Few concepts have shaped EU environmental law as profoundly as the polluter pays principle.
Despite its apparent simplicity, its implementation continues to raise a number of questions, such as who qualifies as the “polluter” and which mechanisms, from taxes to extended producer responsibility (EPR) schemes, should be used to transfer the costs of environmental protection to those deemed responsible for the resulting impacts.
These questions are becoming increasingly relevant as the European Union relies on and is expected to further expand the use of extended producer responsibility schemes beyond their traditional role in waste management.
What if applied to wastewater?
That question has now reached the European Court of Justice in Case C-193/25 concerning the Urban Wastewater Treatment Directive (UWWTD) and the Opinion delivered by Advocate General Kokott on 3 September 2026 may prove to be one of the most significant developments in recent years regarding the boundaries of the polluter pays principle and the conditions under which extended producer responsibility schemes may be used to implement it. If her Opinion is followed by the Court, it may reshape the future work related to EPR as her recommendation is for the partial annulment of the UWWTD based on a misapplication of how to apply that core principle.
For context, as part of the revision of the UWWTD, the EU’s co-legislators agreed to introduce a new quaternary treatment stage aimed at tackling micropollutants. The bill for such treatment was expected to be substantial, exceeding EUR 1 billion per year.
The obvious question therefore became – who should pay?
To answer that question, the co-legislators, following a proposal from the European Commission, decided to introduce an EPR scheme in relation to wastewater. The idea was seemingly straightforward: apply the polluter pays principle by requiring those deemed responsible for the release of micropollutants to contribute to the costs of the additional fourth layer of treatment needed to remove them from urban wastewater. To that end, the UWWTD identified producers of medicinal products and cosmetic products as the primary contributors to the financing of quaternary treatment.
Why those sectors, you may ask?
To this day, that question remains the subject of considerable debate and one of the most contentious aspects of the reform. Numerous legal actions were brought at the EU level by industry in 2025 challenging various aspects of the new regime. Most were dismissed at the admissibility stage, without the European Court having the opportunity to examine the substantive arguments.
Poland, however, also expressed doubts regarding the compatibility of Article 9(1)(a) and Annex III of the UWWTD, the parts of the Directive that implemented the EPR scheme) and brought an action for annulment before the European Court of Justice (Case C-193/25).
It is in this context that, on 3 September 2026, Advocate General Kokott delivered her Opinion and recommended that the Court partially annul the UWWTD. The recommendation came as a surprise to many, although perhaps less so to those who have followed the dossier closely from the outset.
The Opinion focuses, in particular, on the polluter pays principle and the principle of equal treatment.
AG Kokott started with an important reminder that “in allocating the costs of pollution according to causal contributions, the polluter-pays principle is simultaneously a specific expression of the principle of equal treatment or non-discrimination...”. In other words, where costs are imposed on certain operators under the polluter pays principle, the causal contribution to the pollution at issue becomes key.
The Opinion also reiterated the well-established principle that the EU institutions enjoy a broad margin of discretion in complex technical and scientific matters. However, AG Kokott stressed that “even where that judicial review is of limited scope, it still requires that the EU institutions that have adopted the act in question must be able to show before the Court that in adopting the act they actually exercised their discretion.”
This, she explained, presupposes that all relevant factors and circumstances of the situation to be regulated were genuinely taken into account and it is precisely on this point that the Opinion raises significant concerns regarding the selection of the pharmaceutical and cosmetics sectors as the sole designated contributors to the costs of quaternary treatment.
According to AG Kokott: “As far as can be seen, the Commission, the Parliament and the Council have made no remarks, either in the legislative process or in the proceedings before the Court, on a crucial step in the establishment of extended producer responsibility, that is to say, on the calculation of the shares attributable to pharmaceuticals and cosmetics to the PNEC-weighted toxic load.”
She continued by noting that the institutions had therefore failed to demonstrate, clearly and unequivocally, that they had actually exercised their discretion when determining which sectors should bear the financial burden of the scheme.
On that basis, AG Kokott concluded that the first plea should be upheld and that Article 9(1)(a) and Annex III of the UWWTD should be annulled.
The Opinion contains many other noteworthy observations related to the impact assessment, “incomprehensible” numbers or, as AG Kokott notably observed that the incentive effect that traditionally justifies EPR schemes may be particularly limited in the case of medicinal products.
The question now is whether the Court will follow the Advocate General’s reasoning.
Interestingly, the Opinion also suggests another possibility. Given the overlap with the questions raised in Case C-614/26, Irish Pharmaceutical Healthcare Association and Medicines for Ireland, AG Kokott notes that the Court could make use of certain procedural mechanisms to allow a more complete examination of the issues raised by giving priority to this indirect action.
One thing, however, is certain – this case is a particularly relevant for environmental law practitioners as, not only does it concern two increasingly important concepts in EU environmental regulation, namely the polluter pays principle and extended producer responsibility, but it may also become a landmark case in future implementation or introduction of EPR. This is especially timely given that, over the summer, the European Commission published its Fitness Check of the Polluter Pays Principle, which notably recommends a more effective implementation of the principle across EU policies.
If the Court confirms one of the central elements of AG Kokott’s reasoning, namely that a demonstrable and genuine causal connection must exist between the pollution generated and the operator bearing the costs, the implications could extend well beyond wastewater regulation and influence future discussions on the design of EPR schemes across a much wider range of environmental legislation. A potential watershed indeed.