More than 1,000 days after the United Kingdom Parliament was first presented with a draft Bill, it has finally passed its first 'Environment Act' in a generation, laying the framework for a significant shift in environmental standards and regulation within the UK, and within England in particular. The secretary of state for the environment, George Eustice, hailed the Act as the vehicle to ''deliver the most ambitious environmental programme of any country on earth... setting an example for the rest of the world to follow.'' The Environment Act 2021 will have an extensive reach, with implications not just for businesses with manufacturing operations in England but also for those seeking access to the Great Britain (''GB'') market (England, Scotland and Wales). This briefing explains and examines some of the key issues that the business community will need to follow.
In Part 1, we look at how the new Environment Act 2021 provides a new framework for environmental law in the UK.
Part 2 is a quick guide to the regulatory issues that matter for international trade, for companies established outside of the UK with supply chains into the GB market.
Part 1: The new framework for UK environmental law
Power to the Ministers
The catalyst for the Environment Act 2021 was, of course, the UK's exit from the European Union. For decades, a significant majority of environmental laws and standards in the UK had been dictated by the EU institutions, and there is now a large body of 'retained law' of EU origin that has been copied onto the UK statute book.
Having 'taken back control' of the environmental legislative agenda, one of the objectives for the Environment Act 2021 was to establish a framework to govern how environmental law will be created and modified in an independent UK. The focus is on the mechanisms for shaping future environmental law rather than changing the substantive laws (at this stage). Devolution adds to the complexity: environment and health are two policy areas that have been devolved to Scotland, Wales and Northern Ireland, and therefore large parts of the Environment Act 2021 are concerned with England only. However, environmental law and policy can also impact the integrity of the internal market within Great Britain, and so certain areas of law, such as chemicals regulation and product standards, remain a matter for the UK Parliament in London.
The Environment Act 2021 creates a system that has been referred to as 'executive environmental law': rather than UK Parliament setting environmental targets for government to meet, the power is given to government ministers to set legally binding long-term targets, and then report to UK Parliament on progress. The logic is that ministers will have 'ownership' of their own targets, without the ability to blame forces in Brussels or elsewhere for those targets being unrealistic or unachievable. It also allows a good deal more flexibility, so that the government can react to new scientific knowledge or technological advances. Critics, however, warn that it provides too much opportunity for the government to set itself unambitious goals. For industry, an agile regulatory system may provide new opportunities to bring emerging issues to the attention of government, through targeted advocacy, and to receive a faster response where government is minded to act.
The Environment Act 2021 also provides government with powers to create, adapt and change large areas of environmental law through 'secondary legislation' (laws created through a fast-track system with less parliamentary scrutiny). Again, proponents argue that this allows environmental law and regulation to keep pace with the rapidly-moving policy agenda, whereas critics are concerned it allows government to move the goal posts without proper accountability.
To counter concerns that there will be a race to the bottom, five environmental principles, all of which are familiar under EU environmental law, have now been given a statutory footing in the Environment Act 2021: these are the precautionary principle, the polluter pays principle, the integration principle (that environmental protection is integrated into the making of all policies), the prevention principle and the rectification at source principle. The manner in which these are implemented will be key. The secretary of state will be under an obligation to prepare a ''policy statement on environmental principles'' explaining how they should be ''interpreted and proportionately applied by Ministers of the Crown when making policy''. Ministers from most (but not all) government departments are now obliged to give 'due regard' to these principles in policy-making. These principles will limit the freedom of ministers to diverge completely from current EU-derived environmental law, although there is still considerable opportunity for change in the letter of the law. We anticipate that this is an area that could give rise to legal challenges as the boundaries are tested. Indeed, the interpretation and application of some of these principles has been a source of significant litigation before the European Court of Justice.
To counter the concerns raised, the secretary of state for the environment has been vocal in arguing that the government has no lack of ambition, claiming that the Environment Act 2021 is the framework for delivering a world-leading environmental agenda. Now that he has the tools to do exactly that, all eyes are on the secretary of state to see how these tools are used. This could be the beginning of an era of rapid change, and industry needs to monitor this closely.
Who guards the guardians?
One of the central features of EU environmental law is that member states are held to account for failing to implement environmental law or failing to achieve environmental targets (with the possibility of financial penalties).
Now that the UK is outside of the EU, one of the big questions addressed in the Environment Act 2021 is that of governance. The answer has been to create a new Office for Environmental Protection (the OEP), with an independent role to monitor and report on the compliance of government, its agencies and other public bodies with environment laws. The OEP also has an enforcement role, to replace the enforcement powers of the European Commission (under EU law).
It is important to note that, for the vast majority of companies, the OEP has no direct regulatory control: the OEP is there to hold government to account, not to duplicate the existing regulatory regimes enforced by, for example, England's Environment Agency, or the Health & Safety Executive in its role as chemicals agency.
However, the business community should not ignore this new governance framework. It provides both an opportunity and a risk. There is little doubt that the OEP will have an impact, and it is to be expected that, when an area of environmental law comes under OEP’s scrutiny, the pressure put on government and regulators will work its way down to industry operators. While proportionate, risk-based regulation and pragmatism remain key concepts in UK regulation, the OEP will be seeking to ensure that regulators are not unduly lenient or lax in their investigations and enforcement of environmental law. The OEP will prioritize cases that it considers have or may have national implications, and in particular, those that relate to (a) ongoing or recurrent conduct, (b) may cause (or has caused) serious damage to the natural environment or to human health, or (c) may raise a point of environmental law of general public importance. Those operators spending significant sums on compliance and concerned about competitors cutting corners (to save costs and obtain unfair market advantage) now have a new avenue to explore when seeking a level playing field It is one we anticipate will be utilized by forward-thinking businesses.
Part 2: A quick guide to the implications for trade and supply chains
Across its 268 pages, the Environment Act 2021 addresses many areas of environmental law: water quality, water scarcity, air quality, nature, biodiversity and the protection of habitats, waste management, resource use, eco-design and product standards, and chemicals. Those operating in the UK will need to pay close attention to all of these issues. The Environment Act 2021 does nothing to change or transfer existing liabilities regarding pre-existing breaches of environmental law, nor does it directly impact current civil liability rules (contractual or non-contractual torts) for environmental harm, as these were matters already governed under domestic law, rather than EU law. However, as the UK seeks to deliver its environmental policy agenda, these are further areas to watch for change.
However, even international businesses without a UK footprint could still be impacted, if products are destined for the market of Great Britain. Some of these impacts are summarized below.
Those grappling with UK REACH should note that the secretary of state has been given powers to amend UK REACH, to change the 'how' of REACH and adapt it for the GB market. However, as a safeguard, the secretary of state must ensure that any such changes remain consistent with the aim and scope of REACH as set out in Article 1 of the REACH Regulation, and must obtain consent from Scottish and Welsh ministers. Although not unlimited power, the scope for change under these provisions are significant, and should be monitored closely. We have already seen how authorities responsible for chemicals may take different approaches to their EU counterparts – even when applying the same black letter law. Modifications to the GB decision making process are likely to accelerate that trend.
Further, the chemicals sector should keep a close eye on the list of substances that the UK nations will monitor when considering the chemical status of its water bodies: wide powers are provided to amend the criteria for assessing chemical status including the substances to be monitored. The inclusion of new substances will inevitably increase regulatory scrutiny of the use of chemicals and the supply to the GB market.
- Vehicles and engines
Following the vehicle emissions scandal, it was widely observed that the UK authorities lacked the power to enforce corrective actions, including product recalls, on car manufacturers. The criteria for existing UK powers for recall or other corrective action was based on safety, not environmental impact, so could not be used for products that did not meet environmental standards.
To rectify this, the Environment Act 2021 provides for ‘environmental recall’ of mechanically propelled vehicles and engines for transportable machinery: the scope is clearly wider than just automobiles. Recall may be enforced through compulsory recall notices, and environmental impact includes not just emissions relevant to air quality but also noise, heat and vibration impacts. Further detail is to be provided by way of regulations made by the secretary of state.
- Forest risk commodities
In parallel with similar moves towards supply chain diligence in the US and the EU (see our Steptoe blog here), the Environment Act 2021 provides the secretary of state with powers to tackle threats to the world’s forests from illegal deforestation, by creating a duty on businesses of a certain size operating the UK to establish and implement a due diligence system for the supply chain, and to report on its activities. The regime will prohibit the commercial use in the UK of 'forest risk commodities' – being commodities for which demand creates pressure to turn forests into agricultural land – unless those commodities were produced in accordance with local laws.
Again, the detailed rules on the operation of the regime will be specified in regulations made by the secretary of state, but the outcome of a recent UK government consultation provides a strong indication of the likely scope and the extent of the obligations.
- Product standards and labelling
The environmental impact of products placed on the GB market is an area of particular focus within UK environmental policy, and there are a number of measures in the Environment Act 2021 which will be relevant those manufacturing within or supplying to the GB market.
In line with wider European trends, there is a move to pass the full costs of the end-of-life treatment of products (whether recycling or disposal) to the producers, to incentivize product designers to factor reuse, repair and recycling into product design. There has been a significant amount of work already done on how these 'extended producer responsibility' regimes might be implemented, with an initial focus on packaging. New measures to permit the introduction of deposit return schemes are also included.
There are also powers for the secretary of state to make regulations obligating product manufacturers to include resource efficiency information on product labels, and to set minimum resource efficiency requirements. Information on 'resource efficiency' is drafted widely, covering issues such as anticipated life, details on availability for parts for repairs, greenhouse gas emissions attributable to both production and anticipated use, the materials used in the product and other resources used in manufacture, and recyclability.
During the UK-EU exit negotiations, single use plastics was singled out by the then secretary of state for the environment as an example of how the UK's independence will allow it to move faster and with more impact than the EU, generating a public spat with the EU Commission's vice-president on Twitter.
It is therefore no surprise that, within days of the Environment Act 2021 finally becoming law, UK government has moved quickly to outline its plans to ban single use plastic plates, cutlery, balloon sticks and expanded and extruded polystyrene food and drink containers, and issue a call for evidence on other items such as wet wipes, tobacco filters, sachets, and other single-use plastic cups.
Such bans will come into force through regulations made by the secretary of state, and therefore the opportunity to influence the scope of these measures is best achieved through the current consultation, open until February 12, 2022.
The UK is entering a new chapter in its environmental laws, and the Environment Act 2021 is an enabling act that will facilitate rapid change. International business can no longer assume a common rulebook for the European markets, and divergence between the EU Single Market and the market of Great Britain is expected. Steptoe has environmental law specialists in the EU and the UK, and so is well placed to monitor the divergence and spot the risks and the opportunities for international clients. For more details on the UK's Environment Act 2021, or the UK's approach to environmental law and chemicals regulation, please contact Simon Tilling and Darren Abrahams.