Environmental Law News Update

In this latest Environmental Law News Update, Charles Morgan, Christopher Badger and Frances Lawson consider the Environment Agency’s flooding strategy consultation, thoughts on Ofwat’s future direction and a new Government consultation on the future of carbon pricing post-Brexit.

Environment Agency consult on flooding

The most recent climate change predictions confirm that we will experience wetter winters and drier summers, with an increased chance of more intense rainfall leading to flooding. In all predicted climate futures we will experience a continued rise in sea level, well into the next century. This will affect our coastline significantly.

It is against this background that the Environment Agency is looking for views on a draft strategy which it states “aims to create a nation resilient to flooding and coastal change to the year 2100”. It is estimated by the Environment Agency that as a nation we will need an average annual investment of at least £1 billion in flooding and coastal change infrastructure over the next 50 years. Mention is even made in the draft strategy of planning for a 4 degrees celsius rise in global temperatures.

The strategy includes a number of high level strategic objectives such as:

“Between now and 2050 the nation will be resilient to future flood and coastal risks”

and

“Between now and 2030 all those involved in managing water will embrace and embed adaptive approaches to enhance the resilience of our environment to future flooding and drought.”

However, in contrast to the 25 year Environment Plan, the draft strategy puts forward specific measures designed to achieve its aspirational aims, with reference to dates for action. These include reviewing the green finance strategy by 2021 to explore new options for funding and financing flooding and coastal change and imposing a requirement on all risk management authorities that they will report on the resilience of their flood and coastal change infrastructure in a nationally consistent way by 2024.

The aspirational nature of the draft strategy may never make it way to a policy decision. At page 6 the strategy’s status is made clear:

“This draft strategy is not a policy document but a consultation by the Environment Agency, reflecting its own views and those we have heard from other stakeholders. Policy on flood and coastal erosion risk is for the government and the strategy will be finalised in the light of the consultation responses and the government’s forthcoming national policy statement on flood and coastal risk before being submitted to the Secretary of State for Environment, Food and Rural Affairs for approval.”

In addition, environment minister Thérèse Coffey announced that the government was launching its own call for evidence to inform future action on flood and coastal erosion risk. This may lead to interesting tensions when the Environment Agency come to publish its final document to be laid before Parliament in winter this year.

The consultation can be found here

Have a chat with Ofwat

Behind the water industry sits Ofwat, its economic regulator. Even most legal practitioners are unaware of many of its multifarious functions, duties and powers under the Water Industry Act 1991. Its public profile is largely confined to its control over prices (or the “five-yearly reset of revenue allowances, performance commitments and incentives” as the document under review puts it). Most of its written products are longish tracts of rather dry prose. Now, in an earnest bid to attract the public’s attention and to obtain input to its strategy, comes “Ofwat’s emerging strategy: Join the conversation”, a 20 page document with at least as much space devoted to colourful pictures as words, including photographs of human beings (though no other species) of all ages interacting with their aqueous environment by swimming, surfing, whitewater rafting and … growing onions (no water at all visible in that last picture, but they wouldn’t grow without it, would they?). There is also a very interesting picture on p.17 of a Metropolitan Vickers Power Factor Meter (thought to be early post-war), without which it would be difficult to make much sense of the rest of the document.

The prose remains drier and somewhat jargon-ridden. Ofwat identifies the future challenges (resources, resilience, environmental pressures, customer expectations, reputational issues and affordability) and there is a useful list of applicable policy documents. It then sets out its thoughts about its future approach to its role. It does (possibly intentionally) manage a single pun, referring to “untapped opportunities” available to water companies.

The expressed purpose of the document is to inform Ofwat’s strategy, to be published in the autumn. The document itself poses no specific questions for consultation, however the invitation to participate directs the reader to a link and also provides a Twitter hashtag (for those who like to be brief). The link leads to a page containing another link which does take the would-be consultee to a page containing a number of questions for completion (and an e-mail address).

New Government consultation on the future of carbon pricing post-Brexit

Given the probable departure of the UK from the EU Emissions Trading Scheme (‘EU ETS’) after Brexit, it is unsurprising that the Government has opened a consultation on alternatives thereafter. The consultation, run by the Department for Business, Energy and Industrial Strategy (‘BEIS’) covers the devolved administrations as well as England, and seeks stakeholders’ and wider public views as to how carbon should be priced and traded outside of the EU ETS until 19th July 2019.

The consultation does not set out a blank canvas as to future carbon pricing. Rather, it explains that in line with its Clean Growth Strategy, the Government is committed to establishing an approach which is at least as ambitious as the current EU ETS in its targets. Further, in line with earlier political declarations on the subject, the Government’s preferred option is for a UK ETS linked to the EU ETS. Nevertheless, the consultation acknowledges that should it not prove possible to conclude a linking agreement with the EU, alternative options will need to be in place. Chief among these are a standalone UK ETS or a tax on carbon. The fourth alternative explored in the consultation is joining Phase IV of the EU ETS even after Brexit.

Interestingly, the consultation records that “as ambitious” does not necessarily equate to a calculation of the UK’s notional share of the existing EU ETS cap. This is because the UK is estimated to accumulate a surplus of carbon allowances to the EU ETS, due in part to the significant progress the UK has made in decarbonising those sectors of the economy covered by emissions trading. As such, actual emissions from the UK traded sector are expected to be lower than the UK’s notional share of the EU ETS cap.

The proposals for a UK ETS retain free allocations, as a means of maintaining the competitiveness of those sectors at risk of carbon leakage and to support those not significantly exposed to carbon leakage in their transition to a low carbon economy, adopting the EU ETS free allocation methodology. The consultation recognises current industry concerns with the application of the cross-sectoral correction factor (“CSCF”) but does nothing to address them for the sake of stability. The UK might revisit its Phase IV proposal of additional “carbon leakage tiers” (intended to better target free allocation at those sectors at greatest risk of carbon leakage and avoid the risk of the CSCF being applied) as part of the future evolution of the system past 2030.

On an aspirational level, the consultation also welcomes further views on how a UK ETS could be used within the framework of international climate agreements and carbon market mechanisms, such as Article 6 of the Paris Agreement, with a view to making the ETS more connected to international markets in the future.

The consultation document runs to 135 pages and can be found here

To keep up-to-date click here to subscribe to the mailing list. If you have any comments or suggestions please contact Bridget Tough at bridget.tough@6pumpcourt.co.uk