWWTD requires Member States to exempt producers from their EPR obligations if they demonstrate any of the following: (i) the quantity of the substances contained in the products they place on the Union market is below 1 ton per year; or (ii) "the substances contained in the products they place on the market are rapidly biodegradable in wastewater or do not generate micropollutants in wastewater at the end of their life." The Directive empowers the Commission to adopt implementing acts to establish detailed criteria on threshold (ii), "to specific categories of products and their biodegradability or hazardousness." In addition, arguably the quantity exemption (i) based on the 1 ton threshold should only apply to substances that do not already qualify for exemption (ii) under the biodegradability or micropollutant criteria.
• The UWWTD requires Member States to impose the EPR obligations on producers that "place on the market" the covered products. The UWWTD defines placing on the market by reference to the "market of a Member State." Arguably this should mean that the EPR obligations should fall on those companies that import covered products into each Member States even if they do not put their brand name on the product. This may also mean that Member States may have to establish producer registries as under other EPR waste take-back frameworks.

Whether Member States should introduce compensation mechanisms to ensure that, where products are first placed on the market of one Member State and subsequently placed on the market of another, only the entity importing the product into the final Member State contributes to the national PRO of that Member State.

If you have any questions concerning the material discussed in this client alert, please contact the members of our EU Life Sciences and Environmental practices.