The environmental policy of the European Community is nested within a broader institution devoted predominantly to market integration. It also co-exists with the domestic environmental policies of the member states. This institutional arrangement has important consequences for environmental governance in the present Union. Not only does the wide scope for domestic environmental action generate different logics of harmonization for the regulation of products and processes, it also creates an institutional preference for European product standards because this type of regulation allows a trade-off between environmental and single market concerns. This effect is demonstrated by the development of the originally purely environmentally motivated and process-related directive on packaging and packaging waste adopted in 1994. During its preparation, this legislative project was supplemented with a strong product-related component that made a trade-off between policies possible and facilitated majority support in the Council.