Environment | UK Regulatory Outlook January 2024

Government delays mandatory Biodiversity Net Gain to January 2024 and publishes first statutory instruments

The Department for Environment, Food and Rural Affairs announced that the government is delaying the implementation of mandatory Biodiversity Net Gain (BNG) requirements.

BNG was due to come into force in November 2023 but has been delayed until January 2024 (April 2024 for small sites).

A government blog post, published on 29 November 2023, set out the six statutory instruments that will become law in January to deliver the BNG framework. These cover:

• Site register regulations – set out the processes and requirements for biodiversity gain sites to be registered and allocated to developments.
• Exemptions – which sites and developments will not need to comply with BNG regulations.
• Penalties and fees – the fees associated with registering sites and also the penalties for providing false or misleading information during registration.
• Irreplaceable habitats – contains the list of habitats classed as irreplaceable as well as the differences in how applications relating to them will be determined.
• Modifications and amendments – adds provisions for phased developments, sets out what needs to be included in a planning application in relation to BNG, details the timescales for submission of a biodiversity gain plan as well as the application, determination and appeal process in relation to gain plans. Notably the amendments state that the earliest a biodiversity gain plan can be submitted is the day after planning permission is granted.
• Consequential amendments – minor amendments to other pieces of planning legislation.

BNG will not apply to nationally significant infrastructure projects until November 2025, with further guidance to be published throughout 2024.

Government launches consultation on the proposed rules to govern carbon capture transportation and storage networks

The department for Energy Security and Net Zero (DESNZ) is inviting consultation on the Carbon Capture and Storage Network Code. The code will set out the arrangements that will govern the networks to transport carbon from where it is emitted and captured to storage facilities.

Any feedback on the potential drafting and contents of the code should be submitted to DESNZ before 16 February 2024. 

UK Sustainability Disclosure Requirements

The UK Sustainability Disclosure Standards (SDS) will set out the necessary disclosures for companies in relation to sustainability-related risks and opportunities. The standards will form the basis of future reporting requirements in the UK.

These standards will be based on the International Sustainability Standards Board IFRS disclosure standards, and will only divert for UK specific matters where absolutely necessary. The IFRS standards incorporate and expand upon the Taskforce for Climate-related Financial Disclosure's recommendations, so firms already voluntarily reporting in line with these requirements will be at an advantage. The secretary of state for Business and Trade will consider the endorsement of the IFRS standards and creation the UK SDS by July 2024.

The decision as to whether to require disclosure in line with the UK SDS will be taken independently by the UK government for UK registered companies and LLPs and by the FCA for UK listed companies.

UK government confirms plans for Carbon Border Adjustment Mechanism

Where carbon intensive goods are imported to the UK they may be subject to carbon levies from 2027. Aluminium, glass, cement, ceramics, fertiliser, hydrogen, iron, and steel will be affected by the new scheme.

The liability under the UK Carbon Border Adjustment Mechanism (CBAM) will depend on the greenhouse gas emissions of the imported product and the difference between the carbon price applied in the country of origin and the carbon price that would have been applied if the goods had been made in the UK. Liability to pay this levy will be with the importer of the goods.

The government hopes the scheme will:

• support UK firms in implementing net zero transition plans for their products and manufacturing;
• create a more equitable market between UK goods and imported goods with a higher embedded carbon footprint; and
• incentivise firms outside the UK to decarbonise their products to remain competitive.

Further detail of the precise goods in scope will be subject to consultation in 2024.

Vehicle Emissions Trading Scheme Order 2023 has been made

The Vehicle Emissions Trading Schemes Order 2023 was made on 13 December 2023 and came into force on 3 January 2024.

The order forms part of the UK's zero emissions vehicle (ZEV) transition, which includes the recently delayed ban on new petrol and diesel cars from 2035.

It establishes four UK-wide trading schemes two in relation to ZEV production and two in relation to CO2 emissions.

The ZEV production schemes relate to the number of vehicle registrations made by manufacturers, and the allowances for non-ZEVs will decrease annually from 2024. If fewer non-ZEVs are registered than their target then the manufacturer will have surplus allowances; if they register more than their target then they will be in deficit and will need to purchase additional allowances. Surplus allowances can be traded or banked.

The CO2 standard schemes work in a similar way, however allowances are based on a baseline per-vehicle emissions target. Manufacturers must have one allowance for every gram CO2/km they emit on average across their entire fleet. Sufficient allowances will be given for manufacturers to meet their targets and surpluses can be traded and banked. If there are deficits, allowances must be bought or can be transferred from ZEV scheme surpluses.

Provisional agreement has been reached on CSDD

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EU deforestation-free products regulation set to come into force

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First reporting obligations under the Corporate Sustainability Reporting Directive

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