19.6.2018   

EN

Official Journal of the European Union

L 156/1

(1)

The European Council in its conclusions of 23-24 October 2014 on the 2030 climate and energy policy framework endorsed a binding target of at least a 40 % domestic reduction in economy-wide greenhouse gas emissions by 2030 compared to 1990, and that target was reaffirmed in the European Council’s conclusions of 17-18 March 2016.

(2)

The European Council conclusions of 23-24 October 2014 stated that the emissions reduction target of at least 40 % should be delivered collectively by the Union in the most cost-effective manner possible, with the reductions in the European Union emissions trading system (‘EU ETS’) laid down in Directive 2003/87/EC of the European Parliament and of the Council (4) and in non-ETS sectors amounting to 43 % and 30 %, respectively, by 2030 compared to 2005, with efforts distributed on the basis of relative GDP per capita.

(3)

This Regulation forms part of the implementation of the Union’s commitments under the Paris Agreement (5) adopted under the United Nations Framework Convention on Climate Change (‘UNFCCC’). The Paris Agreement was concluded on behalf of the Union on 5 October 2016 by Council Decision (EU) 2016/1841 (6). The commitment of the Union to economy-wide emission reductions was set out in the Intended Nationally Determined Contribution submitted in view of the Paris Agreement by the Union and its Member States to the Secretariat of the UNFCCC on 6 March 2015. The Paris Agreement entered into force on 4 November 2016. The Union should continue to decrease its greenhouse gas emissions and enhance removals in line with the Paris Agreement.

(4)

The Paris Agreement, inter alia, sets out a long-term goal in line with the objective to keep the global temperature increase well below 2 °C above pre-industrial levels and to pursue efforts to keep it to 1,5 °C above pre-industrial levels. Forests, agricultural land and wetlands will play a central role in achieving this goal. In the Paris Agreement, the Parties also recognise the fundamental priority of safeguarding food security and ending hunger, in the context of sustainable development and efforts to eradicate poverty, and the particular vulnerabilities of food production systems to the adverse impacts of climate change, thereby fostering climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production. In order to achieve the objectives of the Paris Agreement, the Parties should increase their collective efforts. The Parties should prepare, communicate and maintain successive nationally determined contributions. The Paris Agreement replaces the approach taken under the 1997 Kyoto Protocol, which will not be continued beyond 2020. The Paris Agreement also calls for a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, and invites Parties to take action to conserve and enhance, as appropriate, sinks and reservoirs of greenhouse gases, including forests.

(5)

The land use, land use change and forestry (‘LULUCF’) sector has the potential to provide long-term climate benefits, and thereby to contribute to the achievement of the Union’s greenhouse gas emissions reduction target, as well as to the long-term climate goals of the Paris Agreement. The LULUCF sector also provides bio-materials that can substitute fossil- or carbon-intensive materials and therefore plays an important role in the transition to a low greenhouse-gas-emitting economy. As removals through LULUCF are reversible, they should be treated as a separate pillar in the Union climate policy framework.

(6)

The European Council conclusions of 23-24 October 2014 stated that the multiple objectives of the agriculture and land use sector, with their lower mitigation potential as well as the need to ensure coherence between the Union food security and climate change objectives, should be acknowledged. The European Council invited the Commission to examine what the best means of encouraging the sustainable intensification of food production are, while optimising the sector’s contribution to greenhouse gas mitigation and sequestration, including through afforestation, and to establish policy on how to include LULUCF in the 2030 greenhouse gas mitigation framework as soon as technical conditions allow and in any case before 2020.

(7)

Sustainable management practices in the LULUCF sector can contribute to climate change mitigation in several ways, in particular by reducing emissions, and maintaining and enhancing sinks and carbon stocks. In order for measures aiming in particular at increasing carbon sequestration to be effective, the long-term stability and adaptability of carbon pools is essential. In addition, sustainable management practices can maintain the productivity, regeneration capacity and vitality of the LULUCF sector and thereby promote economic and social development, while reducing the carbon and ecological footprint of that sector.

(8)

The development of sustainable and innovative practices and technologies, including agro-ecology and agro-forestry, can enhance the role of the LULUCF sector in relation to climate mitigation and adaptation, as well as strengthen the productivity and resilience of that sector. As the LULUCF sector is characterised by long timeframes for returns, long-term strategies are important to enhance research funding for the development of, and investments in, sustainable and innovative practices and technologies. Investments in preventive actions, such as sustainable management practices, can reduce the risks associated with natural disturbances.

(9)

In its conclusions of 22-23 June 2017, the European Council reaffirmed the commitment of the Union and its Member States to the 2030 Agenda for Sustainable Development, which aims, inter alia, to ensure that the management of forests is sustainable.

(10)

Action to reduce deforestation and forest degradation and to promote sustainable forest management in developing countries is important. In this context, in its conclusions of 21 October 2009 and 14 October 2010, the Council recalled the Union’s objectives of reducing gross tropical deforestation by at least 50 % by 2020 compared to current levels and to halt global forest cover loss by 2030 at the latest.

(11)

Decision No 529/2013/EU of the European Parliament and of the Council (7) sets out accounting rules applicable to emissions and removals from the LULUCF sector and thereby has contributed to the development of policies that have led towards the inclusion of the LULUCF sector in the Union’s emission reduction commitment. This Regulation should build on the existing accounting rules, updating and improving them for the period from 2021 to 2030. It should lay down the obligations of Member States in implementing those accounting rules, and should also require the Member States to ensure that the overall LULUCF sector does not generate net emissions and contributes to the aim of enhancing sinks in the long-term. It should not lay down any accounting or reporting obligations for private parties, including farmers and foresters.

(12)

The LULUCF sector, including agricultural land, has a direct and significant impact on biodiversity and ecosystems services. For this reason, an important objective of policies affecting this sector is to ensure that there is coherence with the Union’s biodiversity strategy objectives. Actions should be taken to implement and support activities in this sector relating to both mitigation and adaptation. Coherence between the Common Agricultural Policy and this Regulation should also be ensured. All sectors need to deliver their fair share as regards the reduction of greenhouse gas emissions.

(13)

Wetlands are effective ecosystems for storing carbon. Therefore, protecting and restoring wetlands could reduce greenhouse gas emissions in the LULUCF sector. The Intergovernmental Panel on Climate Change (‘IPCC’) Refinement to the 2006 IPCC Guidelines for National Greenhouse Gas Inventories relating to wetlands should be taken into account in this context.

(14)

To ensure the contribution of the LULUCF sector to the achievement of the Union’s emission reduction target of at least 40 % and to the long-term goal of the Paris Agreement, a robust accounting system is needed. In order to obtain accurate accounts of emissions and removals in accordance with the 2006 IPCC Guidelines for National Greenhouse Gas Inventories (‘IPCC Guidelines’), the annually reported values under Regulation (EU) No 525/2013 of the European Parliament and of the Council (8) for land use categories and the conversion between land use categories should be utilised, thereby streamlining the approaches used under the UNFCCC and the Kyoto Protocol. Land that is converted to another land use category should be considered to be in the process of transitioning to that category for the default value of 20 years referred to in the IPCC Guidelines. Member States should only be able to derogate from that default value for afforested land and only in limited circumstances justified under the IPCC Guidelines. Changes in the IPCC Guidelines as adopted by the Conference of the Parties to the UNFCCC or the Conference of the Parties serving as the Meeting of the Parties to the Paris Agreement should be reflected, as appropriate, in the reporting requirements under this Regulation.

(15)

The internationally agreed IPCC Guidelines state that emissions from the combustion of biomass can be accounted for as zero in the energy sector on condition that such emissions are accounted for in the LULUCF sector. In the Union, emissions from biomass combustion are currently accounted for as zero pursuant to Article 38 of Commission Regulation (EU) No 601/2012 (9) and the provisions set out in Regulation (EU) No 525/2013, therefore consistency with the IPCC Guidelines would only be ensured if such emissions were reflected accurately in this Regulation.

(16)

Emissions and removals from forest land depend on a number of natural circumstances, dynamic age-related forest characteristics, as well as on past and present management practices that differ substantially between the Member States. The use of a base year would not make it possible to reflect those factors and resulting cyclical impacts on, or the interannual variation of, emissions and removals. The relevant accounting rules should instead provide for the use of reference levels to exclude the effects of natural and country-specific characteristics. Forest reference levels should take account of any unbalanced age structure of forests and should not unduly constrain future forest management intensity, so that long-term carbon sinks can be maintained or strengthened. Given the particular historical situation of Croatia, its forest reference level could also take into account the occupation of its territory, and wartime and post-war circumstances that had an impact on forest management during the reference period. The relevant accounting rules take account of the principles of sustainable forest management as adopted in the Ministerial Conferences on the Protection of Forests in Europe (‘Forest Europe’).

(17)

Member States should submit to the Commission national forestry accounting plans, including forest reference levels. In the absence of the international review under the UNFCCC or the Kyoto Protocol, a review procedure should be established to ensure transparency and improve the quality of accounting in the category of managed forest land.

(18)

When the Commission assesses the national forestry accounting plans, including the forest reference levels proposed therein, it should build on the good practice and experience of the expert reviews under the UNFCCC, including as regards participation of experts from the Member States. The Commission should ensure that experts from the Member States are involved in the technical assessment of whether the proposed forest reference levels have been determined in accordance with the criteria and requirements set out in this Regulation. The results of the technical assessment should be forwarded to the Standing Forestry Committee established by Council Decision 89/367/EEC (10) for information. The Commission should also consult stakeholders and civil society. The national forestry accounting plans should be made public in accordance with the relevant legislation.

(19)

The increased sustainable use of harvested wood products can substantially limit emissions by the substitution effect and enhance removals of greenhouse gases from the atmosphere. The accounting rules should ensure that Member States accurately and transparently reflect in their LULUCF accounts changes in the carbon pool of harvested wood products when such changes take place, in order to recognise and incentivise the enhanced use of harvested wood products with long life-cycles. The Commission should provide guidance on issues related to the methodology concerning the accounting for harvested wood products.

(20)

Natural disturbances, such as wildfires, insect and disease infestations, extreme weather events and geological disturbances, that are beyond the control of, and not materially influenced by, a Member State, can result in greenhouse gas emissions of a temporary nature in the LULUCF sector, or cause the reversal of previous removals. As such reversal can also be the result of management decisions, such as decisions to harvest or plant trees, this Regulation should ensure that human-induced reversals of removals are always accurately reflected in LULUCF accounts. Moreover, this Regulation should provide Member States with a limited possibility to exclude emissions resulting from disturbances that are beyond their control from their LULUCF accounts. However, the manner in which Member States apply those provisions should not lead to undue under-accounting.

(21)

Depending on national preferences, Member States should be able to choose adequate national policies for achieving their commitments in the LULUCF sector, including the possibility of balancing emissions from one land category with removals from another land category. They should also be able to cumulate net removals over the period from 2021 to 2030. Transfers to other Member States should continue to be available as an additional option, and Member States should be able to use annual emissions allocations established pursuant to Regulation (EU) 2018/842 of the European Parliament and of the Council (11) for compliance under this Regulation. The use of flexibilities set out in this Regulation will not compromise the overall ambition level of the Union’s greenhouse gas reduction targets.

(22)

Forests managed in a sustainable way normally are sinks, contributing to climate mitigation. In the reference period from 2000 to 2009, the reported average removals by sinks from forest land were 372 million tonnes of CO2 equivalent per year for the Union as a whole. Member States should ensure that sinks and reservoirs, including forests, are conserved and enhanced, as appropriate, with a view to achieving the purpose of the Paris Agreement and meeting the ambitious greenhouse gas emissions reduction targets of the Union by 2050.

(23)

Removals from managed forest land should be accounted against a forward-looking forest reference level. The projected future removals by sinks should be based on an extrapolation of forest management practices and intensity from a reference period. A decrease in a sink relative to the reference level should be accounted for as emissions. Specific national circumstances and practices, such as lower harvest intensity than usual or ageing forests during the reference period, should be taken into account.

(24)

Member States should be granted some flexibility to temporarily increase their harvest intensity in accordance with sustainable forest management practices that are consistent with the objective set out in the Paris Agreement, provided that within the Union total emissions do not exceed total removals in the LULUCF sector. Under such flexibility, all Member States should be granted a basic amount of compensation calculated on the basis of a factor expressed as a percentage of their reported sink in the period from 2000 to 2009 to compensate for the emissions from managed forest land they have accounted for. It should be ensured that Member States can only be compensated up to the level at which their forests are no longer sinks.

(25)

Member States with very high forest coverage compared to the Union average, and in particular smaller Member States with very high forest coverage, are more dependent than other Member States on managed forest land to balance emissions in other land accounting categories and would therefore be affected to a higher degree and would have a limited potential to increase their forest coverage. The compensation factor should, therefore, be increased on the basis of forest coverage and land area so that Member States with a very small land area and very high forest coverage compared to the Union average are granted the highest compensation factor for the reference period.

(26)

In its conclusions of 9 March 2012, the Council acknowledged the particularities of richly forested countries. Those particularities especially concern the limited possibilities of balancing emissions with removals. Given that it is the most richly forested Member State and taking into account its particular geographical characteristics, Finland faces particular difficulties in this respect. Therefore, Finland should be granted limited additional compensation.

(27)

To monitor the progress of Member States towards meeting their commitments under this Regulation and to ensure that information on emissions and removals is transparent, accurate, consistent, complete and comparable, Member States should provide the Commission with the relevant greenhouse gas inventory data in accordance with Regulation (EU) No 525/2013, and compliance checks under this Regulation should take those data into account. If a Member State intends to apply the managed forest land flexibility set out in this Regulation, it should include in the compliance report the amount of compensation that it intends to use.

(28)

The European Environment Agency should assist the Commission, where appropriate in accordance with the Agency's annual work programme, with the system of annual reporting of greenhouse gas emissions and removals, the assessment of information on policies and measures and national projections, the evaluation of planned additional policies and measures, and the compliance checks carried out by the Commission under this Regulation.

(29)

In order to provide for the appropriate accounting of transactions under this Regulation, including the use of flexibilities and tracking compliance, as well as to promote enhanced use of wood products with long life-cycles, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of technical adaptation of definitions, including the minimum values for the definition of forests, lists of greenhouse gases and carbon pools, laying down the forest reference levels of Member States for the periods from 2021 to 2025 and from 2026 to 2030, respectively, the addition of new categories of harvested wood products, the revision of methodology and information requirements regarding natural disturbances to reflect changes in the IPCC Guidelines, and the accounting of transactions through the Union Registry. The necessary provisions related to accounting of transactions should be contained in a single instrument combining the accounting provisions pursuant to Regulation (EU) No 525/2013, Regulation (EU) 2018/842, this Regulation and Directive 2003/87/EC. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (12). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts have systematic access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(30)

As part of its regular reporting under Regulation (EU) No 525/2013, the Commission should also assess the outcome of the 2018 Facilitative Dialogue under the UNFCCC (‘Talanoa dialogue’). This Regulation should be reviewed in 2024 and every five years thereafter in order to assess its overall functioning. The review should be informed by the results of the Talanoa dialogue and the Global Stocktake under the Paris Agreement. The framework for the period after 2030 should be in line with the long-term objectives and the commitments made under the Paris Agreement.

(31)

In order to ensure that there is efficient, transparent and cost-effective reporting and verification of greenhouse gas emissions and removals, and reporting of any other information necessary to assess compliance with Member States’ commitments, reporting requirements should be included in Regulation (EU) No 525/2013.

(32)

To facilitate data collection and methodology improvement, land use should be inventoried and reported using geographical tracking of each land area, corresponding to national and Union data collection systems. The best use should be made of existing Union and Member State programmes and surveys including the Land Use/Cover Area frame Survey (‘LUCAS’), the European Earth observation programme Copernicus and the European satellite navigation system Galileo for data collection. Data management, including sharing of data for reporting, reuse and dissemination, should conform to the requirements provided for in Directive 2007/2/EC of the European Parliament and of the Council (13).

(33)

Regulation (EU) No 525/2013 should be amended accordingly.

(34)

Decision No 529/2013/EU should continue to apply to the accounting and reporting obligations for the accounting period from 1 January 2013 to 31 December 2020. For the accounting periods from 1 January 2021, this Regulation should apply.

(35)

Decision No 529/2013/EU should be amended accordingly.

(36)

Since the objectives of this Regulation, in particular to set out the commitments of Member States for the LULUCF sector that contribute to achieving the objectives of the Paris Agreement and meeting the greenhouse gas emission reduction target of the Union for the period from 2021 to 2030, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives,

(a)

During the periods from 2021 to 2025 and from 2026 to 2030:

(i)   ‘afforested land’: land use reported as cropland, grassland, wetlands, settlements or other land, converted to forest land;

(ii)   ‘deforested land’: land use reported as forest land converted to cropland, grassland, wetlands, settlements or other land;

(iii)   ‘managed cropland’: land use reported as:

(iv)   ‘managed grassland’: land use reported as:

(v)   ‘managed forest land’: land use reported as forest land remaining forest land.

(b)

As of 2026: ‘managed wetland’: land use reported as:

(1)

‘sink’ means any process, activity or mechanism that removes a greenhouse gas, an aerosol, or a precursor to a greenhouse gas from the atmosphere;

(2)

‘source’ means any process, activity or mechanism that releases a greenhouse gas, an aerosol or a precursor to a greenhouse gas into the atmosphere;

(3)

‘carbon pool’ means the whole or part of a biogeochemical feature or system within the territory of a Member State and within which carbon, any precursor to a greenhouse gas containing carbon, or any greenhouse gas containing carbon is stored;

(4)

‘carbon stock’ means the mass of carbon stored in a carbon pool;

(5)

‘harvested wood product’ means any product of wood harvesting that has left a site where wood is harvested;

(6)

‘forest’ means an area of land defined by the minimum values for area size, tree crown cover or an equivalent stocking level, and potential tree height at maturity at the place of growth of the trees as specified for each Member State in Annex II. It includes areas with trees, including groups of growing, young, natural trees, or plantations that have yet to reach the minimum values for tree crown cover or an equivalent stocking level or minimum tree height as specified in Annex II, including any area that normally forms part of the forest area but on which there are temporarily no trees as a result of human intervention, such as harvesting, or as a result of natural causes, but which area can be expected to revert to forest;

(7)

‘forest reference level’ means an estimate, expressed in tonnes of CO2 equivalent per year, of the average annual net emissions or removals resulting from managed forest land within the territory of a Member State in the periods from 2021 to 2025 and from 2026 to 2030, based on the criteria set out in this Regulation;

(8)

‘half-life value’ means the number of years it takes for the quantity of carbon stored in a category of harvested wood products to decrease to one half of its initial value;

(9)

‘natural disturbances’ mean any non-anthropogenic events or circumstances that cause significant emissions in forests and the occurrence of which is beyond the control of the relevant Member State, and the effects of which the Member State is objectively unable to significantly limit, even after their occurrence, on emissions;

(10)

‘instantaneous oxidation’ means an accounting method that assumes that the release into the atmosphere of the entire quantity of carbon stored in harvested wood products occurs at the time of harvest.

(a)

wetland remaining wetland;

(b)

settlement or other land, converted to wetland; or

(c)

wetland converted to settlement or other land.

(a)

paper;

(b)

wood panels;

(c)

sawn wood.

(a)

submit to the Commission information on the background level for the land accounting categories referred to in paragraph 1 and on the data and methodologies used in accordance with Annex VI; and

(b)

exclude from accounting until 2030 all subsequent removals on the land affected by natural disturbances.

(a)

the general flexibilities set out in Article 12; and

(b)

in order to comply with the commitment in Article 4, the managed forest land flexibility set out in Article 13.

(a)

the Member State, in its strategy submitted in accordance with Article 4 of Regulation (EU) No 525/2013, has included ongoing or planned specific measures to ensure the conservation or enhancement, as appropriate, of forest sinks and reservoirs; and

(b)

within the Union, total emissions do not exceed total removals in the land accounting categories referred to in Article 2 of this Regulation for the period for which the Member State intends to use the compensation. When assessing whether, within the Union, total emissions exceed total removals, the Commission shall ensure that double counting is avoided by Member States, in particular in the exercise of the flexibilities set out in this Regulation and Regulation (EU) 2018/842

(a)

sinks accounted for as emissions against its forest reference level; and

(b)

up to the maximum amount of compensation for that Member State set out in Annex VII for the period from 2021 to 2030.

(1)

In Article 7, paragraph 1 is amended as follows:

(2)

In point (c) of Article 13(1), the following point is added:

(3)

In Article 14(1), the following point is inserted:

(4)

The following Annex is inserted:

(1)

in Article 3(2), the first subparagraph is deleted;

(2)

in Article 6, paragraph 4 is deleted.

19.6.2018   

EN

Official Journal of the European Union

L 156/26

(1)

The European Council in its conclusions of 23-24 October 2014 on the 2030 climate and energy policy framework endorsed a binding target of at least a 40 % domestic reduction in economy-wide greenhouse gas emissions by 2030 compared to 1990 and that target was reaffirmed in the European Council conclusions of 17-18 March 2016.

(2)

The European Council conclusions of 23-24 October 2014 stated that the emissions reduction target of at least 40 % should be delivered collectively by the Union in the most cost-effective manner possible, with the reductions in the European Union emissions trading system (‘EU ETS’) laid down in Directive 2003/87/EC of the European Parliament and of the Council (4) and non-ETS sectors amounting to 43 % and 30 %, respectively, by 2030 compared to 2005. All sectors of the economy should contribute to achieving these greenhouse gas emission reductions, and all Member States should participate in this effort, balancing considerations of fairness and solidarity. The methodology to set the national reduction targets for the non-ETS sectors, with all the elements applied in Decision No 406/2009/EC of the European Parliament and of the Council (5), should be continued until 2030 with efforts distributed on the basis of relative Gross Domestic Product (GDP) per capita. All Member States should contribute to the overall Union reduction in 2030 with the targets spanning from 0 % to – 40 % compared to 2005. National targets within the group of Member States with a GDP per capita above the Union average should be adjusted relatively to reflect cost-effectiveness in a fair and balanced manner. Achieving these greenhouse gas emission reductions should boost efficiency and innovation in the Union economy and should, in particular, promote improvements, notably in buildings, agriculture, waste management and transport, in so far as they fall under the scope of this Regulation.

(3)

This Regulation forms part of the implementation of the Union’s contributions under the Paris Agreement (6) adopted under the United Nations Framework Convention on Climate Change (‘UNFCCC’). The Paris Agreement was concluded on behalf of the Union on 5 October 2016 by Council Decision (EU) 2016/1841 (7). The commitment of the Union to economy-wide greenhouse gas emission reductions was set out in the intended nationally determined contribution submitted in view of the Paris Agreement by the Union and its Member States to the Secretariat of the UNFCCC on 6 March 2015. The Paris Agreement entered into force on 4 November 2016 and replaces the approach taken under the 1997 Kyoto Protocol which will not be continued beyond 2020.

(4)

The Paris Agreement, inter alia, sets out a long-term goal in line with the objective to keep the global temperature increase well below 2 °C above pre-industrial levels and to pursue efforts to keep it to 1,5 °C above pre-industrial levels. It also stresses the importance to adapt to the adverse impacts of climate change and to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. The Paris Agreement also calls for a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, and invites Parties to take action to conserve and enhance, as appropriate, sinks and reservoirs of greenhouse gases, including forests.

(5)

In its conclusions of 29-30 October 2009, the European Council supported a Union objective, in the context of necessary reductions according to the Intergovernmental Panel on Climate Change (IPCC) by developed countries as a group, to reduce greenhouse gas emissions by 80-95 % by 2050 compared to 1990 levels.

(6)

The nationally determined contributions of the Parties to the Paris Agreement are to reflect their highest possible ambition and represent a progression over time. In addition, Parties to the Paris Agreement should strive to formulate and communicate long-term low greenhouse gas emission development strategies, mindful of the objectives of the Paris Agreement. The Council conclusions of 13 October 2017 recognise the importance of the long-term goals and the five-year review cycles in the implementation of the Paris Agreement and highlight the importance of long-term low greenhouse gas emission development strategies as a policy tool for developing reliable pathways and the long-term policy changes needed to achieve the goals of the Paris Agreement.

(7)

The transition to clean energy requires changes in investment behaviour and incentives across the entire policy spectrum. It is a key Union priority to establish a resilient Energy Union to provide secure, sustainable, competitive and affordable energy to its citizens. Achieving that requires continuation of ambitious climate action with this Regulation and progress on the other aspects of the Energy Union as set out in the Commission communication of 25 February 2015 entitled ‘A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’.

(8)

A range of Union measures enhance Member States’ ability to meet their climate commitments and are crucial to achieving necessary greenhouse gas emission reductions in the sectors covered by this Regulation. Those measures include legislation on fluorinated greenhouse gases, CO2-reductions from road vehicles, energy performance of buildings, renewables, energy efficiency and circular economy, as well as Union funding instruments for climate-related investments.

(9)

The conclusions of the European Council of 19-20 March 2015 noted that the Union is committed to building an Energy Union with a forward-looking climate policy on the basis of the Commission’s framework strategy, whose five dimensions are closely interrelated and mutually reinforcing. Moderation of energy demand is one of the five dimensions of that Energy Union strategy. Improving energy efficiency can deliver significant reductions in greenhouse gas emissions. It can also benefit the environment and health, improve energy security, cut energy costs for households and companies, help alleviate energy poverty and lead to increased jobs and economy-wide economic activity. Measures which contribute to an increased uptake of energy-saving technologies in buildings, industry and transport could be a cost-effective way of helping Member States achieve their targets under this Regulation.

(10)

The deployment and development of sustainable and innovative practices and technologies can enhance the role of the agricultural sector in relation to climate mitigation and adaptation, in particular by reducing greenhouse gas emissions and by maintaining and enhancing sinks and carbon stocks. To reduce the carbon and ecological footprint of the agricultural sector, whilst maintaining its productivity, regeneration capacity and vitality, it is important to enhance action on climate mitigation and adaption as well as research funding for the development of and investments in sustainable and innovative practices and technologies.

(11)

The agricultural sector has direct and significant impact on biodiversity and ecosystems. For that reason, it is important to ensure the coherence between the objective of this Regulation and other Union policies and objectives, such as the common agricultural policy and objectives related to the biodiversity strategy, the forestry strategy and circular economy strategy.

(12)

The transport sector represents almost a quarter of the Union’s greenhouse gas emissions. It is therefore important to reduce greenhouse gas emissions and risks related to fossil fuel dependency in the transport sector through a comprehensive approach for the promotion of greenhouse gas emission reductions and energy efficiency in transport, for electric transportation, for a shift of transport modes, where more sustainable, and for sustainable renewable energy sources in transport also after 2020. The shift towards low-emission mobility as part of the broader shift to a safe and sustainable low-carbon economy can be facilitated through the introduction of enabling conditions and strong incentives, as well as long-term strategies that can enhance investments.

(13)

The impact of Union and national policies and measures implementing this Regulation should be assessed in line with the monitoring and reporting obligations under Regulation (EU) No 525/2013 of the European Parliament and of the Council (8).

(14)

Without prejudice to the powers of the budgetary authority, the mainstreaming methodology implemented during the 2014-2020 Multiannual Financial Framework should, where appropriate, be continued and improved with a view to responding to the challenges and investment needs related to climate action as of 2021 onwards. Union funding should be coherent with the objectives of the Union’s 2030 climate and energy policy framework and the long-term objectives expressed in the Paris Agreement, so as to ensure the effectiveness of public spending. The Commission should prepare a report on the impact of Union funding granted from the Union budget or otherwise pursuant to Union law on the greenhouse gas emissions in the sectors covered by this Regulation or Directive 2003/87/EC.

(15)

This Regulation should cover greenhouse gas emissions from the IPCC categories of energy, industrial processes and product use, agriculture and waste as determined pursuant to Regulation (EU) No 525/2013 excluding greenhouse gas emissions from the activities listed in Annex I to Directive 2003/87/EC.

(16)

Data currently reported in the national greenhouse gas inventories and the national and Union registries are not sufficient to determine, at Member State level, the CO2 civil aviation emissions at national level that are not covered by Directive 2003/87/EC. In adopting reporting obligations, the Union should not impose upon Member States or small and medium-sized enterprises (SMEs) burdens that are disproportionate to the objectives pursued. CO2 emissions from flights that are not covered by Directive 2003/87/EC represent only a very minor part of the total greenhouse gas emissions, and establishing a reporting system for these emissions would be unduly burdensome in the light of existing requirements for the wider sector pursuant to Directive 2003/87/EC. Therefore, CO2 emissions from IPCC source category ‘1.A.3.A civil aviation’ should be treated as being equal to zero for the purposes of this Regulation.

(17)

The greenhouse gas emissions reduction of each Member State for 2030 should be determined in relation to the level of its 2005 reviewed greenhouse gas emissions covered by this Regulation, excluding verified greenhouse gas emissions from installations that operated in 2005 and which were only included in the EU ETS after 2005. Annual emission allocations from 2021 to 2030 should be determined on the basis of data submitted by the Member States and reviewed by the Commission.

(18)

The approach of annually binding national limits taken in Decision No 406/2009/EC should be continued from 2021 to 2030. The rules for setting out the annual emission allocations for each Member State as laid down in this Regulation should follow the same methodology as for Member States with negative limits under that Decision, but with the start of the trajectory calculation at five-twelfths of the distance from 2019 to 2020 or in 2020 on the average of the greenhouse gas emissions during 2016 to 2018 and the end of the trajectory being the 2030 limit for each Member State. To ensure appropriate contributions to the Union’s greenhouse gas emission reduction target for the period from 2021 to 2030, the start date of the trajectory should be determined for each Member State on the basis of which of those dates results in a lower allocation. An adjustment to the annual emission allocation in 2021 should be provided for Member States with both a positive limit under Decision No 406/2009/EC and increasing annual emission allocations between 2017 and 2020 determined pursuant to Commission Decision 2013/162/EU (9) and Commission Implementing Decision 2013/634/EU (10), to reflect the capacity for increased greenhouse gas emissions in those years.

An additional adjustment should be provided for certain Member States in recognition of their exceptional situation of having both a positive limit under Decision No 406/2009/EC and either the lowest greenhouse gas emissions per capita under that Decision or the lowest share of greenhouse gas emissions from sectors not covered by that Decision compared to their total greenhouse gas emissions. That additional adjustment should only cover part of the greenhouse gas emission reductions needed in the period from 2021 to 2029 in order to maintain incentives for additional greenhouse gas emission reductions and in order to not impact the 2030 target achievement, taking into account the use of other adjustments and flexibilities set out in this Regulation.

(19)

In order to ensure uniform conditions for the implementation of the provisions of this Regulation concerning the setting out of the annual emission allocations for Member States, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (11).

(20)

In its conclusions of 23-24 October 2014, the European Council stated that the availability and use of existing flexibility instruments within the non-ETS sectors should be significantly enhanced in order to ensure cost-effectiveness of the collective Union effort and convergence of greenhouse gas emissions per capita by 2030. As a means to enhance the overall cost-effectiveness of total reductions, Member States should be able to bank and borrow part of their annual emission allocations. They should also be able to transfer part of their annual emission allocation to other Member States. The transparency of such transfers should be ensured, and they ought to be carried out in a manner that is mutually convenient, including by means of auctioning, by the use of market intermediaries acting on an agency basis, or by way of bilateral arrangements. Any such transfer could be the result of a greenhouse gas mitigation project or programme carried out in the selling Member State and financed by the receiving Member State. In addition, Member States should be able to encourage the establishment of public-private partnerships for projects under Article 24a(1) of Directive 2003/87/EC.

(21)

A one-off flexibility should be created in order to facilitate the achievement of targets for Member States with national reduction targets significantly above both the Union average and their cost-effective reduction potential as well as for Member States that did not allocate any EU ETS allowances for free to industrial installations in 2013. To preserve the aim of the Market Stability Reserve established by Decision (EU) 2015/1814 of the European Parliament and the Council (12) to tackle structural supply-demand imbalances in the EU ETS, the EU ETS allowances taken into account for the one-off flexibility should be considered as EU ETS allowances in circulation when determining the total number of EU ETS allowances in circulation in a given year. In its first review under that Decision, the Commission should consider whether to maintain such accounting as EU ETS allowances in circulation.

(22)

Regulation (EU) 2018/841 of the European Parliament and of the Council (13) lays down accounting rules on greenhouse gas emissions and removals relating to land use, land-use change and forestry (‘LULUCF’). Activities that fall under the scope of that Regulation should not be covered by this Regulation. However, while the environmental outcome under this Regulation in terms of the levels of greenhouse gas emission reductions that are made is affected by taking into account a quantity up to the sum of total net removals and total net emissions from afforested land, deforested land, managed cropland, managed grassland and, under certain conditions, managed forest land as well as, where made mandatory under Regulation (EU) 2018/841, managed wetland, as defined in that Regulation, a LULUCF flexibility for a maximum quantity of 280 million tonnes of CO2 equivalent of those removals divided among Member States should be included in this Regulation as an additional possibility for Member States to meet their commitments when needed. That total amount and its division among Member States should acknowledge the lower mitigation potential of the agriculture and land use sector and an appropriate contribution of that sector to greenhouse gas mitigation and sequestration. In addition, voluntary deletions of annual emission allocations under this Regulation should allow for such amounts to be taken into account when assessing Member States’ compliance with requirements under Regulation (EU) 2018/841.

(23)

On 30 November 2016, the Commission presented a proposal for a Regulation of the European Parliament and of the Council on the Governance of the Energy Union (‘governance proposal’), which requires Member States to draw up integrated national energy and climate plans in the context of strategic energy and climate policy planning for all five key dimensions of the Energy Union. According to the governance proposal, the national plans covering the period from 2021 to 2030 are to play a key role in Member States’ planning of their compliance with this Regulation and Regulation (EU) 2018/841. To that end, Member States are to set out the policies and measures to meet the obligations under this Regulation and Regulation (EU) 2018/841, with an outlook to the long-term goal to achieve a balance between greenhouse gas emissions and removals in accordance with the Paris Agreement. Those plans are also to set out an assessment of the impacts of the planned policies and measures to meet the objectives. According to the governance proposal, the Commission should be able to indicate in its recommendations on the draft national plans the appropriateness of the level of ambition and of the subsequent implementation of policies and measures. The possible use of the LULUCF flexibility to comply with this Regulation should be taken into account when compiling those plans.

(24)

The European Environment Agency aims to support sustainable development and to help achieve significant and measurable improvement in the environment by providing timely, targeted, relevant and reliable information to policy-makers, public institutions and the public. The European Environment Agency should assist the Commission, as appropriate in accordance with the Agency’s annual work programme.

(25)

Any adjustments in the coverage as set out in Articles 11, 24, 24a and 27 of Directive 2003/87/EC should be matched by a corresponding adjustment in the maximum quantity of greenhouse gas emissions covered by this Regulation. Consequently, where Member States include additional greenhouse gas emissions from installations that were previously covered by Directive 2003/87/EC into their commitments under this Regulation, those Member States should implement additional policies and measures in the sectors covered by this Regulation in order to reduce those greenhouse gas emissions.

(26)

In recognition of previous efforts made since 2013 by those Member States which had a GDP per capita below the Union average in 2013, it is appropriate to establish a limited special purpose safety reserve corresponding to up to 105 million tonnes CO2 equivalent, while maintaining the environmental integrity of this Regulation as well as incentives for Member States’ actions beyond the minimum contributions under this Regulation. The safety reserve should benefit Member States whose GDP per capita was below Union average in 2013, whose greenhouse gas emissions remain below their annual emission allocations from 2013 to 2020 and which have problems with achieving their 2030 greenhouse gas emission target despite using other flexibilities provided for in this Regulation. A safety reserve of that size would cover a significant part of the projected collective deficit of eligible Member States in the period from 2021 to 2030, without additional policies, while maintaining incentives for additional action. The safety reserve should be available to those Member States in 2032, under certain conditions and provided that its use does not undermine the achievement of the greenhouse gas emission reduction target of the Union of 30 % for the year 2030 in the sectors covered by this Regulation.

(27)

In order to reflect developments in the framework of Regulation (EU) 2018/841 as well as to ensure the accurate accounting under this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of allowing the use of the land accounting categories of managed forest land and managed wetland under the LULUCF flexibility and in respect of the accounting of transactions under this Regulation, including the use of flexibilities, the application of compliance checks and the accurate functioning of the safety reserve, through the registry established pursuant to Article 10 of Regulation (EU) No 525/2013 (‘Union Registry’). Information regarding accounting under this Regulation should be accessible to the public. The necessary provisions for accounting of transactions should be contained in a single instrument combining the accounting provisions pursuant to Regulation (EU) No 525/2013, Regulation (EU) 2018/841, this Regulation and Directive 2003/87/EC. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (14). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(28)

This Regulation should be reviewed as of 2024 and every five years thereafter in order to assess its overall functioning, in particular with regard to the need for increased stringency of Union policies and measures. The review should take into account, inter alia, evolving national circumstances and be informed by the results of the 2018 Facilitative Dialogue under the UNFCCC (‘Talanoa dialogue’) and the global stocktake under the Paris Agreement. As part of the review, the balance between supply and demand for annual emission allocations should also be considered to ensure the adequacy of the obligations laid down by this Regulation. In addition, as part of its regular reporting under Regulation (EU) No 525/2013, the Commission should, by 31 October 2019, assess the outcome of the Talanoa dialogue. The review for the period after 2030 should be in line with the long-term objectives and the commitments made under the Paris Agreement and, to this end, it should reflect a progression over time.

(29)

In order to ensure efficient, transparent and cost-effective reporting and verification of greenhouse gas emissions and of other information necessary to assess progress with Member State’s annual emission allocations, the requirements for annual reporting and evaluation under this Regulation should be integrated with the relevant Articles under Regulation (EU) No 525/2013. That Regulation should also ensure that the progress of Member States in reducing greenhouse gas emissions continues to be evaluated annually, taking into account progress in Union policies and measures and information from Member States. Every two years, the evaluation should include the projected progress of the Union towards meeting its reduction targets and of Member States towards fulfilling their obligations. However, the application of deductions should only be considered at five-year intervals, so that the potential contribution from afforested land, deforested land, managed cropland and managed grassland taking place pursuant to Regulation (EU) 2018/841 can be considered. That is without prejudice to the duty of the Commission to ensure compliance with the obligations of Member States resulting from this Regulation or to the power of the Commission to initiate infringement proceedings for this purpose.

(30)

Regulation (EU) No 525/2013 should be amended accordingly.

(31)

Since the objectives of this Regulation, in particular to lay down obligations on Member States with respect to their minimum contributions for the period from 2021 to 2030 to fulfilling the Union’s target of reducing its greenhouse gas emissions and to contribute to achieving the objectives of the Paris Agreement, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(32)

This Regulation is without prejudice to more stringent national objectives,

(1)

‘Greenhouse gas emissions’ means emissions in terms of tonnes of CO2 equivalent of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), nitrogen trifluoride (NF3) and sulphur hexafluoride (SF6) determined pursuant to Regulation (EU) No 525/2013 and falling within the scope of this Regulation;

(2)

‘Annual emission allocations’ means the maximum allowed greenhouse gas emissions for each year between 2021 and 2030 determined pursuant to Article 4(3) and Article 10;

(3)

‘EU ETS allowance’ means an ‘allowance’ as defined in point (a) of Article 3 of Directive 2003/87/EC.

(a)

in respect of the year 2021, bank that excess part of its annual emission allocation to subsequent years until 2030; and

(b)

in respect of the years 2022 to 2029, bank the excess part of its annual emission allocation up to a level of 30 % of its annual emission allocations up to that year to subsequent years until 2030.

(a)

the cumulative quantity taken into account for that Member State for all the years of the period from 2021 to 2030 does not exceed the maximum amount of total net removals set out in Annex III to this Regulation for that Member State;

(b)

such quantity is in excess of that Member State’s requirements under Article 4 of Regulation (EU) 2018/841;

(c)

the Member State has not acquired more net removals under Regulation (EU) 2018/841 from other Member States than it has transferred;

(d)

the Member State has complied with Regulation (EU) 2018/841; and

(e)

the Member State has submitted a description of the intended use of the flexibility available under this paragraph pursuant to the second subparagraph of Article 7(1) of Regulation (EU) No 525/2013.

(a)

reflect the contribution of the land accounting category managed forest land while respecting the maximum amount of total net removals for each Member State referred to in Annex III to this Regulation, when delegated acts laying down forest reference levels are adopted pursuant to Article 8(8) or (9) of Regulation (EU) 2018/841; and

(b)

reflect the contribution of the land accounting category managed wetland while respecting the maximum amount of total net removals for each Member State referred to in Annex III to this Regulation, when all Member States are required to account for this category under Regulation (EU) 2018/841.

(a)

additional actions that the Member State shall implement in order to meet its specific obligations under Article 4 of this Regulation, through domestic policies and measures and the implementation of Union action;

(b)

a strict timetable for implementing such actions, which enables the assessment of annual progress in implementation.

(a)

an addition to the Member State’s greenhouse gas emission figure of the following year equal to the amount in tonnes of CO2 equivalent of the excess greenhouse gas emissions, multiplied by a factor of 1,08, in accordance with the measures adopted pursuant to Article 12; and

(b)

the Member State shall be temporarily prohibited from transferring any part of its annual emission allocation to another Member State until it is in compliance with Article 4.

(a)

adjustments to the number of EU ETS allowances issued pursuant to Article 11 of Directive 2003/87/EC that resulted from a change in the coverage of sources under that Directive, in accordance with the Commission Decisions adopted pursuant to that Directive on the final approval of the national allocation plans for the period from 2008 to 2012;

(b)

adjustments to the number of EU ETS allowances or credits, respectively, issued pursuant to Articles 24 and 24a of Directive 2003/87/EC in respect of greenhouse gas emission reductions in a Member State; and

(c)

adjustments to the number of EU ETS allowances pertaining to greenhouse gas emissions from installations excluded from the EU ETS in accordance with Article 27 of Directive 2003/87/EC, for the time that they are excluded.

(a)

its GDP per capita at market prices in 2013, as published by Eurostat in April 2016, was below the Union average;

(b)

its cumulative greenhouse gas emissions for the years from 2013 to 2020 in the sectors covered by this Regulation are below its cumulative annual emission allocations for the years from 2013 to 2020; and

(c)

its greenhouse gas emissions exceed its annual emission allocations in the period from 2026 to 2030, although it has:

(a)

annual emission allocations;

(b)

flexibilities exercised under Articles 5, 6 and 7;

(c)

compliance checks under Article 9;

(d)

adjustments under Article 10; and

(e)

the safety reserve under Article 11.

(1)

in Article 7, paragraph 1 is amended as follows:

(2)

in point (c) of Article 13(1), the following point is added:

(3)

in Article 14(1), the following point is added:

(4)

in Article 21(1), the following point is added:

19.6.2018   

EN

Official Journal of the European Union

L 156/43

(1)

Directive (EU) 2015/849 of the European Parliament and of the Council (4) constitutes the main legal instrument in the prevention of the use of the Union financial system for the purposes of money laundering and terrorist financing. That Directive, which had a transposition deadline of 26 June 2017, sets out an efficient and comprehensive legal framework for addressing the collection of money or property for terrorist purposes by requiring Member States to identify, understand and mitigate the risks related to money laundering and terrorist financing.

(2)

Recent terrorist attacks have brought to light emerging new trends, in particular regarding the way terrorist groups finance and conduct their operations. Certain modern technology services are becoming increasingly popular as alternative financial systems, whereas they remain outside the scope of Union law or benefit from exemptions from legal requirements, which might no longer be justified. In order to keep pace with evolving trends, further measures should be taken to ensure the increased transparency of financial transactions, of corporate and other legal entities, as well as of trusts and legal arrangements having a structure or functions similar to trusts (‘similar legal arrangements’), with a view to improving the existing preventive framework and to more effectively countering terrorist financing. It is important to note that the measures taken should be proportionate to the risks.

(3)

The United Nations (UN), Interpol and Europol have been reporting on the increasing convergence between organised crime and terrorism. The nexus between organised crime and terrorism and the links between criminal and terrorist groups constitute an increasing security threat to the Union. Preventing the use of the financial system for the purposes of money laundering or terrorist financing is an integral part of any strategy addressing that threat.

(4)

While there have been significant improvements in the adoption and implementation of Financial Action Task Force (FATF) standards and the endorsement of the work of the Organisation for Economic Cooperation and Development on transparency by Member States in recent years, the need to further increase the overall transparency of the economic and financial environment of the Union is clear. The prevention of money laundering and of terrorist financing cannot be effective unless the environment is hostile to criminals seeking shelter for their finances through non-transparent structures. The integrity of the Union financial system is dependent on the transparency of corporate and other legal entities, trusts and similar legal arrangements. This Directive aims not only to detect and investigate money laundering, but also to prevent it from occurring. Enhancing transparency could be a powerful deterrent.

(5)

While the aims of Directive (EU) 2015/849 should be pursued and any amendments to it should be consistent with the Union’s ongoing action in the field of countering terrorism and terrorist financing, such amendments should be made having due regard to the fundamental right to the protection of personal data, as well as the observance and application of the proportionality principle. The Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions entitled ‘The European Agenda on Security’ indicated the need for measures to address terrorist financing in a more effective and comprehensive manner, highlighting that the infiltration of financial markets allows for the financing of terrorism. The European Council conclusions of 17-18 December 2015 also stressed the need to take rapidly further action against terrorist financing in all domains.

(6)

The Communication from the Commission to the European Parliament and to the Council entitled ‘Action Plan for strengthening the fight against terrorist financing’ underscores the need to adapt to new threats and to amend Directive (EU) 2015/849 accordingly.

(7)

Union measures should also accurately reflect developments and commitments undertaken at international level. Therefore, UN Security Council Resolution (UNSCR) 2195 (2014) on Threats to international peace and security and UNCSRs 2199(2015) and 2253(2015) on Threats to international peace and security caused by terrorist acts, should be taken into account. Those UNSCRs deal with, respectively, the links between terrorism and transnational organised crime, preventing terrorist groups from gaining access to international financial institutions and expanding the sanctions framework to include Islamic State in Iraq and Levant.

(8)

Providers engaged in exchange services between virtual currencies and fiat currencies (that is to say coins and banknotes that are designated as legal tender and electronic money, of a country, accepted as a medium of exchange in the issuing country) as well as custodian wallet providers are under no Union obligation to identify suspicious activity. Therefore, terrorist groups may be able to transfer money into the Union financial system or within virtual currency networks by concealing transfers or by benefiting from a certain degree of anonymity on those platforms. It is therefore essential to extend the scope of Directive (EU) 2015/849 so as to include providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. For the purposes of anti-money laundering and countering the financing of terrorism (AML/CFT), competent authorities should be able, through obliged entities, to monitor the use of virtual currencies. Such monitoring would provide a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship.

(9)

The anonymity of virtual currencies allows their potential misuse for criminal purposes. The inclusion of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as a large part of the virtual currency environment will remain anonymous because users can also transact without such providers. To combat the risks related to the anonymity, national Financial Intelligence Units (FIUs) should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed.

(10)

Virtual currencies should not to be confused with electronic money as defined in point (2) of Article 2 of Directive 2009/110/EC of the European Parliament and of the Council (5), with the larger concept of ‘funds’ as defined in point (25) of Article 4 of Directive (EU) 2015/2366 of the European Parliament and of the Council (6), nor with monetary value stored on instruments exempted as specified in points (k) and (l) of Article 3 of Directive (EU) 2015/2366, nor with in-games currencies, that can be used exclusively within a specific game environment. Although virtual currencies can frequently be used as a means of payment, they could also be used for other purposes and find broader applications such as means of exchange, investment, store-of-value products or use in online casinos. The objective of this Directive is to cover all the potential uses of virtual currencies.

(11)

Local currencies, also known as complementary currencies, that are used in very limited networks such as a city or a region and among a small number of users should not be considered to be virtual currencies.

(12)

Business relationships or transactions involving high-risk third countries should be limited when significant weaknesses in the AML/CFT regime of the third-countries concerned are identified, unless adequate additional mitigating measures or countermeasures are applied. When dealing with such cases of high-risk and with such business relationships or transactions, Member States should require obliged entities to apply enhanced customer due diligence measures to manage and mitigate those risks. Each Member State therefore determines at national level the type of enhanced due diligence measures to be taken with regard to high-risk third countries. Those different approaches between Member States create weak spots on the management of business relationships involving high-risk third countries as identified by the Commission. It is important to improve the effectiveness of the list of high-risk third countries established by the Commission by providing for a harmonised treatment of those countries at Union level. That harmonised approach should primarily focus on enhanced customer due diligence measures, where such measures are not already required under national law. In accordance with international obligations, Member States should be allowed to require obliged entities, where applicable, to apply additional mitigating measures complementary to the enhanced customer due diligence measures, in accordance with a risk based approach and taking into account the specific circumstances of business relationships or transactions. International organisations and standard setters with competence in the field of preventing money laundering and combating terrorist financing may call for the application of appropriate countermeasures to protect the international financial system from the ongoing and substantial risks relating to money laundering and terrorist financing emanating from certain countries. In addition, Member States should require obliged entities to apply additional mitigating measures regarding high-risk third countries identified by the Commission by taking into account calls for countermeasures and recommendations, such as those expressed by the FATF, and responsibilities resulting from international agreements.

(13)

Given the evolving nature of threats and vulnerabilities relating to money laundering and the financing of terrorism, the Union should adopt an integrated approach on the compliance of national AML/CFT regimes with the requirements at Union level, by taking into consideration an effectiveness assessment of those national regimes. For the purpose of monitoring the correct transposition of the Union requirements in national AML/CFT regimes, the effective implementation of those requirements and the capacity of those regimes to achieve an effective preventive framework, the Commission should base its assessment on the national AML/CFT regimes, which should be without prejudice to assessments conducted by international organisations and standard setters with competence in the field of preventing money laundering and combating terrorist financing, such as the FATF or the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism.

(14)

General purpose prepaid cards have legitimate uses and constitute an instrument contributing to social and financial inclusion. However, anonymous prepaid cards are easy to use in financing terrorist attacks and logistics. It is therefore essential to deny terrorists this means of financing their operations, by further reducing the limits and maximum amounts under which obliged entities are allowed not to apply certain customer due diligence measures provided for by Directive (EU) 2015/849. Therefore, while having due regard to consumers’ needs in using general purpose prepaid instruments and not preventing the use of such instruments for promoting social and financial inclusion, it is essential to lower the existing thresholds for general purpose anonymous prepaid cards and to identify the customer in the case of remote payment transactions where the transaction amount exceeds EUR 50.

(15)

While the use of anonymous prepaid cards issued in the Union is essentially limited to the Union territory only, that is not always the case with similar cards issued in third countries. It is therefore important to ensure that anonymous prepaid cards issued outside the Union can be used in the Union only where they can be considered to comply with requirements equivalent to those set out in Union law. That rule should be enacted in full compliance with Union obligations in respect of international trade, especially the provisions of the General Agreement on Trade in Services.

(16)

FIUs play an important role in identifying the financial operations of terrorist networks, especially cross-border, and in detecting their financial backers. Financial intelligence might be of fundamental importance in uncovering the facilitation of terrorist offences and the networks and schemes of terrorist organisations. Due to a lack of prescriptive international standards, FIUs maintain significant differences as regards their functions, competences and powers. Member States should endeavour to ensure a more efficient and coordinated approach to deal with financial investigations related to terrorism, including those related to the misuse of virtual currencies. The current differences should however not affect an FIU’s activity, particularly its capacity to develop preventive analyses in support of all the authorities in charge of intelligence, investigative and judicial activities, and international cooperation. In the exercise of their tasks, FIUs should have access to information and be able to exchange it without impediments, including through appropriate cooperation with law enforcement authorities. In all cases of suspected criminality and, in particular, in cases involving the financing of terrorism, information should flow directly and quickly without undue delays. It is therefore essential to further enhance the effectiveness and efficiency of FIUs, by clarifying the powers of and cooperation between FIUs.

(17)

FIUs should be able to obtain from any obliged entity all the necessary information relating to their functions. Their unfettered access to information is essential to ensure that flows of money can be properly traced and illicit networks and flows detected at an early stage. The need for FIUs to obtain additional information from obliged entities based on a suspicion of money laundering or financing of terrorism might be triggered by a prior suspicious transaction report reported to the FIU, but might also be triggered through other means such as the FIU’s own analysis, intelligence provided by competent authorities or information held by another FIU. FIUs should therefore in the context of their functions be able to obtain information from any obliged entity, even without a prior report being made. This does not include indiscriminate requests for information to the obliged entities in the context of the FIU's analysis, but only information requests based on sufficiently defined conditions. An FIU should also be able to obtain such information on a request made by another Union FIU and to exchange the information with the requesting FIU.

(18)

The purpose of the FIU is to collect and analyse the information which they receive with the aim of establishing links between suspicious transactions and underlying criminal activity in order to prevent and combat money laundering and terrorist financing, and to disseminate the results of its analysis as well as additional information to the competent authorities where there are grounds to suspect money laundering, associated predicate offences or financing of terrorism. An FIU should not refrain from or refuse the exchange of information to another FIU, spontaneously or upon request, for reasons such as a lack of identification of an associated predicate offence, features of criminal national laws and differences between the definitions of associated predicate offences or the absence of a reference to particular associated predicate offences. Similarly, an FIU should grant its prior consent to another FIU to forward the information to competent authorities regardless of the type of possible associated predicate offence in order to allow the dissemination function to be carried out effectively. FIUs have reported difficulties in exchanging information based on differences in national definitions of certain predicate offences, such as tax crimes, which are not harmonised by Union law. Such differences, should not hamper the mutual exchange, the dissemination to competent authorities and the use of that information as defined by this Directive. FIUs should rapidly, constructively and effectively ensure the widest range of international cooperation with third countries’ FIUs in relation to money laundering, associated predicate offences and terrorist financing in accordance with the FATF Recommendations and Egmont Principles for Information Exchange between Financial Intelligence Units.

(19)

Information of a prudential nature relating to credit and financial institutions, such as information relating to the fitness and properness of directors and shareholders, to the internal control mechanisms, to governance or to compliance and risk management, is often indispensable for the adequate AML/CFT supervision of such institutions. Similarly, AML/CFT information is also important for the prudential supervision of such institutions. Therefore, the exchange of confidential information and collaboration between AML/CFT competent authorities supervising credit and financial institutions and prudential supervisors should not be hampered by legal uncertainty which might arise as a result of the absence of explicit provisions in this field. Clarification of the legal framework is even more important since prudential supervision has, in a number of cases, been entrusted to non-AML/CFT supervisors, such as the European Central Bank (ECB).

(20)

Delayed access to information by FIUs and other competent authorities on the identity of holders of bank and payment accounts and safe-deposit boxes, especially anonymous ones, hampers the detection of transfers of funds relating to terrorism. National data allowing the identification of bank and payments accounts and safe-deposit boxes belonging to one person is fragmented and therefore not accessible to FIUs and to other competent authorities in a timely manner. It is therefore essential to establish centralised automated mechanisms, such as a register or data retrieval system, in all Member States as an efficient means to get timely access to information on the identity of holders of bank and payment accounts and safe-deposit boxes, their proxy holders, and their beneficial owners. When applying the access provisions, it is appropriate for pre-existing mechanisms to be used provided that national FIUs can access the data for which they make inquiries in an immediate and unfiltered manner. Member States should consider feeding such mechanisms with other information deemed necessary and proportionate for the more effective mitigation of risks relating to money laundering and the financing of terrorism. Full confidentiality should be ensured in respect of such inquiries and requests for related information by FIUs and competent authorities other than those authorities responsible for prosecution.

(21)

In order to respect privacy and protect personal data, the minimum data necessary for the carrying out of AML/CFT investigations should be held in centralised automated mechanisms for bank and payment accounts, such as registers or data retrieval systems. It should be possible for Member States to determine which data it is useful and proportionate to gather, taking into account the systems and legal traditions in place to enable the meaningful identification of the beneficial owners. When transposing the provisions relating to those mechanisms, Member States should set out retention periods equivalent to the period for retention of the documentation and information obtained within the application of customer due diligence measures. It should be possible for Member States to extend the retention period on a general basis by law, without requiring case-by-case decisions. The additional retention period should not exceed an additional five years. That period should be without prejudice to national law setting out other data retention requirements allowing case-by-case decisions to facilitate criminal or administrative proceedings. Access to those mechanisms should be on a need-to-know basis.

(22)

Accurate identification and verification of data of natural and legal persons are essential for fighting money laundering or terrorist financing. The latest technical developments in the digitalisation of transactions and payments enable a secure remote or electronic identification. Those means of identification as set out in Regulation (EU) No 910/2014 of the European Parliament and of the Council (7) should be taken into account, in particular with regard to notified electronic identification schemes and ways of ensuring cross-border legal recognition, which offer high level secure tools and provide a benchmark against which the identification methods set up at national level may be checked. In addition, other secure remote or electronic identification processes, regulated, recognised, approved or accepted at national level by the national competent authority may be taken into account. Where appropriate, the recognition of electronic documents and trust services as set out in Regulation (EU) No 910/2014 should also be taken into account in the identification process. The principle of technology neutrality should be taken into account in the application of this Directive.

(23)

In order to identify politically exposed persons in the Union, lists should be issued by Member States indicating the specific functions which, in accordance with national laws, regulations and administrative provisions, qualify as prominent public functions. Member States should request each international organisation accredited on their territories to issue and keep up to date a list of prominent public functions at that international organisation.

(24)

The approach for the review of existing customers in the current framework is risk-based. However, given the higher risk of money laundering, terrorist financing and associated predicate offences associated with certain intermediary structures, that approach might not allow for the timely detection and assessment of risks. It is therefore important to ensure that certain clearly specified categories of existing customers are also monitored on a regular basis.

(25)

Member States are currently required to ensure that corporate and other legal entities incorporated within their territory obtain and hold adequate, accurate and current information on their beneficial ownership. The need for accurate and up-to-date information on the beneficial owner is a key factor in tracing criminals who might otherwise be able to hide their identity behind a corporate structure. The globally interconnected financial system makes it possible to hide and move funds around the world, and money launderers and terrorist financers as well as other criminals have increasingly made use of that possibility.

(26)

The specific factor determining which Member State is responsible for the monitoring and registration of beneficial ownership information of trusts and similar legal arrangements should be clarified. Due to differences in the legal systems of Member States, certain trusts and similar legal arrangements are not monitored or registered anywhere in the Union. Beneficial ownership information of trusts and similar legal arrangements should be registered where the trustees of trusts and persons holding equivalent positions in similar legal arrangements are established or where they reside. In order to ensure the effective monitoring and registration of information on the beneficial ownership of trusts and similar legal arrangements, cooperation between Member States is also necessary. The interconnection of Member States’ registries of beneficial owners of trusts and similar legal arrangements would make this information accessible, and would also ensure that the multiple registration of the same trusts and similar legal arrangements is avoided within the Union.

(27)

Rules that apply to trusts and similar legal arrangements with respect to access to information relating to their beneficial ownership should be comparable to the corresponding rules that apply to corporate and other legal entities. Due to the wide range of types of trusts that currently exists in the Union, as well as an even greater variety of similar legal arrangements, the decision on whether or not a trust or a similar legal arrangement is comparably similar to corporate and other legal entities should be taken by Member States. The aim of the national law transposing those provisions should be to prevent the use of trusts or similar legal arrangements for the purposes of money laundering, terrorist financing or associated predicate offences.

(28)

With a view to the different characteristics of trusts and similar legal arrangements, Member States should be able, under national law and in accordance with data protection rules, to determine the level of transparency with regard to trusts and similar legal arrangements that are not comparable to corporate and other legal entities. The risks of money laundering and terrorist financing involved can differ, based on the characteristics of the type of trust or similar legal arrangement and the understanding of those risks can evolve over time, for instance as a result of the national and supranational risk assessments. For that reason, it should be possible for Member States to provide for wider access to information on beneficial ownership of trusts and similar legal arrangements, if such access constitutes a necessary and proportionate measure with the legitimate aim of preventing the use of the financial system for the purposes of money laundering or terrorist financing. When determining the level of transparency of the beneficial ownership information of such trusts or similar legal arrangements, Member States should have due regard to the protection of fundamental rights of individuals, in particular the right to privacy and protection of personal data. Access to beneficial ownership information of trusts and similar legal arrangements should be granted to any person that can demonstrate a legitimate interest. Access should also be granted to any person that files a written request in relation to a trust or similar legal arrangement which holds or owns a controlling interest in any corporate or other legal entity incorporated outside the Union, through direct or indirect ownership, including through bearer shareholdings, or through control via other means. The criteria and conditions granting access to requests for beneficial ownership information of trusts and similar legal arrangements should be sufficiently precise and in line with the aims of this Directive. It should be possible for Member States to refuse a written request where there are reasonable grounds to suspect that the written request is not in line with the objectives of this Directive.

(29)

In order to ensure legal certainty and a level playing field, it is essential to clearly set out which legal arrangements established across the Union should be considered similar to trusts by effect of their functions or structure. Therefore, each Member State should be required to identify the trusts, if recognised by national law, and similar legal arrangements that may be set up pursuant to its national legal framework or custom and which have structure or functions similar to trusts, such as enabling a separation or disconnection between the legal and the beneficial ownership of assets. Thereafter, Member States should notify to the Commission the categories, description of the characteristics, names and where applicable legal basis of those trusts and similar legal arrangements in view of their publication in the Official Journal of the European Union in order to enable their identification by other Member States. It should be taken into account that trusts and similar legal arrangements may have different legal characteristics throughout the Union. Where the characteristics of the trust or similar legal arrangement are comparable in structure or functions to the characteristics of corporate and other legal entities, public access to beneficial ownership information would contribute to combating the misuse of trusts and similar legal arrangements, similar to the way public access can contribute to the prevention of the misuse of corporate and other legal entities for the purposes of money laundering and terrorist financing.

(30)

Public access to beneficial ownership information allows greater scrutiny of information by civil society, including by the press or civil society organisations, and contributes to preserving trust in the integrity of business transactions and of the financial system. It can contribute to combating the misuse of corporate and other legal entities and legal arrangements for the purposes of money laundering or terrorist financing, both by helping investigations and through reputational effects, given that anyone who could enter into transactions is aware of the identity of the beneficial owners. It also facilitates the timely and efficient availability of information for financial institutions as well as authorities, including authorities of third countries, involved in combating such offences. The access to that information would also help investigations on money laundering, associated predicate offences and terrorist financing.

(31)

Confidence in financial markets from investors and the general public depends in large part on the existence of an accurate disclosure regime that provides transparency in the beneficial ownership and control structures of companies. This is particularly true for corporate governance systems that are characterised by concentrated ownership, such as the one in the Union. On the one hand, large investors with significant voting and cash-flow rights may encourage long-term growth and firm performance. On the other hand, however, controlling beneficial owners with large voting blocks may have incentives to divert corporate assets and opportunities for personal gain at the expense of minority investors. The potential increase in confidence in financial markets should be regarded as a positive side effect and not the purpose of increasing transparency, which is to create an environment less likely to be used for the purposes of money laundering and terrorist financing.

(32)

Confidence in financial markets from investors and the general public depends in large part on the existence of an accurate disclosure regime that provides transparency in the beneficial ownership and control structures of corporate and other legal entities as well as certain types of trusts and similar legal arrangements. Member States should therefore allow access to beneficial ownership information in a sufficiently coherent and coordinated way, by establishing clear rules of access by the public, so that third parties are able to ascertain, throughout the Union, who are the beneficial owners of corporate and other legal entities as well as of certain types of trusts and similar legal arrangements.

(33)

Member States should therefore allow access to beneficial ownership information on corporate and other legal entities in a sufficiently coherent and coordinated way, through the central registers in which beneficial ownership information is set out, by establishing a clear rule of public access, so that third parties are able to ascertain, throughout the Union, who are the beneficial owners of corporate and other legal entities. It is essential to also establish a coherent legal framework that ensures better access to information relating to beneficial ownership of trusts and similar legal arrangements, once they are registered within the Union. Rules that apply to trusts and similar legal arrangements with respect to access to information relating to their beneficial ownership should be comparable to the corresponding rules that apply to corporate and other legal entities.

(34)

In all cases, both with regard to corporate and other legal entities, as well as trusts and similar legal arrangements, a fair balance should be sought in particular between the general public interest in the prevention of money laundering and terrorist financing and the data subjects’ fundamental rights. The set of data to be made available to the public should be limited, clearly and exhaustively defined, and should be of a general nature, so as to minimise the potential prejudice to the beneficial owners. At the same time, information made accessible to the public should not significantly differ from the data currently collected. In order to limit the interference with the right to respect for their private life in general and to protection of their personal data in particular, that information should relate essentially to the status of beneficial owners of corporate and other legal entities and of trusts and similar legal arrangements and should strictly concern the sphere of economic activity in which the beneficial owners operate. In cases where the senior managing official has been identified as the beneficial owner only ex officio and not through ownership interest held or control exercised by other means, this should be clearly visible in the registers. With regard to information on beneficial owners, Member States can provide for information on nationality to be included in the central register particularly for non-native beneficial owners. In order to facilitate registry procedures and as the vast majority of beneficial owners will be nationals of the state maintaining the central register, Member States may presume a beneficial owner to be of their own nationality where no entry to the contrary is made.

(35)

The enhanced public scrutiny will contribute to preventing the misuse of legal entities and legal arrangements, including tax avoidance. Therefore, it is essential that the information on beneficial ownership remains available through the national registers and through the system of interconnection of registers for a minimum of five years after the grounds for registering beneficial ownership information of the trust or similar legal arrangement have ceased to exist. However, Member States should be able to provide by law for the processing of the information on beneficial ownership, including personal data for other purposes if such processing meets an objective of public interest and constitutes a necessary and proportionate measure in a democratic society to the legitimate aim pursued.

(36)

Moreover, with the aim of ensuring a proportionate and balanced approach and to guarantee the rights to private life and personal data protection, it should be possible for Member States to provide for exemptions to the disclosure through the registers of beneficial ownership information and to access to such information, in exceptional circumstances, where that information would expose the beneficial owner to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation. It should also be possible for Member States to require online registration in order to identify any person who requests information from the register, as well as the payment of a fee for access to the information in the register.

(37)

The interconnection of Member States’ central registers holding beneficial ownership information through the European Central Platform established by Directive (EU) 2017/1132 of the European Parliament and of the Council (8) necessitates the coordination of national systems having varying technical characteristics. This entails the adoption of technical measures and specifications which need to take account of differences between registers. In order to ensure uniform conditions for the implementation of this Directive, implementing powers should be conferred on the Commission to tackle such technical and operational issues. Those powers should be exercised in accordance with the examination procedure referred to in Article 5 of Regulation (EU) No 182/2011 of the European Parliament and of the Council (9). In any case, the involvement of Member States in the functioning of the whole system should be ensured by means of a regular dialogue between the Commission and the representatives of Member States on the issues concerning the operation of the system and on its future development.

(38)

Regulation (EU) 2016/679 of the European Parliament and of the Council (10) applies to the processing of personal data under this Directive. As a consequence, natural persons whose personal data are held in national registers as beneficial owners should be informed accordingly. Furthermore, only personal data that is up to date and corresponds to the actual beneficial owners should be made available and the beneficiaries should be informed about their rights under the current Union legal data protection framework, as set out in Regulation (EU) 2016/679 and Directive (EU) 2016/680 of the European Parliament and of the Council (11), and the procedures applicable for exercising those rights. In addition, to prevent the abuse of the information contained in the registers and to balance out the rights of beneficial owners, Member States might find it appropriate to consider making information relating to the requesting person along with the legal basis for their request available to the beneficial owner.

(39)

Where the reporting of discrepancies by the FIUs and competent authorities would jeopardise an on-going investigation, the FIUs or competent authorities should delay the reporting of the discrepancy until the moment at which the reasons for not reporting cease to exist. Furthermore, FIUs and competent authorities should not report any discrepancy when this would be contrary to any confidentiality provision of national law or would constitute a tipping-off offence.

(40)

This Directive is without prejudice to the protection of personal data processed by competent authorities in accordance with Directive (EU) 2016/680.

(41)

Access to information and the definition of legitimate interest should be governed by the law of the Member State where the trustee of a trust or person holding an equivalent position in a similar legal arrangement is established or resides. Where the trustee of the trust or person holding equivalent position in similar legal arrangement is not established or does not reside in any Member State, access to information and the definition of legitimate interest should be governed by the law of the Member State where the beneficial ownership information of the trust or similar legal arrangement is registered in accordance with the provisions of this Directive.

(42)

Member States should define legitimate interest, both as a general concept and as a criterion for accessing beneficial ownership information in their national law. In particular, those definitions should not restrict the concept of legitimate interest to cases of pending administrative or legal proceedings, and should enable to take into account the preventive work in the field of anti-money laundering, counter terrorist financing and associate predicate offences undertaken by non-governmental organisations and investigative journalists, where appropriate. Once the interconnection of Member States’ beneficial ownership registers is in place, both national and cross-border access to each Member State’s register should be granted based on the definition of legitimate interest of the Member State where the information relating to the beneficial ownership of the trust or similar legal arrangement has been registered in accordance with the provisions of this Directive, by virtue of a decision taken by the relevant authorities of that Member State. In relation to Member States’ beneficial ownership registers, it should also be possible for Member States to establish appeal mechanisms against decisions which grant or deny access to beneficial ownership information. With a view to ensuring coherent and efficient registration and information exchange, Member States should ensure that their authority in charge of the register set up for the beneficial ownership information of trusts and similar legal arrangements cooperates with its counterparts in other Member States, sharing information concerning trusts and similar legal arrangements governed by the law of one Member State and administered in another Member State.

(43)

Cross-border correspondent relationships with a third-country’s respondent institution are characterised by their on-going, repetitive nature. Accordingly, Member States, while requiring the adoption of enhanced due diligence measures in this particular context, should take into consideration that correspondent relationships do not include one-off transactions or the mere exchange of messaging capabilities. Moreover, recognising that not all cross-border correspondent banking services present the same level of money laundering and terrorist financing risks, the intensity of the measures laid down in this Directive can be determined by application of the principles of the risk based approach and do not prejudge the level of money laundering and terrorist financing risk presented by the respondent financial institution.

(44)

It is important to ensure that anti-money laundering and counter-terrorist financing rules are correctly implemented by obliged entities. In that context, Member States should strengthen the role of public authorities acting as competent authorities with designated responsibilities for combating money laundering or terrorist financing, including the FIUs, the authorities that have the function of investigating or prosecuting money laundering, associated predicate offences and terrorist financing, tracing and seizing or freezing and confiscating criminal assets, authorities receiving reports on cross-border transportation of currency and bearer-negotiable instruments and authorities that have supervisory or monitoring responsibilities aimed at ensuring compliance by obliged entities. Member States should strengthen the role of other relevant authorities including anti-corruption authorities and tax authorities.

(45)

Member States should ensure effective and impartial supervision of all obliged entities, preferably by public authorities via a separate and independent national regulator or supervisor.

(46)

Criminals move illicit proceeds through numerous financial intermediaries to avoid detection. Therefore it is important to allow credit and financial institutions to exchange information not only between group members, but also with other credit and financial institutions, with due regard to data protection rules as set out in national law.

(47)

Competent authorities supervising obliged entities for compliance with this Directive should be able to cooperate and exchange confidential information, regardless of their respective nature or status. To this end, such competent authorities should have an adequate legal basis for exchange of confidential information, and collaboration between AML/CFT competent supervisory authorities and prudential supervisors should not be hampered unintentionally by legal uncertainty which may stem from a lack of explicit provisions in this field. The supervision of the effective implementation of group policy on AML/CFT should be done in accordance with the principles and modalities of consolidated supervision as laid down in the relevant European sectoral legislation.

(48)

The exchange of information and the provision of assistance between competent authorities of the Members States is essential for the purposes of this Directive. Consequently, Member States should not prohibit or place unreasonable or unduly restrictive conditions on this exchange of information and provision of assistance.

(49)

In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents (12), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(50)

Since the objective of this Directive, namely the protection of the financial system by means of prevention, detection and investigation of money laundering and terrorist financing, cannot be sufficiently achieved by the Member States, as individual measures adopted by Member States to protect their financial systems could be inconsistent with the functioning of the internal market and with the prescriptions of the rule of law and Union public policy, but can rather, by reason of the scale and effects of the action, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

(51)

This Directive respects the fundamental rights and observes the principles recognised by the Charter of Fundamental Rights of the European Union (‘the Charter’), in particular the right to respect for private and family life (Article 7 of the Charter), the right to the protection of personal data (Article 8 of the Charter) and the freedom to conduct a business (Article 16 of the Charter).

(52)

When drawing up a report evaluating the implementation of this Directive, the Commission should give due consideration to the respect of the fundamental rights and principles recognised by the Charter.

(53)

Given the need to urgently implement measures adopted with a view to strengthen the Union’s regime set in place for the prevention of money laundering and financing of terrorism, and seeing the commitments undertaken by Member States to quickly proceed with the transposition of Directive (EU) 2015/849, the amendments to Directive (EU) 2015/849 should be transposed by 10 January 2020. Member States should set up beneficial ownership registers for corporate and other legal entities by 10 January 2020 and for trusts and similar legal arrangements by 10 March 2020. Central registers should be interconnected via the European Central Platform by 10 March 2021. Member States should set up centralised automated mechanisms allowing the identification of holders of bank and payment accounts and safe-deposit boxes by 10 September 2020.

(54)

The European Data Protection Supervisor was consulted in accordance with Article 28(2) of Regulation (EC) No 45/2001 of the European Parliament and of the Council (13) and delivered an opinion on 2 February 2017 (14).

(55)

Directive (EU) 2015/849 should therefore be amended accordingly,

(1)

point (3) of Article 2(1) is amended as follows:

(2)

Article 3 is amended as follows:

(3)

Article 6 is amended as follows:

(4)

Article 7 is amended as follows:

(5)

Article 9 is amended as follows:

(6)

in Article 10, paragraph 1 is replaced by the following:

‘1.   Member States shall prohibit their credit institutions and financial institutions from keeping anonymous accounts, anonymous passbooks or anonymous safe-deposit boxes. Member States shall, in any event, require that the owners and beneficiaries of existing anonymous accounts, anonymous passbooks or anonymous safe-deposit boxes be subject to customer due diligence measures no later than 10 January 2019 and in any event before such accounts, passbooks or deposit boxes are used in any way.’;

(7)

Article 12 is amended as follows:

(8)

Article 13(1) is amended as follows:

(9)

Article 14 is amended as follows:

(10)

Article 18 is amended as follows:

(11)

The following Article is inserted:

‘Article 18a

1.   With respect to business relationships or transactions involving high-risk third countries identified pursuant to Article 9(2), Member States shall require obliged entities to apply the following enhanced customer due diligence measures:

Member States may require obliged entities to ensure, where applicable, that the first payment be carried out through an account in the customer’s name with a credit institution subject to customer due diligence standards that are not less robust than those laid down in this Directive.

2.   In addition to the measures provided in paragraph 1 and in compliance with the Union’s international obligations, Member States shall require obliged entities to apply, where applicable, one or more additional mitigating measures to persons and legal entities carrying out transactions involving high-risk third countries identified pursuant to Article 9(2). Those measures shall consist of one or more of the following:

3.   In addition to the measures provided in paragraph 1, Member States shall apply, where applicable, one or several of the following measures with regard to high-risk third countries identified pursuant to Article 9(2) in compliance with the Union’s international obligations:

4.   When enacting or applying the measures set out in paragraphs 2 and 3, Member States shall take into account, as appropriate relevant evaluations, assessments or reports drawn up by international organisations and standard setters with competence in the field of preventing money laundering and combating terrorist financing, in relation to the risks posed by individual third countries.

5.   Member States shall notify the Commission before enacting or applying the measures set out in paragraphs 2 and 3.’;

(12)

in Article 19, the introductory part is replaced by the following:

‘With respect to cross-border correspondent relationships involving the execution of payments with a third-country respondent institution, Member States shall, in addition to the customer due diligence measures laid down in Article 13, require their credit institutions and financial institutions when entering into a business relationship to:’;

(13)

The following Article is inserted:

‘Article 20a

1.   Each Member State shall issue and keep up to date a list indicating the exact functions which, according to national laws, regulations and administrative provisions, qualify as prominent public functions for the purposes of point (9) of Article 3. Member States shall request each international organisation accredited on their territories to issue and keep up to date a list of prominent public functions at that international organisation for the purposes of point (9) of Article 3. Those lists shall be sent to the Commission and may be made public.

2.   The Commission shall compile and keep up to date the list of the exact functions which qualify as prominent public functions at the level of Union institutions and bodies. That list shall also include any function which may be entrusted to representatives of third countries and of international bodies accredited at Union level.

3.   The Commission shall assemble, based on the lists provided for in paragraphs 1 and 2 of this Article, a single list of all prominent public functions for the purposes of point (9) of Article 3. That single list shall be made public.

4.   Functions included in the list referred to in paragraph 3 of this Article shall be dealt with in accordance with the conditions laid down in Article 41(2).’;

(14)

in Article 27, paragraph 2 is replaced by the following:

‘2.   Member States shall ensure that obliged entities to which the customer is referred take adequate steps to ensure that the third party provides immediately, upon request, relevant copies of identification and verification data, including, where available, data obtained through electronic identification means, relevant trust services as set out in Regulation (EU) No 910/2014, or any other secure, remote or electronic, identification process regulated, recognised, approved or accepted by the relevant national authorities.’;

(15)

Article 30 is amended as follows:

(16)

Article 31 is amended as follows:

(17)

the following Article is inserted:

‘Article 31a

Implementing acts

Where necessary in addition to the implementing acts adopted by the Commission in accordance with Article 24 of Directive (EU) 2017/1132 and in accordance with the scope of Article 30 and 31 of this Directive, the Commission shall adopt by means of implementing acts technical specifications and procedures necessary to provide for the interconnection of Member States’ central registers as referred to in Article 30(10) and Article 31(9), with regard to:

Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 64a(2).

In its implementing acts, the Commission shall strive to reuse proven technology and existing practices. The Commission shall ensure that the systems to be developed shall not incur costs above what is absolutely necessary in order to implement this Directive. The Commission’s implementing acts shall be characterised by transparency and the exchange of experiences and information between the Commission and the Member States.’;

(18)

in Article 32 the following paragraph is added:

‘9.   Without prejudice to Article 34(2), in the context of its functions, each FIU shall be able to request, obtain and use information from any obliged entity for the purpose set in paragraph 1 of this Article, even if no prior report is filed pursuant to Article 33(1)(a) or 34(1).’;

(19)

the following Article is inserted:

‘Article 32a

1.   Member States shall put in place centralised automated mechanisms, such as central registries or central electronic data retrieval systems, which allow the identification, in a timely manner, of any natural or legal persons holding or controlling payment accounts and bank accounts identified by IBAN, as defined by Regulation (EU) No 260/2012 of the European Parliament and of the Council (*7), and safe-deposit boxes held by a credit institution within their territory. Member States shall notify the Commission of the characteristics of those national mechanisms.

2.   Member States shall ensure that the information held in the centralised mechanisms referred to in paragraph 1 of this Article is directly accessible in an immediate and unfiltered manner to national FIUs. The information shall also be accessible to national competent authorities for fulfilling their obligations under this Directive. Member States shall ensure that any FIU is able to provide information held in the centralised mechanisms referred to in paragraph 1 of this Article to any other FIUs in a timely manner in accordance with Article 53.

3.   The following information shall be accessible and searchable through the centralised mechanisms referred to in paragraph 1:

—   for the customer-account holder and any person purporting to act on behalf of the customer: the name, complemented by either the other identification data required under the national provisions transposing point (a) of Article 13(1) or a unique identification number;

—   for the beneficial owner of the customer-account holder: the name, complemented by either the other identification data required under the national provisions transposing point (b) of Article 13(1) or a unique identification number;

—   for the bank or payment account: the IBAN number and the date of account opening and closing;

—   for the safe-deposit box: name of the lessee complemented by either the other identification data required under the national provisions transposing Article 13(1) or a unique identification number and the duration of the lease period.

4.   Member States may consider requiring other information deemed essential for FIUs and competent authorities for fulfilling their obligations under this Directive to be accessible and searchable through the centralised mechanisms.

5.   By 26 June 2020, the Commission shall submit a report to the European Parliament and to the Council assessing the conditions and the technical specifications and procedures for ensuring secure and efficient interconnection of the centralised automated mechanisms. Where appropriate, that report shall be accompanied by a legislative proposal.

(*7)  Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009 (OJ L 94, 30.3.2012, p. 22).’;"

(20)

the following Article is inserted:

‘Article 32b

1.   Member States shall provide FIUs and competent authorities with access to information which allows the identification in a timely manner of any natural or legal persons owning real estate, including through registers or electronic data retrieval systems where such registers or systems are available.

2.   By 31 December 2020, the Commission shall submit a report to the European Parliament and to the Council assessing the necessity and proportionality of harmonising the information included in the registers and assessing the need for the interconnection of those registers. Where appropriate, that report shall be accompanied by a legislative proposal.’;

(21)

in Article 33(1), point (b) is replaced by the following:

(22)

in Article 34, the following paragraph is added:

‘3.   Self-regulatory bodies designated by Member States shall publish an annual report containing information about:

(23)

Article 38 is replaced by the following:

‘Article 38

1.   Member States shall ensure that individuals, including employees and representatives of the obliged entity who report suspicions of money laundering or terrorist financing internally or to the FIU, are legally protected from being exposed to threats, retaliatory or hostile action, and in particular from adverse or discriminatory employment actions.

2.   Member States shall ensure that individuals who are exposed to threats, retaliatory or hostile actions, or adverse or discriminatory employment actions for reporting suspicions of money laundering or terrorist financing internally or to the FIU are entitled to present a complaint in a safe manner to the respective competent authorities. Without prejudice to the confidentiality of information gathered by the FIU, Member States shall also ensure that such individuals have the right to an effective remedy to safeguard their rights under this paragraph.’;

(24)

in Article 39, paragraph 3 is replaced by the following:

‘3.   The prohibition laid down in paragraph 1 of this Article shall not prevent disclosure between the credit institutions and financial institutions from the Member States provided that they belong to the same group, or between those entities and their branches and majority owned subsidiaries established in third countries, provided that those branches and majority-owned subsidiaries fully comply with the group-wide policies and procedures, including procedures for sharing information within the group, in accordance with Article 45, and that the group-wide policies and procedures comply with the requirements set out in this Directive.’;

(25)

in Article 40, paragraph 1 is amended as follows:

(26)

Article 43 is replaced by the following:

‘Article 43

The processing of personal data on the basis of this Directive for the purposes of the prevention of money laundering and terrorist financing as referred to in Article 1 shall be considered to be a matter of public interest under Regulation (EU) 2016/679 of the European Parliament and of the Council (*8).

(*8)  Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).’;"

(27)

Article 44 is replaced by the following:

‘Article 44

1.   Member States shall, for the purposes of contributing to the preparation of risk assessment pursuant to Article 7, ensure that they are able to review the effectiveness of their systems to combat money laundering or terrorist financing by maintaining comprehensive statistics on matters relevant to the effectiveness of such systems.

2.   The statistics referred to in paragraph 1 shall include:

3.   Member States shall ensure that a consolidated review of their statistics is published on an annual basis.

4.   Member States shall transmit annually to the Commission the statistics referred to in paragraph 2. The Commission shall publish an annual report summarising and explaining the statistics referred to in paragraph 2, which shall be made available on its website.’;

(28)

in Article 45, paragraph 4 is replaced by the following:

‘4.   The Member States and the ESAs shall inform each other of instances in which the law of a third country does not permit the implementation of the policies and procedures required under paragraph 1. In such cases, coordinated actions may be taken to pursue a solution. In the assessing which third countries do not permit the implementation of the policies and procedures required under paragraph 1, Member States and the ESAs shall take into account any legal constraints that may hinder proper implementation of those policies and procedures, including secrecy, data protection and other constraints limiting the exchange of information that may be relevant for that purpose.’;

(29)

in Article 47, paragraph 1 is replaced by the following:

‘1.   Member States shall ensure that providers of exchange services between virtual currencies and fiat currencies, and custodian wallet providers, are registered, that currency exchange and cheque cashing offices, and trust or company service providers are licensed or registered, and that providers of gambling services are regulated.’;

(30)

Article 48 is amended as follows:

(31)

Article 49 is replaced by the following:

‘Article 49

Member States shall ensure that policy makers, the FIUs, supervisors and other competent authorities involved in AML/CFT, as well as tax authorities and law enforcement authorities when acting within the scope of this Directive, have effective mechanisms to enable them to cooperate and coordinate domestically concerning the development and implementation of policies and activities to combat money laundering and terrorist financing, including with a view to fulfilling their obligation under Article 7.’;

(32)

in Section 3 of Chapter VI, the following subsection is inserted:

‘Subsection IIa

Cooperation between competent authorities of the Member States

Article 50a

Member States shall not prohibit or place unreasonable or unduly restrictive conditions on the exchange of information or assistance between competent authorities for the purposes of this Directive. In particular Member States shall ensure that competent authorities do not refuse a request for assistance on the grounds that:

(33)

Article 53 is amended as follows:

(34)

in Article 54, the following subparagraph is added:

‘Member States shall ensure that FIUs designate at least one contact person or point to be responsible for receiving requests for information from FIUs in other Member States.’;

(35)

In Article 55, paragraph 2 is replaced by the following:

‘2.   Member States shall ensure that the requested FIU’s prior consent to disseminate the information to competent authorities is granted promptly and to the largest extent possible, regardless of the type of associated predicate offences. The requested FIU shall not refuse its consent to such dissemination unless this would fall beyond the scope of application of its AML/CFT provisions or could lead to impairment of an investigation, or would otherwise not be in accordance with fundamental principles of national law of that Member State. Any such refusal to grant consent shall be appropriately explained. Those exceptions shall be specified in a way which prevents misuse of, and undue limitations to, the dissemination of information to competent authorities.’;

(36)

Article 57 is replaced by the following:

‘Article 57

Differences between national law definitions of predicate offences as referred to in point 4 of Article 3 shall not impede the ability of FIUs to provide assistance to another FIU and shall not limit the exchange, dissemination and the use of information pursuant to Articles 53, 54 and 55.’;

(37)

in Section 3 of Chapter VI, the following subsection is added:

‘Subsection IIIa

Cooperation between competent authorities supervising credit and financial institutions and other authorities bound by professional secrecy

Article 57a

1.   Member States shall require that all persons working for or who have worked for competent authorities supervising credit and financial institutions for compliance with this Directive and auditors or experts acting on behalf of such competent authorities shall be bound by the obligation of professional secrecy.

Without prejudice to cases covered by criminal law, confidential information which the persons referred to in the first subparagraph receive in the course of their duties under this Directive may be disclosed only in summary or aggregate form, in such a way that individual credit and financial institutions cannot be identified.

2.   Paragraph 1 shall not prevent the exchange of information between:

By 10 January 2019, the competent authorities supervising credit and financial institutions in accordance with this Directive and the ECB, acting pursuant to Article 27(2) of Regulation (EU) No 1024/2013 and point (g) of the first subparagraph of Article 56 of Directive 2013/36/EU of the European Parliament and of the Council (*10), shall conclude, with the support of the European Supervisory Authorities, an agreement on the practical modalities for exchange of information.

3.   Competent authorities supervising credit and financial institutions receiving confidential information as referred to in paragraph 1, shall only use this information:

4.   Member States shall ensure that competent authorities supervising credit and financial institutions cooperate with each other for the purposes of this Directive to the greatest extent possible, regardless of their respective nature or status. Such cooperation also includes the ability to conduct, within the powers of the requested competent authority, inquiries on behalf of a requesting competent authority, and the subsequent exchange of the information obtained through such inquiries.

5.   Member States may authorise their national competent authorities which supervise credit and financial institutions to conclude cooperation agreements providing for collaboration and exchanges of confidential information with the competent authorities of third countries that constitute counterparts of those national competent authorities. Such cooperation agreements shall be concluded on the basis of reciprocity and only if the information disclosed is subject to a guarantee of professional secrecy requirements at least equivalent to that referred to in paragraph 1. Confidential information exchanged according to those cooperation agreements shall be used for the purpose of performing the supervisory task of those authorities.

Where the information exchanged originates in another Member State, it shall only be disclosed with the explicit consent of the competent authority which shared it and, where appropriate, solely for the purposes for which that authority gave its consent.

Article 57b

1.   Notwithstanding Article 57a(1) and (3) and without prejudice to Article 34(2), Member States may authorise the exchange of information between competent authorities in the same Member State or in different Member States, between the competent authorities and authorities entrusted with the supervision of financial sector entities and natural or legal persons acting in the exercise of their professional activities as referred to in point (3) of Article 2(1) and the authorities responsible by law for the supervision of financial markets in the discharge of their respective supervisory functions.

The information received shall in any event be subject to professional secrecy requirements at least equivalent to those referred to in Article 57a(1).

2.   Notwithstanding Article 57a(1) and (3), Member States may, by virtue of provisions laid down in national law, authorise the disclosure of certain information to other national authorities responsible by law for the supervision of the financial markets, or with designated responsibilities in the field of combating or investigation of money laundering, the associated predicate offences or terrorist financing.

However, confidential information exchanged according to this paragraph shall only be used for the purpose of performing the legal tasks of the authorities concerned. Persons having access to such information shall be subject to professional secrecy requirements at least equivalent to those referred to in Article 57a(1).

3.   Member States may authorise the disclosure of certain information relating to the supervision of credit institutions for compliance with this Directive to Parliamentary inquiry committees, courts of auditors and other entities in charge of enquiries, in their Member State, under the following conditions:

(*9)  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63)."

(*10)  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).’;"

(38)

in Article 58(2), the following subparagraph is added:

‘Member States shall further ensure that where their competent authorities identify breaches which are subject to criminal sanctions, they inform the law enforcement authorities in a timely manner.’;

(39)

Article 61 is amended as follows:

(40)

the following Article is inserted:

‘Article 64a

1.   The Commission shall be assisted by the Committee on the Prevention of Money Laundering and Terrorist Financing (the “Committee”) as referred to in Article 23 of Regulation (EU) 2015/847 of the European Parliament and of the Council (*11). That committee shall be a committee within the meaning of Regulation (EU) No 182/2011 (*12).

2.   Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

(*11)  Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1)."

(*12)  Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by the Member States of the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).’;"

(41)

Article 65 is replaced by the following:

‘Article 65

1.   By 11 January 2022, and every three years thereafter, the Commission shall draw up a report on the implementation of this Directive and submit it to the European Parliament and to the Council.

That report shall include in particular:

The first report, to be published by 11 January 2022, shall be accompanied, if necessary, by appropriate legislative proposals, including, where appropriate, with respect to virtual currencies, empowerments to set-up and maintain a central database registering users’ identities and wallet addresses accessible to FIUs, as well as self-declaration forms for the use of virtual currency users, and to improve cooperation between Asset Recovery Offices of the Member States and a risk-based application of the measures referred to in point (b) of Article 20.

2.   By 1 June 2019, the Commission shall assess the framework for FIUs’ cooperation with third countries and obstacles and opportunities to enhance cooperation between FIUs in the Union including the possibility of establishing a coordination and support mechanism.

3.   The Commission shall, if appropriate, issue a report to the European Parliament and to Council to assess the need and proportionality of lowering the percentage for the identification of beneficial ownership of legal entities in light of any recommendation issued in this sense by international organisations and standard setters with competence in the field of preventing money laundering and combating terrorist financing as a result of a new assessment, and present a legislative proposal, if appropriate.’;

(42)

in Article 67, paragraph (1) is replaced by the following:

‘1.   Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 26 June 2017.

Member States shall apply Article 12(3) as of 10 July 2020.

Member States shall set up the registers referred to in Article 30 by 10 January 2020 and the registers referred to in Article 31 by 10 March 2020 and the centralised automated mechanisms referred to in Article 32a by 10 September 2020.

The Commission shall ensure the interconnection of registers referred to in Articles 30 and 31 in cooperation with the Member States by 10 March 2021.

Member States shall immediately communicate the text of the measures referred to in this paragraph to the Commission.

When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.’;

(43)

in Annex II, point (3), the introductory part is replaced by the following:

(44)

Annex III is amended as follows:

‘(iv)

authorities responsible for supervising the obliged entities listed in points (1) and (2) of Article 2(1) of Directive (EU) 2015/849 of the European Parliament and of the Council (*13) for compliance with that Directive;

‘(g)

authorities responsible for supervising the obliged entities listed in points (1) and (2) of Article 2(1) of Directive (EU) 2015/849 of the European Parliament and of the Council (*14) for compliance with that Directive.

19.6.2018   

EN

Official Journal of the European Union

L 156/75

(1)

The Union is committed to developing a sustainable, competitive, secure and decarbonised energy system. The Energy Union and the Energy and Climate Policy Framework for 2030 establish ambitious Union commitments to reduce greenhouse gas emissions further by at least 40 % by 2030 as compared with 1990, to increase the proportion of renewable energy consumed, to make energy savings in accordance with Union level ambitions, and to improve Europe’s energy security, competitiveness and sustainability.

(2)

To reach those objectives, the 2016 review of the Union’s energy efficiency legislative acts combines a reassessment of the Union’s energy efficiency target for 2030 as requested by the European Council’s conclusions of 2014, a review of the core provisions of Directive 2012/27/EU of the European Parliament and of the Council (4) and Directive 2010/31/EU of the European Parliament and of the Council (5), and a reinforcement of the financing framework, including the European Structural and Investment Funds (ESIF) and the European Fund for Strategic Investments (EFSI), which will ultimately improve the financial conditions of energy efficiency investments on the market.

(3)

Directive 2010/31/EU required the Commission to carry out a review by 1 January 2017 in the light of the experience gained and progress made during the application of that Directive, and, if necessary, to make proposals.

(4)

To prepare for that review, the Commission took a series of steps to gather evidence on how Directive 2010/31/EU had been implemented in the Member States, focusing on what worked and what could be improved.

(5)

The outcome of the review and the Commission’s impact assessment indicated that a series of amendments are required to strengthen the current provisions of Directive 2010/31/EU and to simplify certain aspects.

(6)

The Union is committed to developing a sustainable, competitive, secure and decarbonised energy system by 2050. To meet that goal, Member States and investors need measures that aim to reach the long-term greenhouse gas emission goal and that decarbonise the building stock, which is responsible for approximately 36 % of all CO2 emissions in the Union, by 2050. Member States should seek a cost-efficient equilibrium between decarbonising energy supplies and reducing final energy consumption. To that end, Member States and investors need a clear vision to guide their policies and investment decisions, which includes indicative national milestones and actions for energy efficiency to achieve the short-term (2030), mid-term (2040) and long-term (2050) objectives. With those objectives in mind and considering the Union’s overall energy efficiency ambitions, it is essential that Member States specify the expected output of their long-term renovation strategies and monitor developments by setting domestic progress indicators, subject to national conditions and developments.

(7)

The 2015 Paris Agreement on climate change following the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 21) boosts the Union’s efforts to decarbonise its building stock. Taking into account that almost 50 % of Union’s final energy consumption is used for heating and cooling, of which 80 % is used in buildings, the achievement of the Union’s energy and climate goals is linked to the Union’s efforts to renovate its building stock by giving priority to energy efficiency, making use of the ‘energy efficiency first’ principle as well as considering deployment of renewables.

(8)

The provisions on long-term renovation strategies laid down in Directive 2012/27/EU should be moved to Directive 2010/31/EU, where they fit more coherently. Member States should be able to use their long-term renovation strategies to address fire safety and risks related to intense seismic activity which affect energy efficiency renovations and the lifetime of buildings.

(9)

To achieve a highly energy efficient and decarbonised building stock and to ensure that the long-term renovation strategies deliver the necessary progress towards the transformation of existing buildings into nearly zero-energy buildings, in particular by an increase in deep renovations, Member States should provide clear guidelines and outline measurable, targeted actions as well as promote equal access to financing, including for the worst performing segments of the national building stock, for energy-poor consumers, for social housing and for households subject to split-incentive dilemmas, while taking into consideration affordability. To further support the necessary improvements in their national rental stock, Member States should consider introducing or continuing to apply requirements for a certain level of energy performance for rental properties, in accordance with the energy performance certificates.

(10)

According to the Commission’s impact assessment, renovation would be needed at an average rate of 3 % annually to accomplish the Union’s energy efficiency ambitions in a cost-effective manner. Considering that every 1 % increase in energy savings reduces gas imports by 2,6 %, clear ambitions for renovation of the existing building stock are of great importance. Thus, efforts to increase the energy performance of buildings would contribute actively to the Union’s energy independence and, furthermore, have great potential to create jobs in the Union, in particular in small and medium-sized enterprises. In that context, Member States should take into account the need for a clear link between their long-term renovation strategies and pertinent initiatives to promote skills development and education in the construction and energy efficiency sectors.

(11)

The need to alleviate energy poverty should be taken into account, in accordance with criteria defined by the Member States. While outlining national actions that contribute to the alleviation of energy poverty in their renovation strategies, the Member States have the right to establish what they consider to be relevant actions.

(12)

In their long-term renovation strategies and in planning actions and measures, Member States could make use of concepts such as trigger points, namely opportune moments in the life cycle of a building, for example from a cost-effectiveness or disruption perspective, for carrying out energy efficiency renovations.

(13)

The 2009 World Health Organisation guidelines provide that, concerning indoor air quality, better performing buildings provide higher comfort levels and wellbeing for their occupants and improve health. Thermal bridges, inadequate insulation and unplanned air pathways can result in surface temperatures below the dew point of the air and in dampness. It is therefore essential to ensure a complete and homogeneous insulation of the building including balconies, fenestrations, roofs, walls, doors and floors, and particular attention should be paid to preventing the temperature on any inner surface of the building from dropping below the dew point temperature.

(14)

Member States should support energy performance upgrades of existing buildings that contribute to achieving a healthy indoor environment, including through the removal of asbestos and other harmful substances, preventing the illegal removal of harmful substances, and facilitating compliance with existing legislative acts such as Directives 2009/148/EC (6) and (EU) 2016/2284 (7) of the European Parliament and of the Council.

(15)

It is important to ensure that measures to improve the energy performance of buildings do not focus only on the building envelope, but include all relevant elements and technical systems in a building, such as passive elements that participate in passive techniques aiming to reduce the energy needs for heating or cooling, the energy use for lighting and for ventilation and hence improve thermal and visual comfort.

(16)

Financial mechanisms, incentives and the mobilisation of financial institutions for energy efficiency renovations in buildings should have a central role in national long-term renovation strategies and be actively promoted by Member States. Such measures should include encouraging energy efficient mortgages for certified energy efficient building renovations, promoting investments for public authorities in an energy efficient building stock, for example by public-private partnerships or optional energy performance contracts, reducing the perceived risk of the investments, providing accessible and transparent advisory tools and assistance instruments such as one-stop-shops that provide integrated energy renovation services, as well as implementing other measures and initiatives such as those referred to in the Commission’s Smart Finance for Smart Buildings Initiative.

(17)

Solutions based on nature, such as well-planned street vegetation, green roofs and walls providing insulation and shade to buildings, contribute to reducing energy demand by limiting the need for heating and cooling and improving a building’s energy performance.

(18)

Research into, and the testing of, new solutions for improving the energy performance of historical buildings and sites should be encouraged, while also safeguarding and preserving cultural heritage.

(19)

For new buildings and buildings undergoing major renovations, Member States should encourage high-efficiency alternative systems, if technically, functionally and economically feasible, while also addressing the issues of healthy indoor climate conditions, fire safety and risks related to intense seismic activity, in accordance with domestic safety regulations.

(20)

To meet the objectives of energy efficiency policy for buildings, the transparency of energy performance certificates should be improved by ensuring that all necessary parameters for calculations, both for certification and minimum energy performance requirements, are set out and applied consistently. Member States should adopt adequate measures to ensure, for example, that the performance of installed, replaced or upgraded technical building systems, such as for space heating, air-conditioning or water heating, is documented in view of building certification and compliance checking.

(21)

The installation of self-regulating devices in existing buildings for the separate regulation of the temperature in each room or, where justified, in a designated heated zone of the building unit should be considered where economically feasible, for example where the cost is less than 10 % of the total costs of the replaced heat generators.

(22)

Innovation and new technology also make it possible for buildings to support the overall decarbonisation of the economy, including the transport sector. For example, buildings can be leveraged for the development of the infrastructure necessary for the smart charging of electric vehicles and also provide a basis for Member States, if they choose to, to use car batteries as a source of power.

(23)

Combined with an increased share of renewable electricity production, electric vehicles produce fewer carbon emissions resulting in better air quality. Electric vehicles constitute an important component of a clean energy transition based on energy efficiency measures, alternative fuels, renewable energy and innovative solutions for the management of energy flexibility. Building codes can be effectively used to introduce targeted requirements to support the deployment of recharging infrastructure in car parks of residential and non-residential buildings. Member States should provide for measures to simplify the deployment of recharging infrastructure with a view to addressing barriers such as split incentives and administrative complications which individual owners encounter when trying to install a recharging point on their parking space.

(24)

Ducting infrastructure provides the right conditions for the rapid deployment of recharging points if and where they are needed. Member States should ensure the development of electromobility in a balanced and cost-effective way. In particular, where a major renovation related to electrical infrastructure takes place, the pertinent installation of ducting infrastructure should follow. In the implementation of the requirements for electromobility in national legislation, Member States should duly consider potential diverse conditions such as ownership of buildings and the adjacent parking lots, public parking lots operated by private entities and buildings that have both a residential and a non-residential function.

(25)

Readily available infrastructure will decrease the costs of installation of recharging points for individual owners and ensure electric vehicle users have access to recharging points. Establishing requirements for electromobility at Union level concerning the pre-equipping of parking spaces and the installation of recharging points is an effective way to promote electric vehicles in the near future while enabling further development at a reduced cost in the medium to long term.

(26)

When Member States establish their requirements for the installation of a minimum number of recharging points for non-residential buildings with more than 20 parking spaces, which are to apply from 2025, they should take into account relevant national, regional and local conditions, as well as possible diversified needs and circumstances based on area, building typology, public transport coverage and other relevant criteria, in order to ensure the proportionate and appropriate deployment of recharging points.

(27)

However, some geographical areas with specific vulnerabilities may face specific difficulties in fulfilling the requirements on electromobility. This could be the case for the outermost regions within the meaning of Article 349 of the Treaty on the Functioning of the European Union (TFEU), due to their remoteness, insularity, small size, difficult topography and climate, as well as micro isolated systems, whose electricity grid might need to evolve to cope with a further electrification of local transport. In such cases, Member States should be allowed not to apply the requirements of electromobility. Notwithstanding that derogation, the electrification of transport may be a powerful tool to address air quality or security of supply problems which those regions and systems often face.

(28)

When applying the requirements for electromobility infrastructure provided for in the amendments to Directive 2010/31/EU, as set out in this Directive, Member States should consider the need for holistic and coherent urban planning as well as the promotion of alternative, safe and sustainable modes of transport and their supporting infrastructure, for example through dedicated parking infrastructure for electric bicycles and for the vehicles of people of reduced mobility.

(29)

The agendas of the Digital Single Market and the Energy Union should be aligned and should serve common goals. The digitalisation of the energy system is quickly changing the energy landscape, from the integration of renewables to smart grids and smart-ready buildings. In order to digitalise the building sector, the Union’s connectivity targets and ambitions for the deployment of high-capacity communication networks are important for smart homes and well-connected communities. Targeted incentives should be provided to promote smart-ready systems and digital solutions in the built environment. This offers new opportunities for energy savings, by providing consumers with more accurate information about their consumption patterns, and by enabling the system operator to manage the grid more effectively.

(30)

The smart readiness indicator should be used to measure the capacity of buildings to use information and communication technologies and electronic systems to adapt the operation of buildings to the needs of the occupants and the grid and to improve the energy efficiency and overall performance of buildings. The smart readiness indicator should raise awareness amongst building owners and occupants of the value behind building automation and electronic monitoring of technical building systems and should give confidence to occupants about the actual savings of those new enhanced-functionalities. Use of the scheme for rating the smart readiness of buildings should be optional for Member States.

(31)

In order to adapt Directive 2010/31/EU to technical progress, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission to supplement that directive by establishing the definition of the smart readiness indicator and a methodology by which it is to be calculated. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (8). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(32)

In order to ensure uniform conditions for the implementation of Directive 2010/31/EU, as amended by this Directive, implementing powers regarding the modalities for implementing an optional common Union scheme for rating the smart readiness of buildings should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (9).

(33)

To ensure that financial measures related to energy efficiency are applied in the best way in building renovation, they should be linked to the quality of the renovation works in light of the targeted or achieved energy savings. Those measures should therefore be linked to the performance of the equipment or material used for the renovation, to the level of certification or qualification of the installer, to an energy audit, or to the improvement achieved as a result of the renovation, which should be assessed by comparing energy performance certificates issued before and after the renovation, by using standard values or by another transparent and proportionate method.

(34)

The current independent control systems for energy performance certificates can be used for compliance checking and should be strengthened to ensure certificates are of good quality. Where the independent control system for energy performance certificates is complemented by an optional database going beyond the requirements of Directive 2010/31/EU as amended by this Directive, it can be used for compliance checking and for producing statistics on the regional or national building stocks. High-quality data on the building stock is needed and this could be partially generated by the databases that almost all Member States are currently developing and managing for energy performance certificates.

(35)

According to the Commission’s impact assessment, provisions concerning the inspections of heating systems and air-conditioning systems were found to be inefficient because they did not sufficiently ensure the initial and continued performance of those technical systems. Even cheap energy efficiency technical solutions with very short payback periods, such as hydraulic balancing of the heating system and the installation or replacement of thermostatic control valves, are insufficiently considered today. The provisions on inspections should be amended to ensure a better result from inspections. Those amendments should place the focus of inspections on central heating systems and air-conditioning systems, including where those systems are combined with ventilation systems. Those amendments should exclude small heating systems such as electric heaters and wood stoves when they fall below the thresholds for inspection pursuant to Directive 2010/31/EU as amended by this Directive.

(36)

When carrying out inspections and in order to achieve the intended building energy performance improvements in practice, the aim should be to improve the actual energy performance of heating systems, air-conditioning systems and ventilation systems under real-life use conditions. The actual performance of such systems is governed by the energy used under dynamically varying typical or average operating conditions. Such conditions require at most times only a part of the nominal output capacity, and therefore inspections of heating systems, air-conditioning systems and ventilation systems should include an assessment of the relevant capabilities of the equipment to improve system performance under varying conditions, such as part load operating conditions.

(37)

Building automation and electronic monitoring of technical building systems have proven to be an effective replacement for inspections, in particular for large systems, and hold great potential to provide cost-effective and significant energy savings for both consumers and businesses. The installation of such equipment should be considered to be the most cost-effective alternative to inspections in large non-residential and multi-apartment buildings of a sufficient size that allow a payback of less than three years, as it enables action to be taken on the information provided, thereby securing energy savings over time. For small-scale installations, the documentation of the system performance by installers should support the verification of compliance with the minimum requirements laid down for all technical building systems.

(38)

The current possibility for Member States to opt for measures based on the provision of advice as an alternative to the inspection of heating systems, air-conditioning systems, systems for combined heating and ventilation and systems for combined air-conditioning and ventilation is to be retained, provided that the overall impact has, by means of submitting a report to the Commission, been documented as being equivalent to the effect of inspection prior to application of those measures.

(39)

The implementation of regular inspection schemes for heating and air-conditioning systems under Directive 2010/31/EU involved a significant administrative and financial investment by Member States and the private sector, including for the training and accreditation of experts, quality assurance and control, as well as the costs of inspections. Member States that have adopted the necessary measures to establish regular inspections, and that have implemented effective inspection schemes, may find it appropriate to continue to operate those schemes, including for smaller heating and air-conditioning systems. In such cases, there should be no obligation for Member States to notify those more stringent requirements to the Commission.

(40)

Without prejudice to the Member States’ choice to apply the set of standards, related to energy performance of buildings, developed under Commission mandate M/480 to the European Committee for Standardisation (CEN), the recognition and promotion of those standards across the Member States would have a positive impact on the implementation of Directive 2010/31/EU as amended by this Directive.

(41)

Commission Recommendation (EU) 2016/1318 (10) on nearly zero-energy buildings described how the implementation of Directive 2010/31/EU could simultaneously ensure the transformation of the building stock and the shift to a more sustainable energy supply, which also supports the heating and cooling strategy. To make sure appropriate implementation takes place, the general framework for the calculation of the energy performance of buildings should be updated and the improved performance of the building envelope should be encouraged with the support of the work elaborated by CEN, under Commission mandate M/480. Member States are able to choose to further supplement this by providing additional numerical indicators, for example for the entire building’s overall energy use or greenhouse gas emissions.

(42)

This Directive should not prevent Member States from setting more ambitious energy performance requirements for buildings and for building elements as long as such requirements are compatible with Union law. It is consistent with the objectives of Directives 2010/31/EU and 2012/27/EU that those requirements may, in certain circumstances, limit the installation or use of products subject to other applicable Union harmonisation legislation, provided that such requirements do not constitute an unjustifiable market barrier.

(43)

Since the objective of this Directive, namely to reduce the energy needed to meet the energy demand associated with the typical use of buildings, cannot be sufficiently achieved by the Member States but can rather, by reason of the guaranteed consistency of shared objectives, understanding and political drive, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Directive does not go beyond what is necessary to achieve that objective.

(44)

This Directive fully respects the Member States’ national specificities and differences and their competences in accordance with Article 194(2) TFEU. Further, the aim of this Directive is to allow the sharing of best practices in order to facilitate the transition to a highly energy efficient building stock in the Union.

(45)

In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents (11), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(46)

Directives 2010/31/EU and 2012/27/EU should therefore be amended accordingly,

(1)

Article 2 is amended as follows:

(2)

The following Article is inserted:

‘Article 2a

Long-term renovation strategy

1.   Each Member State shall establish a long-term renovation strategy to support the renovation of the national stock of residential and non-residential buildings, both public and private, into a highly energy efficient and decarbonised building stock by 2050, facilitating the cost-effective transformation of existing buildings into nearly zero-energy buildings. Each long-term renovation strategy shall be submitted in accordance with the applicable planning and reporting obligations and shall encompass:

2.   In its long-term renovation strategy, each Member State shall set out a roadmap with measures and domestically established measurable progress indicators, with a view to the long-term 2050 goal of reducing greenhouse gas emissions in the Union by 80-95 % compared to 1990, in order to ensure a highly energy efficient and decarbonised national building stock and in order to facilitate the cost-effective transformation of existing buildings into nearly zero-energy buildings. The roadmap shall include indicative milestones for 2030, 2040 and 2050, and specify how they contribute to achieving the Union’s energy efficiency targets in accordance with Directive 2012/27/EU.

3.   To support the mobilisation of investments into the renovation needed to achieve the goals referred to in paragraph 1, Member States shall facilitate access to appropriate mechanisms for:

4.   The Commission shall collect and disseminate, at least to public authorities, best practices on successful public and private financing schemes for energy efficiency renovation as well as information on schemes for the aggregation of small-scale energy efficiency renovation projects. The Commission shall identify and disseminate best practices on financial incentives to renovate from a consumer perspective taking into account cost-efficiency differences between Member States.

5.   To support the development of its long-term renovation strategy, each Member State shall carry out a public consultation on its long-term renovation strategy prior to submitting it to the Commission. Each Member State shall annex a summary of the results of its public consultation to its long-term renovation strategy.

Each Member State shall establish the modalities for consultation in an inclusive way during the implementation of its long-term renovation strategy.

6.   Each Member State shall annex the details of the implementation of its most recent long-term renovation strategy to its long-term renovation strategy, including on the planned policies and actions.

7.   Each Member State may use its long-term renovation strategy to address fire safety and risks related to intense seismic activity affecting energy efficiency renovations and the lifetime of buildings.’.

(3)

Article 6 is replaced by the following:

‘Article 6

New buildings

1.   Member States shall take the necessary measures to ensure that new buildings meet the minimum energy performance requirements laid down in accordance with Article 4.

2.   Member States shall ensure that, before construction of new buildings starts, the technical, environmental and economic feasibility of high-efficiency alternative systems, if available, is taken into account.’.

(4)

In Article 7, the fifth paragraph is replaced by the following:

‘Member States shall encourage, in relation to buildings undergoing major renovation, high-efficiency alternative systems, in so far as this is technically, functionally and economically feasible, and shall address the issues of healthy indoor climate conditions, fire safety and risks related to intense seismic activity.’.

(5)

Article 8 is replaced by the following:

‘Article 8

Technical building systems, electromobility and smart readiness indicator

1.   Member States shall, for the purpose of optimising the energy use of technical building systems, set system requirements in respect of the overall energy performance, the proper installation, and the appropriate dimensioning, adjustment and control of the technical building systems which are installed in existing buildings. Member States may also apply these system requirements to new buildings.

System requirements shall be set for new, replacement and upgrading of technical building systems and shall be applied in so far as they are technically, economically and functionally feasible.

Member States shall require new buildings, where technically and economically feasible, to be equipped with self-regulating devices for the separate regulation of the temperature in each room or, where justified, in a designated heated zone of the building unit. In existing buildings, the installation of such self-regulating devices shall be required when heat generators are replaced, where technically and economically feasible.

2.   With regard to new non-residential buildings and non-residential buildings undergoing major renovation, with more than ten parking spaces, Member States shall ensure the installation of at least one recharging point within the meaning of Directive 2014/94/EU of the European Parliament and of the Council (*3) and ducting infrastructure, namely conduits for electric cables, for at least one in every five parking spaces to enable the installation at a later stage of recharging points for electric vehicles where:

The Commission shall report to the European Parliament and the Council by 1 January 2023 on the potential contribution of a Union building policy to the promotion of electromobility and shall, if appropriate, propose measures in that regard.

3.   Member States shall lay down requirements for the installation of a minimum number of recharging points for all non-residential buildings with more than twenty parking spaces, by 1 January 2025.

4.   Member States may decide not to lay down or apply the requirements referred to in paragraphs 2 and 3 to buildings owned and occupied by small and medium-sized enterprises as defined in Title I of the Annex to Commission Recommendation 2003/361/EC (*4).

5.   With regard to new residential buildings and residential buildings undergoing major renovation, with more than ten parking spaces, Member States shall ensure the installation of ducting infrastructure, namely conduits for electric cables, for every parking space to enable the installation, at a later stage, of recharging points for electric vehicles, where:

6.   Member States may decide not to apply paragraphs 2, 3 and 5 to specific categories of buildings where:

7.   Member States shall provide for measures in order to simplify the deployment of recharging points in new and existing residential and non-residential buildings and address possible regulatory barriers, including permitting and approval procedures, without prejudice to the property and tenancy law of the Member States.

8.   Member States shall consider the need for coherent policies for buildings, soft and green mobility and urban planning.

9.   Member States shall ensure that, when a technical building system is installed, replaced or upgraded, the overall energy performance of the altered part, and where relevant, of the complete altered system, is assessed. The results shall be documented and passed on to the building owner, so that they remain available and can be used for the verification of compliance with the minimum requirements laid down pursuant to paragraph 1 of this Article and the issue of energy performance certificates. Without prejudice to Article 12, Member States shall decide whether to require the issuing of a new energy performance certificate.

10.   The Commission shall, by 31 December 2019, adopt a delegated act in accordance with Article 23, supplementing this Directive by establishing an optional common Union scheme for rating the smart readiness of buildings. The rating shall be based on an assessment of the capabilities of a building or building unit to adapt its operation to the needs of the occupant and the grid and to improve its energy efficiency and overall performance.

In accordance with Annex Ia, the optional common Union scheme for rating the smart readiness of buildings shall:

11.   The Commission shall, by 31 December 2019, and after having consulted the relevant stakeholders, adopt an implementing act detailing the technical modalities for the effective implementation of the scheme referred to in paragraph 10 of this Article, including a timeline for a non-committal test-phase at national level, and clarifying the complementary relation of the scheme to the energy performance certificates referred to in Article 11.

That implementing act shall be adopted in accordance with the examination procedure referred to in Article 26(3).

(*3)  Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the deployment of alternative fuels infrastructure (OJ L 307, 28.10.2014, p. 1)."

(*4)  Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).’."

(6)

In Article 10, paragraph 6 is replaced by the following:

‘6.   Member States shall link their financial measures for energy efficiency improvements in the renovation of buildings to the targeted or achieved energy savings, as determined by one or more of the following criteria: