On 26 June, the Dentons Environment team delivered the second in a series of seminars on "UK Environmental Law – 2019 as it happens (and beyond)".
In the first seminar of the series, the team took a step away from the raft of legislative changes coming from the EU and UK government, exploring where civil society demands more from business than the current regulatory regime and how this is impacting a wide range of sectors and investment decisions around sustainability and environmental standards.
The team's second seminar of the series looked at current and upcoming policy and legislation, with a particular focus on the implications of Brexit, recent climate change developments and the government's proposed (now legislated) net zero emissions target.
Stephen Shergold began by introducing the audience to the Dentons Climate Change Legal Dashboard which maps out four key pieces of the climate change jigsaw: (1) the Rule of Law, (2) Impact, (3) Civil Society and (4) The Response. Stephen explained how each of the quadrants were inter-connected – for example, the impacts of climate change (adverse weather, rising sea levels, etc.) feed into scientific knowledge, which is utilised by civil society to simultaneously shape the rule of law and the response of businesses on a practical and contractual level.
Sam Boileau focused on the Rule of Law piece of the jigsaw. He opened the discussion by posing the following question to the audience: "Brexit may result in a weaker framework of environmental governance in the UK. Do you see this as an opportunity or a threat?" At this point, the room's view was split 50:50.
Sam analysed the volume of environmental law and policy currently being generated by the government including the 25 Year Plan, plastics legislation and the Environment Bill. He explained that there are two key factors driving this. First, Brexit gives rise to the need for a small mountain of legislation just to ensure that environmental law continues to work effectively post Brexit. Second, there is currently a strong political driver, in part caused by Brexit, for government to be seen to be taking the lead on environmental legislation – rather than just continuing to follow Brussels.
Sam went on to discuss the potential impact of Brexit on environmental governance in the UK. On the face of it, Brexit could seriously disrupt our current environmental governance framework. With EU membership, we have overarching environmental principles established by the EU Treaty, enforceable EU-wide environmental laws, external institutions (in the form of the EU Commission and ECJ) that can hold the UK government to account, binding EU level targets and standards, and a more level playing field across all UK jurisdictions. Much of the environmental law and policy that has been proposed by the UK government in the last year is designed to plug the gaps that will be left when these governance mechanisms and frameworks are removed following Brexit.
Looking at the UK's environmental framework post Brexit, Sam explained that the draft Environment Bill proposes to enshrine familiar environmental principles into law. The Bill will also establish a new independent body – the Office for Environmental Protection – for holding government to account (albeit that, as currently proposed, it has no teeth to speak of). Current draft legislation does not, however, establish a clear framework for environmental targets and standards, and also lacks a common legal framework across the devolved administrations. The absence of robust governance mechanisms could leave businesses facing a lack of certainty when trying to meet environmental standards, and leave confusing differences between environmental rules across the devolved administrations. Reduced certainty could also make for a market which is less conducive to investment in environmental and renewable technologies.
Laura Mackett continued with the Rule of Law piece of the jigsaw and provided an overview of the wide raft of international, regional and domestic legislation currently in place to tackle climate change, focusing on the United Nations Framework Convention on Climate Change, Kyoto Protocol, Paris Agreement and UK's Climate Change Act 2008. Laura then examined the UK Committee on Climate Change's May 2019 Net Zero report, the UK government's monumental new commitment to cut domestic greenhouse gas (GHG) emissions to Net Zero by 2050 and supporting draft legislation. The Climate Change Act 2008 (2050 Target Amendment) Order 2019 has since become law, making the UK the first major economy to pass law requiring it to reduce GHG emissions to the point that it makes no net contribution to rising global temperatures. To achieve this, emissions from industry, homes, transport, agriculture and all other areas will need to be completely avoided by 2050 or, in very limited cases, offset (for example, by domestic afforestation or carbon capture and storage).
The projected 1-2% GDP (£20-40 billion a year) cost of meeting Net Zero by 2050 was analysed, with Laura Mackett flagging that the Committee's estimate only factors in resource cost and not the potential economic benefits resulting from the change or the potentially significant costs of doing nothing. Achieving Net Zero by 2050 will demand major shifts in how we conduct our businesses and how we live our daily lives, together with a sharp ramp-up in policy-making and legislation.
Laura went on to explore how these vast-ranging changes might be achieved, from shifts in the waste and resource efficiency sector, to aviation and shipping, consumer choices and diets, the hydrogen economy, bioenergy, electrification, heat networks and many other areas. There are clearly a lot of challenges and costs involved in reaching Net Zero, and the Committee recommends that some of these costs are passed on to consumers and industry. However, there are also many opportunities for businesses to seize in becoming early-movers and leading the way in low and zero-carbon products, services and technologies.
The impacts of climate change, in particular how extreme weather can lead to a failure to meet contractual obligations and breaches of environmental permits, were then discussed. Using the example of a typical force majeure clause in a services agreement, Annabel Hodge discussed how businesses should give more consideration to events such as fire, flood or acts of God, given the increasing frequency of these events being brought on by climate change. From a supplier perspective, it would be beneficial for the events prescribed in a force majeure clause to be widened. However, a customer will most likely want to narrow this to encourage the supplier to invest in business continuity measures, resulting in financial implications for the supplier.
Generally, an environmental permit sets out that a business will not emit certain noxious or polluting substances, waste or trade effluent to the air, land or water beyond a permitted range. Using recent examples, Annabel explained how the increase in severity and frequency of extreme weather means that polluting events, whether contamination of waterways or the release of toxic substances to the air, can be magnified. This extreme weather trend could also affect the harm analysis in sentencing decisions and, in turn, the fine handed down on prosecution and consequent reputational impact.
Stephen Shergold then moved on to consider the response to climate change and the challenges of launching a pilot project for a new technology. New technologies and projects will often not fit within the existing regulatory framework. Businesses therefore often need to engage with regulators, such as the HSE and EA, in relation to issues such as permitting, to get new projects off the ground. Stephen explained how, for the example of new hydrogen technologies, there is currently uncertainty in industry around the applicable regulatory framework. Whilst hydrogen as a substance is already regulated by the HSE, there is a gap between the uses current regulation foresees and the expected growth and use of hydrogen power within our energy network.
Rounding off the session, Stephen repeated the question posed earlier, asking the audience if their views on a weaker framework of environmental governance in a post-Brexit UK would be an opportunity or a threat to business. This time, the overwhelming majority (86%) of the audience saw a weaker framework as a threat. This underlined that, rather than expecting to thrive in an environmentally deregulated economy, businesses expect that their operations will increasingly rely on the rule of law for protection from the impacts of a changing world and climate.