In this latest Environmental Law News Update, Charles Morgan, Christopher Badger and Gordon Wignall consider a call for evidence on the sixth climate budget from the Committee on Climate Change, a dramatic increase in the carbon price used for calculating civil penalties, a case considering the effect of arrangements entered into between a local authority and Thames Water relating to water supply and the rise in private law climate change actions in nuisance.
Committee on Climate Change launches a call for evidence on the sixth climate budget
As everyone is aware, the UK has adopted a target of net zero greenhouse gas emissions by 2050. The Climate Change Act 2008 requires the Committee on Climate Change to provide advice to the Government about the appropriate level for each carbon budget on the path to the long term target.
The Committee must provide its advice on the sixth carbon budget before the end of 2020. In order to do this, it has launched its call for evidence, with a deadline of 5 February 2020.
The call for evidence questions are divided into five sections:
- Climate science and international circumstances;
- The path to the 2050 target
- Delivering carbon budgets
- Wales, Scotland and Northern Ireland
- Sector-specific questions
This of course follows extensive criticism by the Natural Capital Committee on DEFRA’s environmental progress. Essentially, there is very little evidence of any actual improvements in the state of our natural capital. According to the NCC, there is in fact worrying evidence of declines in environmental quality.
And it follows the fact that the Committee on Climate Change has already reported that current policies and plans are insufficient to meet the fourth and fifth carbon budgets, covering 2023-2027 and 2028-2032.
Transitioning to net zero will be disruptive. One issue is that the later concrete plans are left to take the UK to net zero, the more disruptive those plans will inevitably have to be. There is a strong argument that the relevant regulators and the government have to take a much tougher stance now, rather than require a cliff edge reduction in emissions in say five years from now.
This also comes at a time when the European Environment Agency has published its latest five-yearly report and forecast, warning that a drastic change of direction is required to meet existing policy goals.
On a slightly different note, the Committee on Climate Change also doesn’t appear to be all that enamoured with the idea of the Office for Environmental Protection. There is a concern that the OEP will use the reports written by the Committee on Climate Change as a basis for enforcement action against the Government. This in turn risks causing the Committee on Climate Change to be less frank in its language with the Government and may have the unintended consequence of reducing the effectiveness of the Committee.
But can’t that be solved? The answer may lie in ensuring that any memorandum of understanding drawn up between the OEP and the CCC requires the OEP to consider the evidence supporting any CCC report rather than the report itself.
The call for evidence can be found here
BEIS dramatically increases the carbon price for UK civil penalties in 2020
On 29 November 2019, the Secretary of State for Business, Energy and Industrial Strategy determined that the carbon price for the purpose of calculating civil penalties under the EU Emissions Trading System (EU ETS) in the UK for the year beginning 1 January 2020 would be £21.93. The price in 2019 was £12.61. The new figure reflects a 42% increase.
The same carbon price in 2018 was just £4.86.
The determination is linked to the futures price traded for carbon, principally over the course of 2019. This is only increasing, as attitudes towards carbon turn more and more negative.
Regulation 52 of the Greenhouse Gas Emissions Trading Scheme Regulations 2012 sets out the formula for calculating the penalty for carrying out a regulated activity without a permit. It requires an estimated amount of the costs avoided by the offender as a result of carrying out a regulated activity without a permit to be added to the multiple of the estimated amount of reportable emissions multiplied by the carbon price. That penalty can also be increased by a percentage to ensure that any economic benefit obtained as a result of failing to have the necessary permit is removed. With an increasing carbon price, it won’t take much for potential penalties to become highly significant.
It should be noted that Regulation 51 provides the Regulator with a discretion in respect of imposing civil penalties.
The determination can be found here
In Royal Borough of Kingston-upon-Thames v Moss  EWHC 3261 (Ch) Morgan J. had to consider the effect of arrangements entered into between the local authority and Thames Water relating to the supply of water to council houses and flats. Under those arrangements Thames Water did not render bills to individual tenants (as it would have been entitled to do under its charges scheme) and instead charged the Council the global amount due for the properties under the scheme, with agreed reductions in those charges to provide both a “voids allowance” (3.5%) and a “commission” (9.3%), the latter being intended to reflect the fact that under the arrangements the Council relieved Thames Water of the entire administration of the collection process and assumed that burden itself as well as the risk of non-recovery. The Council charged its tenants the full, undiscounted charges.
Having considered earlier case law, Morgan J. concluded that under the arrangements the Council was not acting as an agent or assignee of Thames Water but was itself reselling water to its tenants. The consequence of that conclusion was that the activity engaged the Water Resale Orders 2001 and 2006, which very strictly circumscribe the ability of a reseller to “mark up” supplies of water to dwelling houses. In the result, the Council was held under the original arrangements to be obliged to pass on to its tenants the benefit of both the voids allowance and the commission. A later variation was held to allow the Council to retain the benefit of the voids allowance but not the commission. This outcome was wholly unforeseen when the arrangements were made and effectively a windfall for the tenants at the Council’s expense.
Of note also is that Morgan J. (obiter) held to be ultra vires provisions in the Thames Water charges scheme purporting to render landlords of short lets liable for water charges instead of the occupiers. Occupation has been the traditional touchstone of liability to pay water rates and charges and Morgan J. held that nothing in sections 142-144 of the Water Industry Act 1991entitled an undertaker to depart from that principle in the manner contained in the Thames Water scheme (and doubtless others). (The position will to some extent be modified by section 144C of the Water Industry Act 1991, currently only in force in Wales).
This decision is of potentially wide application to both local authorities and undertakers.
Nuisance and climate change
Private law climate change actions in nuisance have been active for more than 15 years in the US. They are beginning to be seen elsewhere in Europe, and it is only a matter of time before they are made in the UK. Claimants seek damages from fossil fuel undertakings where they face immediate threats in their localities (such as coastal erosion). Gordon Wignall examines some of the formidable challenges encountered by this class of the litigation in a short briefing document here. The first in the series concerns the ‘legislative displacement principle’ which holds that these cases cannot be heard at all as private actions, but must be determined under national climate change legislation.
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