The European Green Deal is "the most effective policy framework worldwide to decarbonise the entire region, achieve zero pollution, protect and restore nature and use resources efficiently". With the aim of becoming a climate-neutral continent by 2050, the EGD brings a number of new and revised legislation. Given the close trade links between the EU and the Asia-Pacific region, many of these new policies have direct and indirect impacts on various sectors and stakeholders in Asia as well. On the one hand, manufacturers and exporters in Asia-Pacific will have to adapt to European standards in order to gain access to the EU market. On the other hand, the acceleration of decarbonisation, detoxification and the circular economy is creating new opportunities for businesses and industry in both interconnected regions.

What is the European Green Deal (EGD)?

The European Green Deal (EGD) is a comprehensive policy framework put in place by the European Union (EU) to transform its economy and society and make sustainability a central part of EU policies. Its main objectives are to achieve decarbonisation, zero pollution, nature protection and resource efficiency, with the ultimate goal of achieving climate neutrality by 2050. The EGD includes a number of laws, strategies and financial instruments that affect different sectors.

What are the main objectives of the European Green Deal?

The main objectives of EGD are:

• Achieve climate neutrality in the EU by 2050.
• Significantly reduce greenhouse gas emissions, with a legally binding target of reducing net emissions by at least 55 % by 2030 compared to 1990 levels.
• Achieve zero air, water and soil pollution.
• Protect, conserve and restore biodiversity and ecosystems.
• Support the transition to a circular economy that reduces waste and promotes reuse and recycling.
• Increase energy efficiency and the share of renewable energy sources.
• Ensure a just and inclusive transition that leaves no one behind.

What factors led to the introduction of the European Green Deal?

The introduction of the EGD was driven by several key factors. Firstly, the EU’s international commitments, notably those stemming from the Paris Agreement, needed to be translated into concrete legislation. Furthermore, the European Commission sees decarbonisation and green innovation as drivers of economic development. The strong demand for stronger climate action, expressed by movements such as Fridays for Future and the Global Climate Strike, with mass mobilisation ahead of the 2019 European elections and broad public support for stronger environmental protection, was also a significant factor. Despite the economic challenges and supply chain disruptions caused by the Covid-19 pandemic and the Russian invasion of Ukraine, the European Commission decided to proceed with the EGD, arguing that the transition to sustainability would increase the resilience of the EU and its economy.

How does EGD affect sectors outside the EU, especially in the Asia-Pacific region?

Many elements of the EGD are expected to have a direct or indirect impact on industrial sectors outside the EU, including the Asia-Pacific region. New rules and standards have been introduced for products and services sold on the EU market. Examples include the Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon tax on imported goods in carbon-intensive sectors, the EU Deforestation Regulation (EUDR), which bans imports of products linked to deforestation, and new requirements for product sustainability and traceability under the Circular Economy Action Plan and the Textile Strategy. These policies require manufacturers and exporters in the Asia-Pacific region to comply with European standards in order to gain access to the EU market.

Which specific policy areas within the EGD have an impact on the Asia-Pacific region?

Several specific policy areas within the EGD have a significant impact on the Asia-Pacific region:

• Climate and energy: CBAM directly impacts manufacturers in the Asia-Pacific region by exporting to the EU. Increasing renewable energy targets stimulate trade in renewable energy technologies.
• Circular economy: The Circular Economy Action Plan and related initiatives such as the Sustainable Products Initiative and the Right to Repair Legislation introduce requirements for sustainability, reparability and recyclability of products that are important for EU-Asia trade, such as textiles and electronics. Changes to the Waste Shipment Regulation affect the shipment of waste from the EU to Asia.
• Buildings and renovation: EGD's goal of making construction and demolition more sustainable and improving the energy efficiency of buildings impacts the trade in materials and components used in construction.
• Zero pollution: The Chemical Sustainability Strategy and the revision of the REACH Regulation will directly impact products manufactured in Asia for export to the EU as rules on hazardous chemicals are tightened.
• Deforestation and agriculture: The EU Deforestation Regulation (EUDR) prohibits the import of certain commodities linked to deforestation, requiring due diligence from importers and affecting producers in countries of origin.

What are the main challenges and opportunities for Asia-Pacific stakeholders as a result of EGD?

Challenges for Asia-Pacific stakeholders include the need to comply with new and more stringent European standards and regulations, which can lead to significant cost implications for production. There are also concerns that some regulations, such as the EUDR, may be burdensome for some manufacturers and may even exclude them from the market. On the other hand, EGD also creates opportunities. Accelerating decarbonisation, detoxification and the transition to a circular economy creates new opportunities for businesses and industry across the Asia-Pacific region in areas such as renewable energy, energy efficiency, sustainable production and circular business models. EGD can also stimulate innovation and changes in product design in countries seeking to export to the EU.

How is the EU addressing the concerns of non-EU stakeholders regarding the impact of EGD?

The EU is aware of the impact of EGD on third countries and seeks to address concerns through dialogue and cooperation. The EU offers capacity building and cooperation on sustainable practices. There is recognition of the need for EU policymakers to fully understand the impact of the new regulations on producers in third countries, especially small producers. It is also proposed that taxes collected by the EU, for example through CBAM, be reinvested to support decarbonisation in fragile emerging markets. The aim is not to hinder trade, but to ensure that products consumed in the EU do not lead to deforestation or other environmental damage.

What is the current status of EGD implementation in 2024?

In 2024, the EGD was rolled out with the adoption of a wide range of new legislation, including the Fit-For-55 package, which aims to meet the target of reducing emissions by 55 % by 2030. Key regulations on climate and energy, the circular economy, buildings, zero pollution and deforestation were introduced or revised. While the implementation of some initiatives, such as the sustainable food system, was delayed and environmental criteria under the Common Agricultural Policy were reduced, the EU remains committed to its climate neutrality and sustainability objectives, with the EGD being an ongoing process. The implementation timetable for some regulations, such as the EUDR, was extended to give businesses and countries time to adapt. Spring

European Green Deal – Knowledge Brief