A few weeks ago on the 12th of June, The European Union confirmed in a letter to BIPAVER that tyre retreading was indeed taxonomy-compliant in what was undoubtedly an important victory for the sector. The letter from the European Union stated that retreading was compliant with section 5.4 of the Environmental Delegated Act. As we have touched upon in other pages of Retreading Business, this isn’t a standalone victory as the taxonomy regulations form a part of a wider, contradictory and challenging regulatory environment for tyre retreading.
That being said, in this piece we thought we would take some time explaining the ins and outs of EU Taxonomy, what it is, and why it is important for tyre retreaders and fleets in Europe.
What is EU Taxonomy and the motivation behind the regulations?
So, as the subtitle suggests, let’s start with breaking down EU Taxonomy.
EU Taxonomy is a classification system that came into force in July 2020 to define which economic activities can be considered environmentally sustainable. The motivation behind its implementation was to help guide investment towards projects and economic activities that align the European Green Deal and the EU’s Goal to become climate neutral by 2050.
Now, the next few paragraphs are going to be quite heavy in the legal mechanics of taxonomy, but please stay with us. It is significant – We promise!
The EU Legislation provides a set of taxonomy activities that are defined as critical for six environmental objectives, and these environmental objectives are covered by delegated acts (The Climate Delegated Act and The Environmental Delegated Act). If an economic activity is included in a delegated act, i.e., taxonomy-eligible, it can substantially contribute to one or more environmental objectives under the Taxonomy Regulation. However, crucially, it must also not significantly harm the other objectives.
A key aspect to note is that for any activity to be classified as taxonomy-compliant, it only needs to meet one set of criteria for either act to qualify under the framework.
Now let’s take a quick look at the environmental objectives that an activity needs to comply with to be considered compliant. The first two EU taxonomy objectives are covered by the Climate Delegated Act, and these objectives are as follows:
- Climate change mitigation
- Climate change adaptation
Now onto the final four objectives, which are covered by the Environmental Delegated Act. These objectives are outlined as follows:
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
Benefits of EU Taxonomy Compliance for Tyre Retreaders and Fleets
Now that we’ve understood the objectives and motivation behind EU taxonomy and its role, the moment has arrived to analyse what this means for the tyre retreading industry and how it can benefit from the European Commission’s confirmation of EU-taxonomy compliance.
The European Union’s official recognition of retreaded tyres as taxonomy-compliant does have major implications for fleet operators, transport providers and retreaders.
Starting with transport providers and fleet operators, the news could help open doors to green financing and investments, as these organisations can now claim alignment with the EU Taxonomy through green loans and ESG-Linked funding, which often require taxonomy compliance. The announcement has also given fleets further proof of environmental sustainability of retreads with the companies now being able to demonstrate alignment with the EU’s circular economy goals. This could be significant in tenders, public procurements and corporate sustainability reports.
As for retreaders, they do finally have legal clarity that their products are taxonomy-aligned under section 5.4 of the Environmental Delegated act, thus giving them the opportunity to market their products as compliant with EU Green standards, as well as providing added marketing leverage with fleets, municipalities and green investors. Furthermore, considering that many public and EU-funded projects require sustainability screening, this clarification does at least make retreaded tyres eligible for inclusion in such contracts, potentially putting retreaders in a stronger position when it comes to public procurement.
The positive nature of the news was supported by Michael Schwämmlein, Technical Secretary of BIPAVER in their original announcement. “This is a decisive step for the retreading industry and for Europe’s circular economy. Retreading conserves raw materials, reduces waste, and cuts CO₂ emissions. With this regulatory clarity, fleet operators and public authorities can confidently integrate retreaded tyres into their sustainability programmes.”
Although there is no denying this is progress for BIPAVER and the European Retreading Industry, the contradictions in other regulations may prevent the industry from seeing the full benefit of this news in the short-term. These contradictions will be covered in our next and final article on EU taxonomy, where we will analyse how these related regulations undermine the industry.
