Investment Institute
Viewpoint Chief Economist

Could the EU’s e-waste directive support US interest in the clean economy?

  • 06 December 2022 (5 min read)

The EU’s new legislation on electronics manufacturing could help fight back against planned obsolescence. Here’s what investors should know.

The European Union recently introduced comprehensive legislation that will enable European consumers, by 2024, to use a single charger to power an array of devices like tablets, smartphones, and portable speakers.1 Proponents of the EU’s “right to repair” legislation believe the sweeping policy changes will help to reduce the 53 million tons of e-waste produced each year and serve as a counter directive to planned obsolescence.2

While it remains to be seen how effective the EU’s directive will be in curbing e-waste levels, American investors have already noticed that new opportunities in the clean economy could arise due to increased regulatory pressures. Here’s what you need to know.

The Impact of E-Waste and Planned Obsolescence

When electronics manufacturers and suppliers practice planned obsolescence, they set a predetermined date for a given product to reach its lifecycle and become obsolete. While companies like Apple have become notorious for designing products destined to break down quickly, planned obsolescence is now a commonly applied strategy among some of the largest global electronics manufacturers. 

These manufacturers can lock in future sales by proactively specifying a product’s sunset date and outlining its shelf life ahead of time. Rather than repair malfunctioning electronics or replace batteries with ease, consumers are forced to purchase replacements for their expired products. The steady and predictable consumption that comes with planned obsolescence locks in long-term consumption patterns to bolster manufacturers’ sales and balance sheets.

At a time when the cost of living and global inflation levels are soaring, some consumers aren’t as forgiving of planned obsolescence as they once were. The thrill of having the latest and greatest device has been replaced with resentment at being forced to buy one, and keeping a glitchy device to avoid buying a replacement holds little appeal. Planned obsolescence also poses serious environmental risks which threaten to undermine the world’s collective response to climate change. Such sentiment has given rise to a network of activist organizations across multiple countries, campaigning for the existing EU legislation to compel companies to go even further to prevent e-waste than the existing proposals.3

In 2019, IT manufacturing contributed around 1,400 million tons of greenhouse gas emissions to the global digital environment footprint, and that’s before any technology is used and thrown away.4 People across the globe created roughly 50 million tons of e-waste in 2019, only 17% of which was appropriately collected and recycled.5 Over 85% of e-waste goes to landfills or incinerators, where harmful toxins from naturally pollutive raw materials like lead, lithium, and barium are released into the air as it burns.6 The remaining percentage accounts for up to 70% of the toxic waste in landfills.7 In addition to causing pollution, e-waste depletes valuable natural resources and raw materials such as lithium and cobalt, rare earth elements which are already becoming scarce.

How the EU’s Response Affects American Markets

While companies’ recycling and reclamation programs can effectively mitigate the negative impact of e-waste, some lawmakers argue more must be done to substantively overhaul the electronics supply chain and reverse alarming e-waste trends. The EU’s recent electronics manufacturing mandate could be that overhaul.

The “common charger will finally become a reality in Europe,” says Member of the European Parliament Alex Agius Saliba. “This future-proof law allows for the development of innovative charging solutions in the future, and it will benefit everyone — from frustrated consumers to our vulnerable environment.”8

Still, this right-to-repair directive is only the first legislative domino to fall. To sustain consumer and environmental protections against planned obsolescence, the next step for the European Commission is to harmonize interoperability standards by the close of 2024. In doing so, the EU can begin to reverse the “lock-in” trend that forces consumers to become reliant on a single manufacturer.

By following Europe’s policy shift and requiring further standardization across electronic manufacturers, United States legislators could further transform the electronics supply chain and begin to mitigate the environmental and economic costs of e-waste and planned obsolescence.

Companies shown are for illustrative purposes only.

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