Environment Update July 2010
The 2010 Budget visualises a greener UK
The June 2010 Budget includes a number of measures which reflect the Government’s aspirations of changing the shape of industry, growth and jobs, by creating a low-carbon economy, which will require an estimated £100 - £200 billion of investment by 2020. By restructuring the energy market, it is hoped that additional private sector funding will come forward, which can be invested in low carbon infrastructure. Investment is crucial if the UK is to meet binding targets under the Climate Change Act 2008, to reduce carbon dioxide emissions by 2020.
The Budget introduces the following key measures intended to create the right incentives for attracting private sector investment in the UK’s low carbon infrastructure and technologies:
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Fixing the carbon price – the Budget sets out the Government’s commitment to a floor price for carbon. As a first step towards this, proposals to reform the climate change levy (CCL) will be published in the Autumn, and depending on the outcome of the consultation on those proposals, should be introduced in the Finance Bill 2011. It is hoped that reforms to the CCL will provide more certainty and support to the carbon price.
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The creation of a Green Investment Bank (GIB) – the Government intends to carry through proposals on the GIB, introduced in the Labour Budget in March 2010. The GIB would deliver the measures needed to overcome existing market failures and barriers to investment in low carbon technologies. It would be based on a public-private sector investment model and would enable access to new funding resources. Detailed proposals for the GIB will be published following the Spending Review in October 2010.
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The establishment of a Green Deal for households – aimed at helping individuals to invest in home energy efficiency improvements that can fund themselves from the savings in energy bills. The Green Deal would be sealed through the Energy Security and Green Economy Bill 2010/11. The Government also propose to enable individuals to directly invest in the green economy, through the creation of green financial products.
Aviation taxes are also under review for the contribution which they could make to cutting carbon dioxide emissions generally – the Government is considering the possibility of switching from a per-passenger to a per-plane duty, which would encourage fuller planes and result in lower carbon dioxide emissions.
However the Budget confirms a number of measures which would have implications for the environment beyond the low carbon economy. For example, the Government will continue to encourage alternatives to landfill by increasing the standard rate of landfill tax by £8 per tonne each year from 1 April 2011 until at least 2014. There will be a floor price under the standard rate so that the rate will not fall below £80 per tonne from April 2014. It also confirms that it will increase the climate change levy from 1 April 2011, in line with inflation. In addition, the discount for climate change levy for industries participating in a climate change agreement (CCA) will be reduced from 80 to 65% in April 2011.
The construction industry can also expect an increase to the aggregates levy, from £2 per tonne to £2.10 per tonne on 1 April 2011.
Those measures which would have a large-scale impact for the low-carbon economy are yet to be finalised. The measures which have been confirmed however, and which will effect those in areas such as the landfill and construction industries, are less ambitious but will still carry significant cost implications for their operations.
A link to the budget may be accessed at the following link:
http://www.hm-treasury.gov.uk/junebudget_documents.htm
EU Industrial Emissions Directive – it’s official
MEPs and Member State negotiators have reached agreement on the Industrial Emissions Directive (IED), which will recast seven existing Directives relating to industrial emissions into a single, clear and coherent legislative instrument.
The recast involves replacing the Integrated Pollution Prevention and Control (IPPC) Directive, the Large Combustion Plants (LPC) Directive, the Waste Incineration Directive (WID), the Solvents Emissions Directive (SED) and three Directives on Titanium Dioxide, all of which will be updated and merged into the new Directive resulting in rules which are easier to implement.
The overall aim is that clearer rules for the reduction of harmful industrial emissions across the EU will lead to better protection of human health and the environment, in particular through better application of Best Available Technique (BATs). Installations covered by IPPC rules must apply BATs, therefore demonstrating an appropriate level of environmental performance to receive an IPPC permit.
A tougher regime regarding emissions will be introduced, with large combustion plants (including fossil fuel power stations) being required to meet more stringent limits on emissions by 30 June 2020. These plants have therefore been given an extension to the original deadline for compliance in 2016.
In addition to the extension granted to large combustion plants, the European Parliament indicated that some older plants may not have to meet the targets, as long as they close by the end of 2023 or operate no more than 17,500 operating hours after 2016 – whichever occurs first. This alternative raised concern from some MEPs who viewed it as permission to extend the length of time that outdated plants can continue to pollute.
The text of the Directive will need to be approved by the full parliament and the Council of Ministers before it becomes law, and therefore it is not expected to be published until later this year or early next year.
The Marine Strategy Regulations 2010
The publication of the Marine Strategy Regulations 2010 introduces the requirements of the Marine Strategy Framework Directive (2008/56/EC) into UK law. The Marine Strategy Directive establishes a framework for Community action in the field of marine environmental policy. The new Regulations ensure that the obligations which the Directive places on the UK to comply with marine policy are assigned to a competent authority, and that those competent authorities are given the necessary powers to carry out their roles.
As the main pillar of the EU’s Integrated Maritime Policy, the Directive aims to achieve healthy marine waters by 2020. It applies an integrated approach to ecosystems and strives to contain the pressure of human activities within sustainable levels. It also establishes a clear regulatory framework for adaptation to climate change and allows for the regular update of environmental targets to take into account the variations caused by climate change.
The Directive therefore calls for the development of a marine strategy by each Member State, in order to meet these targets. By 2012, they must provide a comprehensive assessment of the state of the environment, identifying the main pressures on their respective marine regions, and defining targets and monitoring indicators. By 2015, Member States will have to develop coherent and coordinated programmes of measures. In order to reach the 2020 target, Member States will also have to achieve efficient communication and close cooperation, notably through regional sea conventions.
In line with the Directive’s objectives, the Regulations therefore establish the duties on competent authorities to ensure development of the five key elements of the marine strategy, and include deadlines for doing so. The five elements can be summarised as follows:
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the assessment of marine waters;
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the determination of the characteristics of ‘good environmental status’ for those waters;
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the establishment of environmental targets and indicators;
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the establishment of a monitoring programme; and
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the publication of a programme of measures.
The Regulations also include a number of exceptions to the duty to take measures to achieve good environmental status by 2020. These include action or inaction for which the UK is not responsible, natural causes or force majeure. Further exceptions are included for modifications or alterations to the physical characteristics of marine waters brought about by actions taken for reasons of overriding public interest, which therefore outweigh the negative impact on the environment. Natural conditions which do not allow timely improvement in the status of the marine waters concerned are also under exception.
Finally, the Regulations clarify that the provisions will not overlap with the functions of the Water Framework Directive, as the obligations under the Marine Strategy Directive do not cover coastal waters so far as the objectives of the Directive are achieved under other legislation.
The Regulations can be viewed at the following link:
http://www.opsi.gov.uk/si/si2010/uksi_20101627_en_1
Sewage discharges spill out heavy fines for Scottish Water
Scottish Water recently pled guilty to carrying out a controlled activity liable to cause pollution of the water environment, by discharging sewage effluent from a concrete chamber manhole into the Firth of Clyde, contrary to the Water Environment (Controlled Activities) (Scotland) Regulations 2005 (CAR) and the Water Environment and Water Services (Scotland) Act 2003 (WEWS).
With the bathing water sampling season underway, SEPA are required to carry out visual checks on various key points such as storm sewage overflows and surface water outfalls, with fortnightly samples taken to asses the waters microbiological quality. During the course of this work in June 2009, it was discovered that the Irvine harbour pumping station emergency overflow was producing significant discharge, which was later confirmed by SEPA to be untreated raw sewage, which was running right into the sea.
The risk of disease, visual impact and substantial odour from the effluent was found to be a significant health risk to the public, and as a result of the discharge, bathing waters had failed the appropriate standards. Scottish Water were therefore found to be in breach of Regulation 4 and 40(1)(a) of CAR as well as Section 20(3)(a) of the WEWS.
The fine was the first of two in recent cases involving breaches by Scottish Water of key water pollution legislation. The Irvine Beach incident was closely followed with a fine of £12,000 imposed on Scottish Water for failing to comply with its water use license to discharge sewage effluent into the Torry Burn, Fife.
In this case, sewage discharge had arisen from an overflow pipe at Scottish Water’s Cairneyhill pumping station, in breach of Scottish Water’s water use license which permits the occurrence of overflows only as a result of heavy rainfall or snow melt, or when flow exceeds a specified level. The discharge was later found to have been caused by a blockage in the pumping station’s inlet channel and had also been exacerbated by a power supply fault which prolonged the spill. Having caused extensive sewage fungus, water discoloration and a strong sewage odour, together with the toxic effect of the effluent on the ecological system, Scottish Water were again found to be in breach of CAR and WEWS.
More information may be found on the cases via the following website link:
http://www.sepa.org.uk/
GIB – bridging the gap in green funding
Closely following the announcement of the 2010 Budget, the Government has unveiled a major report on the Green Investment Bank (GIB) – a key measure included in the Budget for building a low carbon economy. The report, entitled ‘Unlocking investment to deliver Britain’s low carbon future’, is the result of findings by the Green Investment Bank Commission, who set out to identify how Britain can better support and accelerate the private sector investment required to deliver the UK’s transition to a low carbon economy, as well as the remaining barriers faced by green investment. The report therefore sets out the challenges facing the UK’s transition to a low carbon economy, the market failures and barriers to investment, and the case for intervention to address them.
The report recognises that the size and nature of the green investment challenge is significant, identifying between £800 billion to £1 trillion of investment required by 2030, to replace, upgrade, and decarbonise Britain’s infrastructure. The urgency for the transition to a low carbon economy is underlined by the reality that the UK has to meet legally binding targets under the Climate Change Act 2008, to reduce Greenhouse gases by 20% by 2020 and by 80% by 2050.
The report identifies the key market failures and barriers to investment, which are preventing existing large-scale and new low-carbon technologies from receiving the financial capital funding that is essential for them to operate on a commercially viable scale. Significantly, the report flags up the current carbon pricing regime as being a deterring factor for investors to select low carbon over high carbon projects, due to the lack of a sufficiently stable price signal.
The GIB would operate independently from the Government to remove these obstacles. It would do so on the basis of delivering a number of key measures including:
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increasing the availability of capital, for example by supporting debt and equity syndication market to facilitate investments in carbon reduction activity;
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providing risk mitigation mechanisms for the private sector;
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developing standardised financial products / instruments for investments in projects it has promoted and vetted where a specific market failure or funding gap exists; and
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providing coherence to public efforts to support innovation in relation to climate change by rationalising existing Government established bodies and funds. For example, it would administer grants / support for venture capital / early stage investment to encourage greater consistency of subsidy across technologies.
The Commission have identified that the GIB would need to raise three forms of funding to ensure that it is able to sustain its operations:
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Government funding for disbursement of grants (i.e. existing quangos and funds);
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financing for ongoing activities and “commercial” investments (with options for Government consideration including green bonds, green ISAs, levy on energy bills); and
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initial Bank capitalisation and funding (with options for Government consideration including private sector bank capitalisation, use of bonus/bank taxes, sale of Government owned assets or UK share of ETS auction proceeds).
In addition, the report proposes that the GIB could play an international co-ordination role in securing initial capitalisation and funding from EU sources, such as the EU Investment Bank, and potentially, proceeds from the EU Emission Trading Scheme (ETS) allowances.
The report may be read at the following link:
http://www.climatechangecapital.com/media/108890/unlocking%20investment%20to%20deliver%20britain%27s%20low%20carbon%20future%20-%20green%20investment%20bank%20commission%20report%20-%20final%20-%20june%202010.pdf
The matters covered in this ebulletin are intended as a general overview and discussion of the subjects dealt with. They are not intended, and should not be used, as a substitute for taking legal advice in any specific situation. Semple Fraser LLP will accept no responsibility for any actions taken or not taken on the basis of this publication.
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