In this latest Environmental Law News Update, Stephen Hockman QC. Mark Davies and Angelica Rokad consider the implications for climate change and energy law following the publication of the Brexit White Paper, the publication of a list of enforcement undertakings and a ‘Definition of Waste Services’ from the Environment Agency.
Energy and Climate Change Law: What Happens After Brexit?
In the field of energy and climate change policy, legal and commercial relationships between the UK and the EU are underpinned by a complex web of legal rules, some of which are binding on Member States, including the UK, for as long as it remains in the EU – these being essentially EU Directives – and some of which are directly applicable within Member States – such as EU Regulations. Key pieces of EU legislation that affect energy and climate change policy in the UK include, for example, the EU Emissions Trading System Directive (Directive 2003/87/EC), which ensures a price is placed on carbon emissions in the industrial, power and aviation sectors, and the Effort-Sharing Regulation (Regulation (EU) 2018/842), which provides legally binding decarbonisation targets for Member States between 2021 and 2030 for emissions not covered by the EU ETS.
As everyone knows, last week the Government published its long-awaited White Paper on “The Future Relationship Between the United Kingdom and The European Union” (CM9593). This White Paper provides a useful opportunity to review the legal position as regards energy and climate change law, which, in summary, can be set out as follows.
On the EU ETS, the Minister for Energy and Climate Change (Claire Perry) has stated that the UK would like to remain in the EU ETS until the end of 2020 (the end of Phase III of the 2020). The key question is whether the UK will remain in the EU ETS in Phase IV of the EU ETS (2021 – 2030). On this, the Government has not expressed a public preference and continues to explore all options for the continued decarbonisation of the ‘traded sector’ (those sectors covered by the EU ETS). These options would include a domestic carbon pricing solution (such as a domestic ETS or carbon tax) or remaining in the EU ETS. A domestic ETS could be designed to link with other ETS’ (including the EU ETS).
Significantly, in relation to climate change, the Government, in its White Paper, gives no specific indication as to whether or how the Government intends to progress matters. The White Paper states only that:
“The UK’s world leading climate ambitions are set out in domestic law and are more stretching than those that arise from its current obligations under EU law. The UK will maintain these high standards after withdrawal.”
As regards energy law, the Government’s position appears to be that it would like the present position to continue, so far as possible. It is seeking broad energy cooperation with the EU. These sentiments appear to recognise that much of the UK’s energy supply depends upon the EU, and therefore upon the legal matrix which is inherent in EU membership. The White Paper acknowledges that a common rule book with regard to electricity trading may be necessary, just as with regard to trading in other commodities; however, it is stated that the UK does not believe that there will be a need for a common rulebook on wider environmental and climate change rules. It is said that the UK is putting in place arrangements to ensure certainty for business when trading after exit; given the amount of work which it seems is still necessary in this area, it is hard to see on what basis the Government can be confident of achieving this objective.
In any event, there are also wider uncertainties.
Firstly, the Government conceded, following the Miller decision in the UK Supreme Court, that not only would Parliament have to legislate for the issue of an Article 50 notice, but that Parliament would, in due course, have to legislate specifically for our withdrawal from the EU. If that does not happen, then, as a matter of domestic law, we cannot leave. The EU Withdrawal Act, recently enacted after lengthy debate in both Houses, is not intended to, and does not, legitimise our withdrawal – it merely deals with the legal consequences of withdrawal, as and when this occurs (as to which, see below). It is still intended that Parliament enact a further piece of legislation, probably to be known as the EU Withdrawal Agreement Bill. This Bill will contain, and allow Parliament to approve, the terms of the Withdrawal Agreement, as and when known, and will legitimise our withdrawal. It is of course the current intention that this Bill will be enacted before 29th March 2019 when withdrawal is due to take place, however, an additional feature of this Bill will presumably be to provide for the so-called “transitional period” up to the end of 2020, for which, as yet, no legal provision has been made, but which is expected to be covered by the Withdrawal Agreement.
It follows from the above that certain key questions remain to be answered in relation to energy and climate change law, which are in large part questions which apply to our departure generally from the EU, and they are questions which remain of intense political controversy. The only area in which there has been, at least to some extent, a reasonably settled landing, is in relation to the EU Withdrawal Act, which is intended to ensure that EU legislation, such as an EU Regulation, which operates directly within the UK, should continue to form part of domestic law on and after exit day (see section 3), and also that subordinate legislation made under the European Communities Act 1972 should continue in force (see section 2). An important area for clarification, however, is the extent to which these provisions, by themselves, will be sufficient to underpin the UK’s continuing rights and obligations with regard to the supply of energy after our departure from the EU, at which point the mutual obligations between Member States will cease to apply.
The most notable international sets of rules with regard to cross border trade and investment in the energy sector are the Energy Charter Treaty (ECT) and the World Trade Organisation’s (WTO) trade rules. Currently, they gain their importance predominantly from regulating cross-border relations between the EU, and its Member States, and third countries. However, after the UK has left the EU, both legal regimes could see a significant rise in relevance with regard to the EU-UK relationship. It may be worth adding that currently the WTO system may be facing a crisis in its dispute resolution process, given the refusal of the US to consent to the appointment of new WTO Appellate Body members, and hence that the UK’s potential reliance on the WTO as a means for ensuring rules-based access to international trading opportunities outside membership of the EU could prove to be rather poorly timed.
Enforcement Undertakings and a First for Odour
The Environment Agency has published a list of the Enforcement Undertakings (“EUs”) accepted in the period between 1st February 2018 and 31st May 2018.
Water pollution continues to be a main concern. The largest offer is from Wessex Water Services Limited for a water discharge activity. The £200,000 reactive offer is broken down into: a £110,000 financial contribution to the Severn Estuary Partnership & Cardiff University; £50,000 to South Gloucestershire Council and £40,000 to the Farming & Wildlife Advisory Group, South West.
Second only to that is the offer made by another water company: Affinity Water Limited, for an amount of £110,000 related to an offence under section 4(1) of the Salmon & Freshwater Fisheries Act 1975.
It is difficult to compare either of these financial contributions with those previously accepted for similar offences. There is no further detail provided about the extent of harm caused or level of assessed culpability for any individual case. However, what is clear is that water pollution remains a key focus for the Environment Agency. This much is outlined in its recently published Report on Water and Sewerage Companies’ Environmental Performance (July 2018) which aims to rank the environmental performance of England’s nine major water utilities, across the fields of pollution, sewage management and permit compliance.
There was a small rise in the number of “Category 1” incidents, to 11, up from 9 in 2016. Conversely, there has been a slight reduction in the total number of pollution incidents in 2017 at 1,827, down from 1,902. Overall, the Report is clearly intended to send a strong warning to the industry, concluding that the sector as a whole is “not doing enough” to reduce serious pollution incidents and ensure compliance with discharge permits. It also warned that it is prepared to take “tough action” on any polluter – corporate or otherwise – who causes significant pollution and damage to the environment. The Report then singles out three water companies for their continued poor performance and lack of compliance with permit conditions.
The Environment Agency has also accepted, for the first time, an EU in respect of odour pollution; the Environment Agency has revealed that the financial contribution of £60,000 to a local environmental charity comes from Shanks Waste Management Limited (now trading as Renewi UK Services Limited) after a history of odour complaints. The offence allegedly related to a breach of permit requirements at the company’s site in Sowerby Woods which currently processes part of Cumbria’s municipal waste.
The full list of published EUs can be found here
The Report can be found here
Environment Agency’s ‘Definition of Waste Service’ back open for business
At the end of June the Environment Agency launched its Definition of Waste Service to complement the ‘IsItWaste’ tool. If the Definition of Waste Service sounds familiar, don’t be surprised, it should; the Environment Agency mothballed a previous incarnation of it back in October of 2016.
By way of recap, since 2014 those involved in the waste industry have been able to use the free ‘IsItWaste’ tool (between the hours of 7am and 7pm, Monday to Friday) to perform a self-assessment in order to determine whether their material is likely to be waste or not. The tool is based on Article 5 (‘by-products’) and Article 6 (‘end of waste’) of the Waste Framework Directive 2008/98/EC, and case law from England and Wales. Strictly speaking, insofar as the tool is an Environment Agency function, it is only for use in England.
Now, in addition to the self-assessment function the tool provides, there is also an option to submit a request to the Environment Agency’s Definition of Waste Service. Unlike the tool, the Service is not free, with an initial interim charge of £750 plus VAT payable upon submission, and work thereafter charged at £125 per hour plus VAT in accordance with a cost estimate provided.
Insofar as the Service will be applying tests derived from case law it can presumably be safely concluded that the questions asked will be those set out on the relevant Guidance page, namely whether:
- “the waste has been converted into a distinct and marketable product, this means:
- the waste has been turned into a completely new product, for example a playground surface is produced from waste tyres
- the new product is different from the original waste (minor changes to its composition may not be sufficient), for example non packaging plastic recycled material is processed to make new plastic products
- there is a genuine market for the material so it will definitely be used – if it’s stored indefinitely with little prospect for use the material remains waste
- the processed substance can be used in exactly the same way as a non-waste
- the processed substance can be stored and used with no worse environmental effects when compared to the material it is intended to replace.”
Given that the guidance page (here) already sets out the questions the Service will ask, it will be interesting to see what the uptake is like, particularly amongst small and medium sized operators who might see the charges as prohibitive. That said, the advantage of having a degree of certainty, particularly certainty from the regulator’s mouth, may prove to be money well spent.