Letter: Brussels is creating a green spaghetti bowl of regulation

This letter was first published in the Financial Times. Read the full text here.

We agree with many of the points included in your article on the backfiring of the “Brussels effect” across a spectrum of rules and new regulations, and its inability to influence trading partners (Report, December 15). However, we would like to emphasise how this reflects regulatory over-reach, combined with value-chain ignorance, as well as increased industrial protectionism.

The postponement of the EU’s deforestation regulation (EUDR), and stakeholders’ lack of preparedness to comply, demonstrates a profound disconnect regarding the complexity of global agricultural production systems and value chain organisation. For example, most coffee production in Ethiopia — the birthplace of coffee — is grown on farms of less than 0.5 hectares, outside the “forest” definition and therefore not subject to the full EUDR requirements.

However, because the auction system aggregates all coffee for purchase, compliance will still be required: it is nigh impossible to differentiate coffee grown from less than, or more than, 0.5ha, with significant investments that systems cannot, and should not, absorb.

It is right to emphasise the role of international business and the EU’s ability to “hold sway”. A more positive picture is painted in your article regarding the influence of the EU’s carbon border adjustment mechanism (CBAM) on third-party country carbon pricing schemes (even though the ways and means through which carbon prices paid in third-party countries will be deducted remain to be seen). However, the EU’s global climate leadership now sits uneasily alongside growing industrial protection in strategic sectors — reducing the “sway” of CBAM and incentives for global decarbonisation.

Steel is a case in point: the culmination of a set of proposed measures in the “steel and metal action plan” launched this year (e.g., the proposed permanent steel safeguard, ongoing development of a lead market and low-carbon steel standards, eco-design and performance requirements) all risk a new green spaghetti bowl of overlapping rules and incredible compliance challenges.

The impact looks set to be an EU market semi-closed to steel imports from certain countries, reducing incentives for third-country producers under CBAM to invest in cleaner production.

Moreover, the envisioned additional export restrictions on scrap steel — a low-hanging fruit to decarbonise steel — could stall decarbonisation efforts further by trading partners. It is hard to justify these measures, by any standard of sustainability or enlightened regulation.