In a Nutshell

The Environmental Liability Directive (ELD) establishes an EU-wide liability framework for environmental damages.  

It places obligations on operators that undertake certain industrial and agricultural activities, as well as those that are at fault for damage or have been negligent, making them liable for preventing and remedying any environmental damage caused by their activities. The Directive enshrines the ‘polluter pays’ principle in an effort to deter the occurrence of damage. It works in concert with other laws including the Wild Birds Directive, Habitats Directive, Water Framework Directive, Marine Strategy Framework, Industrial Emissions Directive, and CCS Directive.

Under the ELD, obligated operators must undertake preventive action where there is an imminent threat of environmental damage and remedial action where damage has already occurred, as well as bear the costs of such action.

The Directive is concerned with damage to protected species and natural habitats (which are those outlined in the Wild Birds Directive and Habitats Directive), to water and land, as well as with adverse changes in natural resources or impairment of a natural service.  

The Directive is relevant to carbon dioxide removal (CDR) as it sets obligations on operators of geological CO2 storage sites. These obligations are operationalised through the CCS Directive, which amends the scope of the ELD to cover the operation of CO2 storage sites. Operators are obliged to prevent the occurrence of, and take remedial action to address, environmental damage associated with the operation of such sites. This liability applies during the operational phase, but also during the closure and post-closure period. 

What's on the Horizon?

Under Article 18(2) of the ELD, the Commission must collect information from member states about their experience in applying the Directive, and in turn, undertake an evaluation that must be published before 30 April, 2023 and every five years subsequently. The evaluation is expected to consider the weaknesses in the ELD’s liability regime, as highlighted by the Parliament’s 2021 resolution, and may lead to revision of the rules for operators.

Deep Dive

How does the Environmental Liability Directive (ELD) work? 

The ELD establishes two categories of operator, subject to different liabilities: 

  • Strict liability: Occupational activities considered to be dangerous are outlined in Annex III of the Directive, as regulated under the Integrated Pollution Prevention and Control Directive. These operators face ’strict liability’, meaning a causal link does not need to be proven to make them liable for damage. In 2009, the entry into force of the CCS Directive amended the list in Annex III to include operators of geological CO2 storage sites.
  • Fault-based liability: Operators of activities not listed in Annex III must undertake measures when it can be proven that they are at fault.

In terms of the measures to be used by operators, Annex II of the Directive outlines a framework for remedying environmental damage, including primary, complementary, and compensatory remediation. Whilst primary remediation measures seek to return resources towards their baseline condition, complementary remediation seeks to provide the same level of resources elsewhere. Compensatory remediation addresses interim losses, and is undertaken during recovery, to fill the gap before primary and complementary measures have taken full effect.  

Regulating damages from CO2 storage

In the context of the CDR value chain, the Directive works in concert with the CCS Directive and ETS Directive to regulate damages related to CO2 leakage from storage sites, which could include BECCS and DACCS activities. While liability for environmental damage (i.e. damage to protected species and natural habitats) is regulated under the ELD, damage to the climate is regulated through the EU Emissions Trading System (ETS), whereby operators must surrender ETS allowances to address any leakage. Meanwhile, the CCS Directive, introduced in 2009, amended the Environmental Liability Directive to include operators of CO2 storage sites under Annex III.  

The CCS Directive outlines the obligations of storage site operators and competent authorities. These are outlined below.  

During operation:  
  • Where CO2 leakage has occurred, operators have an obligation to undertake ’corrective measures’.
  • Operators have a legal obligation to report leakages or irregularities, under the conditions of the storage permit as well as under the ETS Directive.
  • The CCS Directive does not outline what these ’corrective measures’ may be specifically, or how they differ from the ‘remedial measures’ of the ELD. It may be interpreted that, while corrective measures are measures to rectify direct and immediate harm, remedial measures under the ELD may refer to the wider environmental damage associated with leakage.
  • In addition to the corrective, preventive and remedial measures taken, ETS allowances must be surrendered by the operator per the ETS Directive. 
  • Where an operator’s storage permit is withdrawn, for example due to permit expiry or permit conditions not being met, the competent authority temporarily takes on the operator’s legal obligations such as those under the ELD but can recover any associated costs from the previous
During closure and post-closure:  
  • After a storage site has been closed, operators continue to be liable for the ‘preventive and remedial’ actions under the ELD (alongside their monitoring, reporting, and corrective measures obligations under the CCS Directive).  
  • After certain conditions are met to adequately close the site, the legal obligations and liabilities of the operator can be transferred to the competent authority. These conditions include a need for clear evidence that the CO2 is permanently contained and that the site has been sealed, and a minimum period of time (no less than 20 years) has elapsed.

Both the Environmental Liability Directive and CCS Directive provide that competent authorities can recover costs from the operator, where they have undertaken remedial or corrective measures.  

Scope of the ELD and applicability to CDR 

In the context of CDR, the Environmental Liability Directive and CCS Directive work together to manage the risk of environmental damage associated with CO2 storage operations, such as those in the BECCS and DACCS value chain. The scope of the ELD includes damage relating to: 

  • Protected species and natural habitats, defined under EU conservation legislation broadly as naturally occurring wild species in the European territory and their habitats;
  • Waters, defined under the Water Framework Directive as “’inland surface waters, transitional waters, coastal waters and groundwater’;
  • Land, not explicitly defined in the Directive.

Meanwhile the scope of CCS Directive includes geological storage in: 

  • Member state territories, exclusive economic zones (EEZs), and continental shelves under the UNCLOS definition.

Thus, the scope of the ELD is such that it applies strict liability to operators of geological storage activities in member state territories, EEZs, and continental shelves where damage to protected species and natural habitats, land, or water occurs.  

The ELD has been criticised for introducing ‘potentially uninsurable liabilities which dis-incentivise private sector investment in CCS technology […] in contrast with legislation in competing states including the United States, Norway, Canada and Australia’.  

 Due to its limited scope, the ELD does not directly contribute to more durable and secure storage of CO2. Instead, CO2 storage is overseen primarily through the CCS and ETS Directives. Thus, while it plays an important role as a deterrent for environmental damage, especially regarding the liability of storage site operators, the ELD cannot specifically penalise CO2 reversal events and their repercussions.  

Timeline

April 2004
23 April, 2009
March 2021
20 May, 2021
22 November, 2022
Upcoming
April 2004

Environmental Liability Directive signed into law

23 April, 2009

CCS Directive signed into law, amending the Environmental Liability Directive to include operators of CO2 storage sites. Revision of the ETS Directive to include carbon capture and storage, linking the ETS with the CCS Directive

March 2021

Publication of Commission Notice Guidelines clarifying the scope of ‘environmental damage’ in the Directive

20 May, 2021

Adoption of Parliament resolution highlighting limitations of the Environmental Liability Directive and calling for revision  

22 November, 2022

Study workshops on the 2023 Evaluation of the Environmental Liability Directive

Upcoming

Report on the Evaluation of the Environmental Liability Directive 

Official Document

Unofficial Title

Environmental Liability Directive 

Year

2004

Status