Environment | UK Regulatory Outlook January 2023

European Commission's proposed Packaging and Packaging Waste Regulation

The European Commission introduced a new proposal on packaging and packaging waste on 30 November 2022. This will repeal the existing Packaging and Packaging Waste Directive (PPWD), turning the main piece of EU packaging legislation into a regulation which directly applies to all Member States to improve harmonisation of the EU packaging waste regime.

The draft regulation expands the scope of the PPWD by introducing new provisions to tackle issues such as the excessive use of packaging, low recycling rates and high recycling costs, and the low uptake of recycled material in new packaging. It will apply to all packaging of any material that is placed onto the Union market and will therefore affect many businesses, including those outside the EU which supply packaging to the EU. Read our Insight for further details on what the Commission is proposing. 

Businesses have until 26 January 2023 to submit any views or concerns by responding to the public consultation being run by the Commission. Although the regulation is not expected to come into force before 2024, it is important that businesses keep an eye out for updates, including on the implementation date and any new drafts published, to ensure they are well informed of the future packaging obligations and timescales.  

Deposit return schemes start to go live in the UK

On 16 August 2023, Scotland's drinks deposit return scheme (DRS) will go live. Drinks receptacles considered to be in-scope will be sold with a 20p deposit applied. This is the first DRS being implemented in the UK, with the rest of the UK likely to follow in 2025. 

Businesses that wish to manufacture or sell drinks in Scotland will have to register with the Scottish Environment Protection Agency (SEPA) by 1 March 2023 to be part of the DRS. Failure to register may result in businesses not being able to sell drinks in Scotland after August 2023. Affected businesses should ensure they are familiar with the scheme and how it will work: see guidance. Drinks producers and importers can either discharge their obligations directly or will need to nominate a scheme administrator to act on their behalf. 

The Department for Environment, Food and Rural Affairs (Defra) has also now confirmed in its response to the consultation on introducing a drinks DRS in England, Wales and Northern Ireland that a DRS will be introduced from 2025 (the expected start date being 1 October 2025). Businesses will note that materials covered in DRS will vary between nations. For example, glass bottles will not be covered in England and Northern Ireland but are covered in Scotland and Wales. 

Extended producer responsibility measures for single-use plastic products in the EU

Businesses operating in the EU should be preparing to implement extended producer responsibility (EPR ) schemes for all packaging waste by the end of 2024 under both the Single-Use Plastics Directive (SUPD) and the Packaging and Packaging Waste Directive. EPR means that obligated producers will take on financial and organisational responsibility for the collection and sorting of used packaging.

Understanding how the EPR schemes will be implemented in local legislation is important, as each EU Member State will differ in their approach and sanctions. In particular, obligated producers should be aware of their packaging recycling and recovery targets which must be met.

Further ban on single-use plastic items introduced in UK

On 14 January, the government published its long-awaited response to its consultation proposing to ban the supply of commonly littered single-use plastic items in England. Defra confirmed that from October 2023 it will introduce a ban on the supply of single-use plastic plates, cutlery, balloon sticks and expanded and extruded polystyrene food and drinks containers. These products will not be available to buy from any business; this includes retailers, takeaways, food vendors and the hospitality industry.

The ban will not apply to plates, trays and bowls that are used as packaging in shelf-ready pre-packaged food items, as these will be included in Defra's EPR scheme for packaging. For example, this would include pre-packaged salad bowls and bowls filled with food at the counter of a takeaway.

This will shift the responsibility for cutting down single-use plastics from consumers onto businesses. It is important that businesses start to think about how they will phase out the single-use plastic items covered by the ban and substitute them with alternative packaging. 

Defra set to introduce regulations on mandatory recyclability labelling

In its response to the consultation on extended producer responsibility for packaging, Defra indicated that mandatory recyclability labelling of packaging will be introduced in the UK. 

All packaging types will need to be labelled by 31 March 2026, with the exception of plastic films and flexibles which must be labelled by 31 March 2027. "Recycle Now" and "Do not recycle" on-pack recycling label (OPRL) logos will be used. 

The use of the mark will not be subject to a licence once it becomes mandatory. The requirement to label packaging will be introduced as part of new UK-wide packaging regulations that are expected to enter into force late in 2023.

UK EPR scheme delayed to 2024

The EPR scheme for packaging will be implemented in the UK in a phased approach from 2024. Businesses should engage with the published response to the consultation early to ensure that there is a clear understanding of the steps that must be taken to comply with the new EPR from 2024.

The relevant 2022 business recycling targets for packaging waste under the Packaging Waste Regulations 2007 have been rolled over to 2023 to provide continuity as businesses prepare for the EPR. Business should have data collection processes in place for 2023 and should be collecting the correct packaging data from the start of the year. See government guidance. Large organisations will then need to submit data between 1 July and 1 October 2023. Read our Insight for more. 

Biodiversity net gain regulations 2023 

On 30 November 2022, the government passed secondary legislation to implement provisions of the  Environment Act 2021 and which extended the statutory duty on local planning authorities (LPAs) to not only conserve biodiversity but also enhance it.

This greater onus on LPAs paves the way for Part 6 of the Environment Act 2021, which sets out a  new mandatory biodiversity net gain requirement for development applications. Both local and large-scale infrastructure projects in England will be affected by this. The requirement will affect all planning permissions (subject to exceptions) by requiring that these are deemed subject to a mandatory planning condition to deliver a biodiversity objective of 10% net gain as part of the development. 

The introduction of the mandatory requirement is subject to secondary legislation, which is expected to be implemented in England in November 2023. This secondary legislation is subject to an ongoing consultation (published by Defra in January 2022). 

Key points raised in the consultation include: (1) proposals as to how phased development will need to deliver the biodiversity objective; (2) the introduction of habitat banking to allow "useable" biodiversity value to be generated now for future use in development applications; and (3) the proposed regulation of "additionality" and the stacking of different types of environmental mitigation and benefits on the same area of land. 

Regulation of Natural Capital Marketplaces  

Over the course of 2022, businesses (in particular developers and investors) have taken greater interest in the commercial opportunities of pursuing projects which deliver environmental benefits. The increasing demand for natural capital-derived services, including carbon (peatland and woodland) offsets, nutrient offsets and biodiversity credits has been prompted by the introduction of planning-based regulatory frameworks (such as biodiversity net gain and the "nutrient crisis"). 

As businesses invest and market these services (via both bespoke arrangements and newly established natural capital markets), we anticipate that regulators will begin to scrutinise more closely these arrangements over the course of 2023. 

The consultation on the biodiversity net gain secondary legislation confirms that Defra is developing an approach to regulating the biodiversity unit market as part of its broader work on regulating environmental markets. 

Additionally, more complex regulatory issues are emerging in respect of deploying public finance and environmental grants (such as the Environmental Land Management subsidies) for the purpose of delivering environmental services.

Extension of EU/UK Emissions trading schemes 

During 2022, the UK Emissions Trading Scheme (UK ETS) looked to extend the heavy emitting sectors which it regulates and in which it obligates businesses to purchase carbon allowances. 

A joint government consultation, which ran until 17 June 2022, proposed the extension of the UK ETS's scope to include maritime and waste incineration activities by the mid-2020s. 

The Department for Business, Energy and Industrial Strategy has published an independent review of the government's approach to delivering its net zero target on 13 January 2023.

The review's recommendations provide that the government should, by 2024, develop a pathway for the UK Emissions Trading Scheme (UK ETS) up until 2040. The recommendations suggest that the pathway should set out a timeline for expanding the scope of the UK ETS to the remaining unregulated sectors of the UK economy. 

Therefore, over the course of 2023, we expect to see further details emerge from government about extending the scope of the UK ETS to impact a greater proportion of the UK economy.

Carbon border adjustment mechanisms

A carbon border adjustment mechanism (CBAM) applies a carbon price at a national border to imports of certain products, based on their embedded carbon footprint and which is equivalent to the carbon price borne on those products by domestic producers.

The EU has announced that it has reached a provisional agreement on the adoption of a CBAM. If implemented (in accordance with the provisional agreement) the CBAM will begin to operate from October 2023 onwards. 

Initially, the EU CBAM would only require reporting obligations for the purpose of collecting data. However, by way of additional phases, the full regulatory impact of the CBAM would be introduced by 2026 to tax products entering the EU which have a high level of embedded carbon. 

The UK is considering introducing its own CBAM. In a written statement to Parliament on 16 May 2022, the government confirmed that it would consult on implementing a CBAM and product standards to address carbon leakage. No date has yet been set for the consultation, but it is anticipated to be published in early 2023.

Voluntary carbon markets

On 13 October 2022, the UK's Climate Change Committee (CCC) published a report on voluntary carbon markets (VCMs) and offsetting. 

Businesses have the option of purchasing carbon credits via VCMs to voluntarily offset their greenhouse gas (GHG) emissions, rather than complying with legally binding GHG emissions reduction obligations. Due to the interest of businesses in meeting net zero commitments, VCMs have rapidly grown and expanded. 

The CCC's report recommends that the government must put in place stronger guidance, regulation and standards to ensure that carbon offsetting is not used as a substitute for direct business emissions reduction. In the absence of these measures, the CCC has warned that VCMs could delay progress towards net zero or damage other priorities, such as climate adaptation and biodiversity.

In support of the CCC, the government's latest net zero review in January 2023 pledged to endorse international voluntary carbon markets (VCMs) standards as soon as possible, to consult on formally adopting regulated standards for VCMs, and to set up a regulator for carbon credits and offsets by 2024.

Therefore, as businesses take steps to meet the milestones of their net zero goals in 2023, they should be alive to the government's proposals to further regulate the supply and use of carbon offsets. 

The Taskforce on Nature-related Financial Disclosures

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