Association des Constructeurs Européens d'Automobiles ACEA

What the Commission proposes

The European Commission has launched a call for evidence for an evaluation and impact assessment running in parallel regarding VAT rules and the circular economy. The initiative aims to modernise selected value added tax rules that currently hinder circular business models, sustainable consumption choices, and the single market for secondary raw materials. It focuses on three specific pillars: second-hand goods, the donation versus destruction of viable goods, and VAT deduction rules for passenger cars. A legislative proposal is indicatively planned for the second quarter of 2027.

• Evaluates and reviews current EU VAT rules to ensure they align with the circular economy and complement the Ecodesign for Sustainable Products Regulation and the Circular Economy Act.
• Examines the VAT treatment of second-hand, refurbished, and remanufactured goods to address lack of deduction rights and complex margin schemes.
• Addresses economic distortions where destroying viable goods is more advantageous under current VAT rules than donating them.
• Considers aligning VAT deduction rules for passenger cars with sustainability objectives and zero-emission mobility goals.
• Assesses policy options including mandatory or discretionary measures on vehicle deductions, harmonised margin schemes, and VAT relief on donations.

What is asked: The Commission asks respondents to provide feedback and evidence on the evaluation of current VAT rules and the impact assessment of potential policy options regarding second-hand goods, the donation or destruction of viable goods, and VAT deduction rules for passenger cars.

Summary written by AI from the Commission's document.

Key passages on your topics

1. The initiative also supports broader EU efforts to accelerate the transition to zero-emission mobility, including the Commission’s 2025 Communication on decarbonising corporate fleets. It also aligns with the upcoming Recommendation on fiscal and non-fiscal demand-side incentives announced in the industrial action plan for the European automotive sector and the objectives of the revision of the CO2 standards and corporate vehicles proposal to decarbonise corporate fleets with binding national targets for zero- and low-emission vehicles. Value added tax (VAT) is a major source of revenue for Member States, accounting for 7.1% of EU GDP and representing 15.5% of total government tax revenue in 2024.

   Proposal for a Council Directive amending Directive 2006/112/EC as..., page 2 (EN)

2. Reducing resource dependencies and keeping materials in productive use for longer are important not only for achieving the EU’s environmental objectives, but also for improving its industrial competitiveness and economic security. This is reflected in the Clean Industrial Deal, in which the Commission identified circularity as one of the key enablers of a competitive and decarbonised European economy and announced a future ‘green VAT initiative’ (also referred to as ‘Circular VAT’). The importance of the circular economy for achieving the EU’s ambition to boost competitiveness and economic security will also be reflected in the forthcoming Circular Economy Act (CEA), which is intended to strengthen the single market for secondary raw materials and is scheduled for adoption in late 2026.

   Proposal for a Council Directive amending Directive 2006/112/EC as..., page 1 (EN)

3. 3. Passenger cars: As a result of the current VAT deduction rules being outdated and highly fragmented, there are limited incentives for businesses to choose less-polluting passenger cars. The drivers of the problems this initiative seeks to address are outlined below: 1. Current VAT rules: the current rules were designed decades ago for linear economic models and do not always adequately accommodate economic activities which could support the circular economy such as the reuse, refurbishment, remanufacturing, repair or donation of goods. 2. Evolving business models and practices: economic activities are increasingly supporting the circular economy. The market for second-hand, refurbished and remanufactured products is a significant and expanding segment of the EU economy.

   Proposal for a Council Directive amending Directive 2006/112/EC as..., page 3 (EN)

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What the Commission proposes

The European Commission proposes a revision of EU public procurement rules through a new regulation that repeals the existing 2014 directives on public procurement, utilities, and concessions. The initiative aims to modernize and simplify rules, reduce administrative burdens, and enable preferences for European products in strategic sectors to secure supply chains and add EU value. It also amends multiple sector-specific regulations and directives containing procurement provisions to improve coherence and transparency. Furthermore, the proposal addresses high administrative burdens and legal uncertainty identified in previous evaluations regarding public buyers and businesses.

• Revises and replaces Directives 2014/23/EU, 2014/24/EU, and 2014/25/EU with a single Public Procurement Act regulation.
• Enables preference for European products in strategic sectors to ensure security of supply and EU added value.
• Aims to modernize and simplify rules, specifically considering EU start-ups and innovators.
• Amends various sector-specific regulations and directives that contain public procurement provisions.
• Addresses administrative burdens and legal uncertainty that currently affect public buyers and businesses, including SMEs.

Summary written by AI from the Commission's document.

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1. 316 considering the entire value chain, from raw materials to final products. Many respondents emphasized the need to promote European industries and jobs, while also ensuring fair competition and protecting international trade partnerships. Some examples of sectors mentioned include:

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2. industries and jobs • The need for certification and traceability tools to ensure the credibility of Made in Europe requirements • The importance of considering the impact of Made in Europe criteria on small and medium-sized enterprises (SMEs) and ensuring that they do not create unnecessary barriers to entry or disproportionately affect certain industries or sectors. Some respondents also suggested that Made in Europe criteria should be applied in a way that takes into account the entire life cycle of a product or service, including its production, use, and disposal, and that they should be linked to EU environmental and

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3. (a) a third country that is party to the GPA, provided that the procurement in question falls within the scope of the Union's commitments under that agreement, taking into account the applicable Annexes; (b) a third country that has concluded a bilateral or multilateral trade agreement with the Union, under the conditions laid down in that agreement, provided that 54 Regulation (EU) 2019/1242 of the European Parliament and of the Council of 20 June 2019 setting CO2 emission performance standards for new heavy-duty vehicles and amending Regulations (EC) No 595/2009 and (EU) 2018/956 of the European Parliament and of the Council and Council Directive 96/53/EC (OJ L 198, 25.7.2019, p. 202, ELI: http://data.europa.eu/eli/reg/2019/1242/oj).

   Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE..., page 87 (EN)

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What the Commission proposes

The European Commission is preparing an initiative to establish common Union minimum performance standards for data centres located in its territory. Building on existing reporting and rating schemes under the Energy Efficiency Directive, the proposed regulation aims to phase out unsustainable practices and technologies in new or retrofitted facilities. The initiative seeks to address rising energy and water consumption, limited waste heat reuse, and regulatory fragmentation across Member States. An impact assessment is planned for late 2026, with a legislative proposal anticipated in the second quarter of 2027.

• Establish common EU minimum performance standards for data centres regarding energy efficiency, water use, waste-heat reuse, and grid services.
• Form the third step in the EU sustainability framework for data centres, following the 2024 reporting scheme and the 2026 rating scheme.
• Prevent divergent national approaches and reduce regulatory fragmentation across Member States.
• Improve sector competitiveness and reduce operational costs by cutting energy and water waste.
• Support energy system integration by aligning data centre operations with power grid and heat network needs.
• Prepare an impact assessment in Q4 2026 to support the drafting of the legislative proposal for Q2 2027.

What is asked: The consultation aims to collect in-depth evidence, information, data and feedback from stakeholders on the need for and feasibility of minimum performance standards for data centres in the EU, the most appropriate way to establish them, which indicators should have standards, and what thresholds should be set.

Summary written by AI from the Commission's document.

Key passages on your topics

1. Problem the initiative aims to tackle As highlighted by the Draghi report and the AI Continent Action Plan, expanding data centre capacity in the EU is essential for fostering AI innovation, accelerating digitalisation, boosting EU competitiveness across industries and supporting a mature data economy. To ensure this, several sustainability challenges need to be tackled: 1. rising energy and water consumption 2. limited waste heat reuse and energy system integration 3. the lack of a framework guiding data centres’ sustainability efforts 4. the lack of regulatory convergence between countries 5. competitiveness and affordability concerns 6. barriers to innovation and uptake of clean technologies Basis for EU action (legal basis and subsidiarity check) Legal basis The legal basis for this initiative is Article 194(2) of the Treaty on the Functioning of the European Union.

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2. This sector touches upon two important EU objectives, namely the Union’s technological sovereignty and the Union’s energy resilience and security. Expanding computing capacities and increasing the number of data centres on the Union’s territory is essential, but it also poses challenges, not only in terms of increasing energy consumption but also for electricity grids, carbon emissions and environmental resources such as water. In response, the EU’s digital strategy emphasises the need for highly energy-efficient and sustainable data centres. As highlighted by the Draghi report on EU competitiveness, using energy more efficiently makes it possible to cut costs, which is vital for the competitiveness of European industries. The Energy Efficiency Directive (EU) 2023/1791 (EED) requires to promote energy efficiency and sustainability in data centres.

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3. CALL FOR EVIDENCE FOR AN INITIATIVE WITH AN IMPACT ASSESSMENT TITLE OF THE INITIATIVE Data centres in the EU - Minimum performance standards LEAD DG (RESPONSIBLE UNIT) Directorate-General for Energy - Unit B2 on Energy efficiency (Policy and Financing) LIKELY TYPE OF INITIATIVE Proposal for a Regulation of the European Parliament and of the Council INDICATIVE TIMETABLE Q2 2027 ADDITIONAL INFORMATION Energy performance of data centres This document is for information purposes only. It does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content. All elements of the initiative described, including its timing, are subject to change. A. Political context, problem definition and subsidiarity check Political context The information and communication technology (ICT) sector is one of the fastest-growing sectors in Europe and globally.

   Establishment of common Union minimum performance standards for..., page 1 (EN)

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