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COP26 and the future of environmental regulation

On 24 November 2021 Shoosmiths hosted a webinar exploring recent developments and forthcoming changes in environmental regulation – the COP26 climate change conference, the Environment Act 2021 and trends in sentencing for environmental offences.

COP26

David Symons, director of sustainability at WSP UK outlined the three main messages from the COP26 conference:

  1. The 1.5°C target to limit global warming remains alive – but only just

  2. Ahead of and during COP26, the UK Government made a number of specific updates and set out new reporting requirements for all large businesses

  3. The UK Government is committed to its net zero by 2050 strategy. The Government has produced clear timescales as to how its departments will make the transition to net zero and how the UK will be a net zero economy by 2050

The key agreement to emerge was the Glasgow Climate Pact:

  • Stronger commitments - parties are to return for next year’s COP27 (in Egypt) with more robust Nationally Determined Contributions
  • Coal - parties agreed to ‘phase down’ (but not ‘phase out’) unabated coal and ‘inefficient’ fossil fuel subsidies
  • Rules - agreement was finally reached over the ‘Paris Rule Book’, which lays down rules on how countries must fulfil the pledges they made in Paris in 2016
  • Funding - developed countries must at least double adaptation finance by 2025 (from 2019 levels)
  • Loss and damage - developing countries affected by the impacts of climate change will get technical assistance to deal with those impacts

Other key commitments included:

  • Methane - a pledge by over 100 countries (including the US, but not China, India or Russia) to reduce methane emissions by 30% by 2030
  • Forests - 137 countries covering 91% of the world’s forests signed the Glasgow Leaders’ Declaration on Forests and Land Use, committing to ‘working collectively to halt and reverse forest loss and land degradation by 2030’
  • Coal - 23 countries (but not the US, China or Russia) made new commitments to phase out coal power
  • Breakthroughs - more than 40 countries said they would align standards and coordinate investments to bring forward the ‘tipping point’ at which green technologies are more affordable and accessible than fossil-fuelled alternatives

Environment Act 2021

Angus Evers, partner at Shoosmiths, outlined the key provisions of the new Environment Act 2021, which received Royal Assent on 9 November 2021:

Governance

The Secretary of State must set targets by the end of October 2022 for air quality, particulate matter in air, water, biodiversity, resource efficiency and waste reduction, and species abundance.

The Act establishes the Office for Environmental Protection, an independent body tasked with holding the government to account for the environment. It has four functions:

  • Monitoring – progress of environmental targets and improvement plans, and implementation of environmental law
  • Reporting – progress of environmental targets and improvement plans, and implementation of environmental law
  • Advisory – changes to environmental law
  • Enforcement - against public authorities for failures to comply with environmental law

Waste and resource efficiency

The Act gives national authorities across the UK powers to make regulations creating new producer responsibility regimes, requiring the provision of energy efficiency information to consumers, and creating deposit return schemes (for example, for drinks containers). Waste collectors must separate recyclable waste from waste destined for landfill/incineration.

Air quality and environmental recall

The Act notably gives the Secretary of State powers to make regulations for issuing ‘compulsory recall notices’ to manufacturers and distributors of vehicles that don’t meet relevant environmental standards.

Water

The Environment Agency is given powers to vary or revoke permanent abstraction licences in England without compensation.

Sewerage undertakers will have to publish reports about storm overflows and ‘secure a progressive reduction in the adverse impacts of discharges’ from them.

Nature and biodiversity

New planning permissions and development consent orders in England must require a ‘biodiversity gain plan’ (achieving at least a 10% gain in biodiversity value) to be submitted and approved before development commences. This will add complexity to new developments.

Compliance with new forest risk commodity regulations will require supply chain due diligence.

REACH

There are new powers for the Secretary of State and devolved administrations to amend certain parts of the UK retained version of the EU REACH Regulation.

Environmental enforcement

Joanne Sear, principal associate at Shoosmiths, covered trends in sentencing for environmental offences following the £90 million fine imposed on Southern Water in July 2021. Southern Water pleaded guilty to 51 counts of discharging untreated sewage into coastal waters.

Environmental offences are dealt with under the Definitive Guideline. Two of the most important steps are the assessment of culpability and harm. In respect of culpability, the Court decides whether actions were deliberate, reckless, negligent or low / no culpability. In the Southern Water case, 50 out of 51 offences fell into the ‘deliberate’ category. For harm, there are four categories ranging from major adverse effects (Category 1) to no actual harm caused (Category 4). In this case, the harm was Category 1.

The Court then considers turnover. Southern Water was deemed a ‘very large’ organisation because its turnover greatly exceeded the threshold for large organisations. The Judge set a starting point for each offence of £2.5 million. There is still uncertainty in relation to the treatment of ‘very large’ organisations.

Taking into account aggravating and mitigating factors, the Judge found the appropriate fine for (almost) every offence to be £6 million. He imposed a separate penalty for each treatment site. There were 17 treatment sites with 16 sites receiving a £6 million fine each and 1 site £3 million. He then added the economic benefit from the offences caused, which brought the total fine to £135 million. As a result of a guilty plea, this was reduced to £90 million.

Recent trends in environmental sentencing include:

  • Corporate ESG credentials are becoming increasingly important - this is a mandate for the Courts to impose higher sentences for environmental offences
  • Fines are increasing in size – it is only 5 years since the first £1 million fine for an environmental offence
  • Backdated landfill tax – landfill tax has been extended to cover waste disposed of at unauthorised sites. Tax penalties apply alongside any other penalties for environmental offences
  • Confiscation Orders - we are seeing more applications for these following convictions for environmental offences

Conclusion

COP26 has put the environment high on many organisations’ agendas. What matters now is how government and businesses respond. Businesses that fail to implement strategies for achieving net zero may come under pressure from customers, investors, lenders and ultimately regulators.

The Environment Act creates a post-Brexit framework for the UK (or at least England) to tackle many of its other pressing environmental challenges. However, it is only a starting point - secondary legislation now needs to be written, consulted on and brought into force in order to bring about transformation.

As new regulations are introduced, environmental compliance will become increasingly important. The Environment Agency and other regulators may face scrutiny from the new Office for Environmental Protection if they are not seen to be taking effective action against those who flout environmental laws. The courts have shown they are willing to impose heavy penalties on environmental offenders who are prosecuted.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.

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