In this issue
Worldwide: Outcome of the Bonn climate change talks
EU: ECJ ruling on SACs and SICs
France: French wind tariffs constitute state aid compatible with EU rules
Germany: Review of the German Renewable Energy Act
UK: Court of Appeal applies parent company liability principles; Queen’s Speech – more changes to planning system and measures to secure electricity supply revealed; proposed changes to CRC annual reporting; tribunal rules on disclosure of viability assessments
USA: US plans to curb power emissions by 30 per cent
Outcome of the Bonn climate change talks
Bonn was the venue for the latest round of UN talks on climate change. Delegates agreed to circulate draft elements of the new global climate treaty to be signed next year in Paris, later this month.
The decision in the main negotiating stream, known as the Ad-hoc Durban Platform for Enhanced Action (ADP), initially led to objections from the US and China that there were still too few areas of agreement for a detailed text.
The chairs of the negotiation process concluded, however, that all countries should state when their greenhouse gas emissions will peak as part of their commitments under the 2015 treaty. A draft paper circulated on ‘intended nationally determined contributions’ also proposed that countries specify their expected emission reductions, how they
plan to deal with land use and which gases and economic sectors will be covered.
It also sets out what information countries should provide in relation to their planned adaptation actions.
Delegates will return to Bonn again in October to discuss the draft texts, before the next conference of the parties to the UN climate change convention in Lima, Peru this December.
UN climate chief Christiana Figueres said many delegates in Bonn ‘spoke of the growing understanding that Paris 2015 needs to be a turning point where decisive and defining pathways are put in place towards [an] ultimately carbon neutral world’.
ECJ ruling on SACs and SICS
In TC Briels and others v Minister van Infrastructuur en Milieu (case C-521/12), the European Court of Justice examined the approach that an authority should take when considering whether a project will adversely affect the integrity of a Special Area of Conservation (SAC) or a Site of Community Interest (SCI). The ECJ confirmed that compensatory measures cannot be taken into account when conducting that assessment and are only relevant where the provisions of Article 6(4) apply.
Both SACs and SCIs enjoy protection under the Habitats Directive regime, which requires member states to conserve them. To protect the integrity of SACs and SCIs, when development is proposed, an appropriate assessment of any plan or project that is likely to have a significant effect on an SAC or SCI must be carried out. Under Article 6(3) of the Habitats Directive an appropriate assessment is required to examine if the development will have a negative effect that will adversely affect the integrity of the site, and whether
there is an alternative solution. Where the assessment is negative, and there is no alternative, Article 6(4) enables the plan or project to go ahead if it is for ‘imperative reasons of overriding public interest’ and provided compensatory measures are undertaken.
In TC Briels, a ministerial decision that a motorway could be widened even though it would have an adverse effect on an SAC was challenged in the national courts. The minister decided the project was justified on the basis that a substitute area (also within the SAC) would be upgraded to offset the negative effects of the motorway and therefore the project would not have a negative effect on the integrity of the site. Importantly, the minister had not argued that the motorway work fell under a specific exception under the Habitats Directive regime
– he simply applied his own interpretation to the procedural obligations.
The claimants, meanwhile, argued that the proposed compensatory measures could not be taken into account in the determination of whether the SAC’s integrity was adversely affected.
The Netherlands court referred two questions to the ECJ for a preliminary ruling:
Is the expression ‘will not adversely affect the integrity of the site’ in Article 6(3) to be interpreted in such a way that, where the project affects the area of a protected natural habitat type within a Natura 2000 site (an SAC or SCI), the integrity of the site is not adversely affected, if in the framework of the project, an area of that natural habitat type of equal or greater size to the existing area is created within that site?
If not, is the creation of a new area of a natural habitat type then to be regarded in that case as a ‘compensatory measure’ within the meaning of Article 6(4)?
Following an earlier decision in Ireland v An Bord Pleanala (case C-258/11), the ECJ adopted
a purposive reading of a member state’s obligations under the regime. It held that protective measures provided for in a project that are aimed at compensating for the negative effects of the project on an SAC or SCI cannot be taken into account when undertaking the appropriate assessment. The minister had therefore failed to follow the correct procedure. Further,
Article 6 should be read as a whole and by applying the precautionary principle, so that any uncertainties as to adverse effects would prevent a project proceeding except under the derogation provided under Article 6(4).
The case highlights the importance of ensuring that decisions under the Habitats Directive regime are made in accordance with the correct procedure. If they have not been, they are vulnerable to a challenge by an interested third party before the national courts.
French wind tariffs constitute state aid compatible with EU rules
The French supreme administrative court has ruled that the purchase of electricity generated by wind turbines at a price higher than its market value constitutes a state aid measure and has cancelled the relevant ministerial orders. However, the ministry of ecology has adopted a new ministerial order setting out feed-in tariffs for wind power.
The ruling by the French supreme administrative court (CE, 28 May 2014, Association Vent de colère ! Fédération nationale et autres, no. 324852) follows the ECJ’s decision in case C-262/12, see Environment, Planning & Regulatory News of February 2014). The ECJ confirmed that
the French mechanism for offsetting the additional costs imposed on electricity distributors because of the obligation to purchase wind-generated electricity at a price higher than the market price constitutes an intervention through State resources within the meaning of Article 107, paragraph 1 of the EU Treaty.
However, the European Commission recently concluded that the French support scheme for onshore wind energy was compatible with EU rules regarding state aid. As a result, the French ministry of ecology adopted a new ministerial order dated 17 June 9NOR:DEVR1412971A) setting out the same feed-in tariffs as the ones that were
laid down in the cancelled orders.
Review of the German Renewable Energy Act
The Bundestag’s Committee on Economic Affairs and Energy has held a hearing on the review of the German renewable energies regulation.
The review ensures that the share of renewable energies in electricity supply will reach at least 40 per cent in 2025 and 55 per cent in 2035. Simultaneously, the recent years’ increase in the cost of energy for consumers is to end. The review is necessary as the initial market launch of renewable energies based on the Renewable Energy Act with its fixed ‘Feed-in Tariffs’ (FiT) has come to an end and conditions have changed. The key reform elements are:
the financial support available for each technology to 2020 is capped (onshore wind
2.5 GW/year, photovoltaic 2.5 GW/year, biomass 100 MW/year, offshore wind 6.5 GW). When the cap is triggered, the technology’s funding will be lowered: so called degression. The low cap for biomass is a result of the high costs resulting from deployment of the technology. For hydropower and geothermal energy, a market control in the form of
a cap is not considered necessary;
those generating their own electricity will only continue to be exempt from paying the fixed FiT surcharge if they have more than 10 kW installed energy and generate less than 10 MWh per annum; and
electricity producers with energy plants with a capacity of over 500 kW will be obliged to trade the energy produced on the electricity market. From 2016 onward, this will be reduced so as to apply to installations over 250 kW, and from 2017 further reduced to capture installations over 100 kW.
These rules will apply to all new plants commissioned after the reviewed regulation comes into force. Existing plants fall under the protection of acquired rights, ie they continue
to benefit from the current tariffs for up to 20 years from the date of their commissioning.
Following the committee’s recommendation, the Bundestag has adopted the reviewed legislation in its parliamentary session on 27 June. The Bundesrat will vote on the bill on 11 July. The new Act is expected to come into force on 1 August.
Court of Appeal applies parent company liability principles
The Court of Appeal’s decision in Cape v Chandler  has recently been considered, again by the Court of Appeal. Despite a similar fact matrix, the Court of Appeal struggled on the evidence to find sufficient proximity between the parent company and the subsidiary that had employed the claimant. As a result, it was unable to impose a duty of care on the parent company for the claimant’s historic exposure to asbestos. The case emphasises that the ruling in Cape is likely to be strictly confined to
Readers will recall that in Cape the Court of Appeal decided that although parent companies would not in principle be liable for the obligations of their subsidiaries,
in special circumstances, liability could extend to the parent. On the basis of the facts in that case, the Court found that the parent had assumed responsibility for the health and safety of the employees of its subsidiary and subsequently owed them a duty of care in relation to their exposure to asbestos fibres.
Thompson v Renwick Group Plc  involved similar facts to Cape, in that the liability related to an employee’s contracting of asbestosis. The claimant sought to argue that the parent company of the subsidiary company that he had been employed by owed him a duty of care. Mr Thompson had worked for two separate companies which, during his employment, were acquired by the defendant, Renwick Group Plc. The companies that Mr Thompson had worked for directly did not have liability insurance or sufficient funds to meet an award
for damages. His employment involved extreme exposure to asbestos, in the form of ‘hand baling’ raw asbestos. It was argued that the three requirements in Caparo Industries v Dickman  to found a duty of care were satisfied: namely that the parent company had sufficient proximity to the subsidiary, foreseeability of damage and that it would be fair, just and reasonable to impose the duty on the parent.
The claimant argued that proximity was established because after the acquisition, paperwork and vehicles carried the parent company logo and the subsidiaries shared resources.
For example, Mr Thompson provided delivery services to other subsidiaries within the group. The parent had also appointed a director to run the business of the subsidiary and the evidence showed that he had been involved in health and safety matters to some extent.
The claim succeeded at first instance. However, on appeal, the facts were distinguished from those in Cape. Delivering the leading judgment, Lord Justice Tomlinson struggled to agree that there was sufficient proximity between the parent and the employees of the subsidiary. There was, his Lordship said, no evidence that the parent at any time carried on any business other than holding shares in its subsidiaries. Further, the director owed a duty to the subsidiary and not to the parent company, and there was no evidence to suggest any relationship with the parent company except the original nomination. Co-ordination
of operations between subsidiaries is not taking control of the business of subsidiaries. In addition, and in contrast to Cape, there was no evidence to suggest that the parent company was better placed to protect the employees of its subsidiaries due to its superior knowledge or expertise.
Therefore, sufficient proximity could not be established and on this basis, the relevant duty of care could not be imposed. The parent company was not liable to Mr Thompson for the illness he suffered as a result of his employment with the subsidiary.
The differing outcomes emphasise the factual evidence claimants will need to adduce to demonstrate sufficient proximity between a parent company and its subsidiaries. Thompson suggests this is likely to be difficult to prove, and is likely to be compounded further where the obligations are historic.
Queen’s Speech – more changes to planning system and measures to secure electricity supply revealed
This year’s Queen’s Speech introduced the coalition government’s legislative programme for its last year before the general election. As might be expected, this involves no big policy changes, merely a little further tinkering with the planning system – to be brought about by the Infrastructure Bill – and the government’s plans to reform the electricity market.
The Infrastructure Bill will, if enacted, affect both planning for major infrastructure projects and the ability of contractors to develop hydrocarbons from shale resources. On the planning front, the planning process for nationally significant infrastructure projects will be streamlined by permitting inspectors to be appointed immediately after an application
has been accepted and allowing two inspectors to be appointed to form the decision panel. Currently, the number of inspectors can vary between one, three, four and five, depending on the application’s complexity.
Another element of the Bill aims to simplify the process for making changes to development consent orders (DCOs) after grant. Major and minor changes to a DCO would be distinguished, with minor changes being able to be dealt with on a discretionary basis.
For developments falling outside the NSIP regime, there is also a provision enabling the Secretary of State to step in and make a ‘development order’ relating to the deemed discharge of a planning condition if a planning authority fails to do so within the statutory timeframe. The resulting order would mean that the local planning authority could not take any enforcement action or prevent development on a site on the basis that the development
did not have its approval.
The Bill will also encourage the development of shale gas resources. The government’s shale gas policy will likely become clearer in the months ahead however, after the results of a consultation currently being conducted are published.
The proposed energy market reform follow the enactment of the Energy Act last year.
There are two proposals of note. The first concerns the allocation of Contracts for Difference (CfD). Between low-carbon electricity generators and the Low Carbon Contracts Company (LCCC), CfDs are intended to encourage further investment in the development of low carbon energy generation. The contract will pay the difference between the ‘strike price’ and the ‘reference price’. Respectively, these are the prices for low carbon technology produced electricity and the average market price for electricity.
The second proposal relates to the creation of a ‘Capacity Market’. This market is intended
to fill the gap from any electricity generation shortfalls. Electricity suppliers can bid to enter a capacity agreement, under which they are required to provide a certain amount of electricity on demand to the national grid if required. Penalties will apply in the event
of any default.
Proposed changes to CRC annual reporting
The Department of Energy and Climate Change is considering making changes to the structure and content of the CRC Energy Efficiency Scheme annual report publication, which is published by the Environment Agency. The changes relate to three specific areas: renewables, energy use and data supply, and turnover data. If adopted, they would apply from 2015.
DECC recently published a discussion paper outlining its proposals, which aim to raise awareness of, and investment in, renewables and create public recognition of CRC participants’ achievements, and ensure transparency by publishing more detailed energy use and data turnover.
The changes proposed are:
the inclusion of a narrative section in the explanatory document which accompanies
the ARP. This would include commentary on the total use of renewables and the resulting impact on carbon reductions. In addition, it is proposed that the total amount of emissions avoided through the generation and use of renewables for each CRC participant should be presented as an indication of that company’s contribution to the UK’s emissions reduction objectives; and
despite CRC participants’ concerns, DECC suggest publishing energy use data in order to allow comparison of participants’ energy efficient achievements with a view to enhancing ARP as a reputational driver.
Participants’ turnover data may also could be included to provide a helpful context to emissions changes within an organisation. It is intended that this would be done on a voluntary basis, however.
DECC state in the discussion paper that they will not be asking participants to provide any additional informational than is already provided.
If the proposals are successful, they will be the third in a line of changes made to the publication of CRC participants’ performances since the scheme was implemented.
It is unlikely they come into force until 2015; the discussion paper notes that the next ARP will be in the current format.
Tribunal rules on disclosure of viability assessments
A recent ruling of the First-Tier Tribunal highlights the risk that information provided by developers to local planning authorities to support planning applications may be made public. London Borough
of Southwark v The Information Commissioner, Lend Lease and another dealt with the question of public disclosure of the viability study for a major London regeneration project at Elephant and Castle. While the tribunal were prepared to protect some of the information in the assessment, the vast majority was ordered to be disclosed to the public.
Read our client briefing on the ruling here.
US plans to curb power emissions by 30 per cent
The United States Environmental Protection Agency recently unveiled its Clean Power Plan. The headline aim is to cut carbon emissions from the power sector by 30 per cent below 2005 levels by 2030.
The Plan is part of a larger climate change action plan which has the objectives of cutting the US’s carbon emissions whilst preparing for the impacts of climate change and leading international efforts in this area.
The power sector is the US’s largest source of domestic greenhouse gas emissions, accounting for approximately one third of carbon emissions in the US.
The Agency predicts that a number of additional benefits will result from the fulfilment of the main aim of reducing emissions from the power sector. These include:
the reduction of particle pollution, nitrogen oxides, and sulphur dioxide by 25 per cent;
various health advantages which could save up to US$93bn in climate and public benefits; and
the reduction of electricity bills by around 8 per cent through increased energy efficiency and reduced demand.
The Plan will be implemented through a state–federal relationship which affords a margin of discretion in determining how best to meet the Plan’s state-specific objectivities. The goals will be set on a state-by-state basis, calculated using a formula which measures each state’s amount of carbon dioxide emitted against the electricity it generates.
States will be able to design a strategy which works for their unique position, or co-ordinate with other states in order to develop multi-state approaches.
Flexibility has also been introduced into the deadlines states must meet for submitting their plans to the Agency. While plans are due in June 2016, there is an option for states to submit their final plans in two stages, if more time is required.
The Plan has received a mixed reaction. Some have warned that power plants will be forced to close if the goals set out are to be reached. A leading Republican senator foresees a ‘catastrophic’ economic impact on power-producing regions of the US, as a result of the power plant closures he anticipates are inevitable. The Agency, meanwhile, does not anticipate that plant closures will be necessary.
Criticism has also been levelled at the Agency for its lack of ambition with regard to the Plan’s goals. The US is one third of the way to meeting its 2030 goal and it is reported that some states have already exceeded the 30 per cent reduction target. Overall, environmental groups have welcomed the President’s attempt to tackle climate change.