Environment | UK Regulatory Outlook July 2024

The King's Speech: Environment and Sustainability aspects

The King's Speech on 17 July 2024 set out 40 new proposed Bills that the Labour government will look to implement over its tenure in office. A number are of particular relevance to Osborne Clarke's environment and sustainability practice, which are set out below:

Water (Special Measures) Bill

This proposal plans to strengthen the powers of the water regulator, Ofwat, in an attempt to improve water quality and revive Britain's rivers, lakes and seas. The bill sets out a number of proposals including:

• banning the payment of bonuses within water companies if environmental standards are not met;
• increasing accountability for water executives by introducing a new code of conduct for water companies;
• introducing automatic and severe fines;
• ensuring that water bosses face personal criminal liability if they break the law; and
• mandating real-time monitoring at every sewage outlet.

In light of the water industry's recent controversies, the government appears to be clamping down on mismanagement of water companies and holding them to account in respect of environmental standards. The proposal comes at a time when Ofwat has refused to increase household bills by the amount proposed by the water companies themselves, so it seems likely that water companies will come under increased regulatory and financial pressure in the coming years.

The government has also set out its intention to outline additional legislation to "transform and reset our water industry" and improve the condition of our waterways, so there are likely to be further developments in this area over the coming years.

Sustainable Aviation Fuel (Revenue Support Mechanism) Bill

This bill looks to provide revenue certainty for sustainable aviation fuel (SAF) producers to try and encourage investment in the construction of SAF plants in the UK. This aligns with the government's net zero commitments and proposals to decarbonise the aviation sector. It is hoped that the bill will create demand for SAF by setting targets on fuel suppliers to use a proportion of SAF.

The government has asserted that SAF production is estimated to add over £1.8 billion and over 10,000 jobs to the economy, which may contribute to kickstarting economic growth and help to make Britain a "clean energy superpower".

National Wealth Fund Bill

The National Wealth Fund (NWF) will invest £7.3 billion of government capital into "priority sectors" with the hope that it will encourage private investment in areas like green infrastructure and clean energy. The NWF is aiming to generate £3 of private sector investment for every £1 it invests and is intended to play a central role in the government's growth and clean energy superpower missions.

Planning and Infrastructure Bill

The government's briefing note sets out that it considers the current planning regime to be acting as a "major brake on economic growth". The Planning and Infrastructure Bill is designed to address this by improving local planning systems and promoting the delivery of housebuilding and key infrastructure. Specific proposals include:

• Streamlining the process for the delivery of critical infrastructure;
• Reforming compulsory purchase compensation rules;
• Improving local planning decision making;
• Increasing local planning authorities' capacity; and
• Using development to fund nature recovery.

The bill is expected to apply to England and Wales, with some measures also extending to Scotland.

For more on what the King's Speech included and the implication for business, see our Insight.

Court confirms nutrient neutrality and Habitats Regulations assessment requirements apply to discharge of planning conditions

In our June Regulatory Outlook, we provided an update on the post-implementation review of Habitats Regulations.

The Habitats Regulations assessment (HRA), require an "appropriate assessment" to be carried out of the impacts of proposed development on protected sites. The appropriate assessment process requires the relevant authority to carry out a four-step appropriate assessment of the impacts of proposed developments (plans or projects) that are likely to have a significant effect on sites designated for habitats or species protection, before granting consent.

The Court of Appeal judgment in C G Fry & Son Ltd v Secretary of State for Levelling Up Housing and Communities and another illustrates the variety of approaches taken by the courts when dealing with retained EU law. The Court of Appeal applied the conventional approach to statutory interpretation to interpret EU-derived domestic legislation that was enacted to give effect to an EU directive. The court concluded that it was unnecessary in this case (which dealt with matters arising before the end of 2023) to refer to the direct effect of the EU directive under section 4 of the European Union (Withdrawal) Act 2018, or the rules of interpretation in section 6.

The Court of Appeal therefore held that regulations 63 and 70 could require an appropriate assessment to be undertaken at the stage when the discharge of conditions was being considered. The court concluded that none of the relevant provisions of the Habitats Directive or the Habitats Regulations 2017 qualified the scope or content of the requisite appropriate assessment according to the stage of the decision-making process at which it was carried out. Where an appropriate assessment was required before an "implementing decision" was made, the assessment had to be of the whole development whose implementation was authorised by that decision.

Nature-related litigation: emerging trends

The Network for Greening the Financial System (NGFS) has published a report on emerging trends to look out for in nature-related litigation. The report focuses on climate, biodiversity loss and ecosystem services degradation and considers:

• Examples of strategic nature-related litigation: Litigants are beginning to target corporate entities, including financial institutions, in strategic nature-related litigation. However, the majority have been historically directed at states and public entities. 
• Nature-related legislation and governance: The report suggests that there is a connection between nature-related legislation and litigation in that legislation may offer new grounds for future litigation, while litigation may fill gaps where legislation is not in place or is weakly enforced.
• The relevance of nature-related litigation for the financial sector: Potential risks arising from nature-related litigation are highlighted in the report, including increased transition risk and compliance costs, costs of legal challenge and spill-over effects on other companies in the same sector and firms with financial exposures to defendants.

The NGFS suggests that two key categories of nature-related litigation might be expected to develop in the coming years: an increase in the number of rights-based nature cases against states and public entities and an increase in the number of cases based on corporate responsibility.