Regulatory Outlook | Environment | July 2019

Current issues

Government revises climate target

On 12 June 2019, following the advice of the Committee on Climate Change, the UK government created secondary legislation which revises the greenhouse gas reduction target set by the Climate Change Act 2008. Previously, the target was to reduce greenhouse gas emissions by 80% of 1990 levels by 2050. The new target is for 'net zero' emissions by 2050. In simple terms, this means that emissions will need to be either equal to or less than the total emissions which are absorbed by the environment in 2050.

The UK is the first major economy to make such an ambitious pledge. While a 'net zero' economy will require significant action across all UK industries, the Committee predicts that the transport and energy sectors will require the most reform.

Clean Air Strategy 2019

On 14 January 2019, the Environment Secretary, Michael Gove, launched the new Clean Air Strategy in a bid to tackle the threat of air pollution to public health. The new strategy includes more stringent measures to reduce emissions across transport, farming, industry and the home.

Objectives that will affect businesses include: a commitment to a new target for the reduction of harmful nitrogen deposits; future legislation which bans the sale of the most polluting fuels; and the phasing-out of coal-fired power stations.

Closure of the CRC Energy Efficiency Scheme

The CRC Energy Efficiency Scheme closed at the end of the previous compliance year, on 31 March 2019. While there is no direct replacement for the scheme, the government has introduced the new Streamlined Energy and Carbon Reporting (SECR) regime and has also increased Climate Change Levy (CCL) rates.

SECR will require many businesses to report on:

• UK energy use (as a minimum, gas, electricity and transport, including UK offshore area).
• Associated greenhouse gas emissions.
• Energy use and greenhouse gas emissions figures from the previous year (from 1 April 2020).
• Energy efficiency measures, in a narrative form.
• Details of the methodology used.

The new regime is aimed at encouraging companies to implement energy efficiency measures to cut costs and achieve environmental benefits.

Government to mandate 'biodiversity net gain'

On 13 March 2019, the government confirmed that new developments must deliver an overall increase in biodiversity. Under the new rules, if a developer causes biodiversity loss or fails to mitigate or compensate all impacts on a site, a penalty will be imposed. The penalty will require developers to create a compensatory habitat, which will support local biodiversity. If a developer fails to mitigate or compensate a loss, then a penalty tariff will be imposed.

The penalty tariff will be calculated against any shortfall in biodiversity, measured against the net gain obligation (10%). Brownfield sites will be exempt from the requirement of a 10% net gain.

This scheme will have a significant impact on both developers and investors. The developer of the site must ensure that all new developments avoid environmental harm and increase biodiversity by at least 10% in order to avoid having to pay a penalty tariff.

Net Zero Carbon Buildings Framework issued

On 30 April 2019, the UK Green building Council issued the 'Net Zero Carbon Buildings: Framework' to the construction industry. The Framework is aimed at enabling both old and new buildings in the UK to achieve net zero carbon status by 2050.

The Framework proposes two approaches for the attainment of net zero carbon buildings, one for in-use operational energy and a second for emissions released during the construction process. According to the report, buildings' operational energy use should be reduced and where possible, powered exclusively through renewably sourced energy. Emissions from productions and construction should be measured, reduced and offset in order to attain 'net zero' carbon emissions. While this Framework is initially intended as guidance, more stringent standards are expected to be developed over the next decade.

This new Framework has obvious relevance to all developers and real estate investors.

In Focus | Regulatory powers and trends

Who are the regulators?

The principal regulator is the Environment Agency (EA).

Do they have powers to compel businesses to hand over documents?

The EA has the power to compel businesses to hand over documents in accordance with the requirements of the 'Regulators' Code'. The most commonly used power is found under section 108 of the Environment Act where the EA can require a business to produce records (including digital records) and provide copies if necessary.

Do they conduct dawn raids?

The EA, in conjunction with the Police, has been known to conduct dawn raids. Dawn raids generally only come as a result of 'serious' breaches such as criminally organised illegal dumping of waste. The powers to carry out dawn raids originates from section 108(4) of the Environment Act 1995, which requires the EA to enter the premises at a reasonable time and allows the EA to take measurements, photographs, recordings and to retain articles for the purpose of an examination or investigation.

Are they able to bring criminal prosecutions (and do they do so)?

The EA can bring criminal proceedings. However, it only does so after considering all other options. As an alternative to criminal prosecution, the EA can also impose a civil sanction, such as an Enforcement Undertaking. These avoid some of the high investigative and legal costs for the EA in a time when it is focusing its budgets and resources on using criminal prosecution for the most serious offences.

Do they bring prosecutions against individuals?

The EA can prosecute any individual with the consent of a court or an insolvency practitioner. Financial penalties are generally not applied unless the penalty is mandatory, although the EA will always seek to recover the costs of investigations and enforcement proceedings.

Is there a self-reporting / leniency regime?

The EA is more likely to issue either a fixed penalty notice or a formal caution if the offender admits/ reports the offence. However if the offence is 'serious', prosecution will normally be the outcome.

Are there any plans to introduce new powers (or use existing powers differently)?

There are currently no new proposals for an extension of the EA's powers. However, the new Environment Act, which is predicted to come into force following Brexit, will create a new 'green watchdog' called the Office for Environmental Protection (OEP). The OEP will work alongside the EA and will have the power to take businesses, public bodies and the government to court over any breaches of environmental law.