Parliament and Council Come Close to Agreement on Proposed Energy Labelling Regulation

The EU Council and the Parliament are coming close to reaching agreement on a proposal to reform energy efficiency labels placed on products such as refrigerators, cooking appliances, dishwashers and washing machines. The proposal has been discussed in ‘trilogue’ negotiations between the two co-legislatures and the Commission since autumn, with hopes that an agreement on a final text could be reached by the end of the year. However, this looks increasingly unlikely following reports that hammering out the agreement’s more political points is being delayed over procedural questions.

Hong Kong traders familiar with the energy labelling of electrical appliances will recall that in July 2015, the European Commission proposed to revise the EU’s requirements for energy labelling in order to return to an A-G energy labelling scale.

Current energy efficiency labels generally rank products from H, the least efficient class, to A+++, the most efficient. However, consumer and environmental groups have noted that the existence of the top three classes - A+, A++ and A+++ - misleads customers, who may reasonably believe an A class appliance is the most efficient appliance on the market, when in fact it could be one of the least, depending on the product group. This is because technological developments have gradually pushed most products into the top classes over the past few years.

Now, a recent draft text showing the state of negotiations between the EU Council and the Parliament, on the Commission’s legislative proposal, reveals that both institutions are prepared to agree on revising energy labels for products where 30% of models in the product group fall within the highest A class.

It also appears that negotiators have provisionally agreed to rescale energy label requirements when 50% of products in a group fall into the two highest energy efficiency classes A and B. This reflects the proposal agreed on by the Parliament on 6 July 2016 (see: Regulatory Alert-EU issue 15/2016).

The Council and Parliament have agreed to make this latest proposal forward-looking. The draft agreement, therefore, provides that when a label for a new class of products is introduced, or a label for an existing product group is being rescaled, the efficiency requirement should be set in such a way that no products come within the highest class immediately. Rather, the requirements will be set with the intention that most models would come within that highest class only after 10 years.

As reported, the draft text also confirms that the EU’s co-legislative institutions have provisionally agreed to give retailers, operating online or out of physical shops, fourteen working days to replace old energy labels with updated ones. This represents a compromise between the Parliament, which wanted to give retailers three weeks, and the Commission, which thought that only one week would be optimal.

However, despite these hard won compromises, some of the proposal’s more contentious provisions are yet to be agreed upon. In fact, energy ministers from the EU’s twenty-eight Member States were keen not to overstate the amount of progress that has been made. They noted that after three rounds of negotiations, agreement had only been reached on most “non-core political issues”, such as scope, definitions, harmonised standards and market surveillance. However, core issues were yet to be resolved.

In particular, the Parliament and Council are still at odds over the procedural question of what type of act should be used to develop secondary legislation under the proposed Regulation. The Council is pushing for implementing acts to be the chosen instrument while the Parliament would prefer to see delegated acts being used.

Delegated acts are viewed as closer to actual law-making and constitute an explicit decision by EU legislators to grant the Commission power to amend or supplement the original legislation. Implementing acts, in contrast, deal with more procedural matters and concern themselves with how the agreed law is to be applied in practice.

This rift has caused delays in agreeing on the finalised proposal. The Council has attempted to put the blame for this hold-up on the Parliament, with Germany saying that the latter “has made this almost a question of struggle for power.”

Another issue still to be worked out between the two co-legislatures is when exactly the updated energy labels, featuring the A-G classification, should be applied to new products.

The Parliament’s latest compromise, proposed on the 29 November 2016, has put the timeframe at four years from the entry into force of the Regulation, for most existing product groups already subject to energy labelling. However, the Council has called for an even longer timeframe.

Nevertheless, it is reported that for all products, with the exception of water heaters and space heaters, members of the European Parliament (MEPs) appear willing to agree to a longer timeframe of twelve years.

Hong Kong manufacturers and suppliers of products that are covered by the proposal and that are marketed in the EU will probably want to monitor these legislative developments closely, and understand how these future changes may affect their businesses.