The significance of different exit scenarios

Current environmental laws that derive from EU legislation will, of course, continue to apply, including as updated over time, throughout the period of exit negotiations, however long that may be. While it is technically correct that the Article 50 exit route allows a period of two years to conclude negotiations, a significant extension of this period is very plausible.

Thereafter, it is true, of course, that a lot of the detail will turn on the future nature of Britain’s relationship with the EU and that is presently unknown.

However, it is likely that for many commercial and industrial clients the precise nature of the Britain’s relationship with Europe will not have anywhere near as much impact on future environmental law and policy as many have suggested.

The wide range of potential future exit-models is tending to obscure the debate on the likely impacts from an environmental perspective.

In practice there are two primary options, based around whether or not the UK retains access to the EU’s internal market (a bespoke EFTA/EEA-style model, or an ‘entirely outside’ WTO-style model).

In a statement on 31 August 2016, new Prime Minister Theresa May stated that Britain would not accept an ‘off the shelf’ deal, but would demand a bespoke agreement.

Although this apparently tough-talk made headlines, it is really no more than a statement of the obvious. The Norway and Switzerland models were never likely to be anything more than an outline structure for a new and unique situation.

It is unlikely that the EU would ever accept a Swiss-style model anyway, as the EU has, for a long time, publicly expressed its dissatisfaction with the Swiss system of ‘voluntary adaptation’ to the EU’s body of law (acquis communautaire).

EEA countries, such as Norway, are required to adopt almost the full body of EU environmental law relating to the internal market into their national law. Therefore, if the UK were to negotiate membership of the EEA or a bespoke arrangement modelled on EEA membership, either way the starting point from the EU’s perspective would be that most EU environmental (and climate change) legislation must continue to apply, including core measures covering industrial pollution control, chemicals and waste.

Absent negotiation of bespoke exceptions for the UK, the following core EU legislation would likely continue to apply if Britain left the EU but stayed in the EEA:

• REACH chemicals regulation
• Industrial Emissions Directive
• Emissions Trading Directive
• Seveso III Directive (control of major accident hazards)
• Waste Framework Directive
• Waste Shipment Regulation
• Landfill Directive
• WEEE and RoHS Directives
• Ecodesign Directive
• End of Life Vehicles Directive
• Water Framework Directive
• Environmental Liability Directive

Chief among the relatively few directives that would no longer automatically apply under the EEA or an EEA-style membership would be the Birds Directive, the Habitats Directive and the Bathing Water Directive. It is likely to be politically sensitive to backtrack in these areas but even if this did happen, while many would deplore the loss of protection for wildlife and habitats that might follow, these directives are not core to day to day environmental compliance of corporates in the same way as, say, the REACH chemicals regime.

Other relevant factors

1. The origin of the law in question

Environmental directives that, because they do not have direct effect, have been implemented in the UK by domestic legislation can technically continue to apply post exit unless that implementing legislation is repealed.

On the other hand EU regulations (such as REACH) are directly effective without separate implementing legislation and so could in principle fall away immediately on exit, leaving a potential vacuum.

It is highly unlikely that such a vacuum will intentionally occur in practice. It is obviously not going to be possible to replace 40 years’ worth of law with a coherent set of replacements within two years, particularly given the dramatic cuts in personnel and budgets we have seen in, for example, Defra and the Environment Agency in recent years.

More likely, therefore, (even ignoring the many other factors discussed in this article) is a lengthy transition period in which the UK enacts measures to continue to apply EU law largely unchanged for many years.

Separately, the UK is signatory to a number of international agreements on environmental matters and will still be legally bound to honour those agreements post exit. Examples include the Kyoto Protocol and, assuming it is ratified, the replacing Paris Agreement, the Aarhus Convention on public participation in decision-making and access to justice and information, the Basel Convention on transboundary movements of hazardous wastes and many others.

Other areas of modern European environmental protection have their origins firmly in pre-existing UK law and policy. For example, the UK adopted its contaminated land regime over a decade before implementation of a pan-European equivalent under the EU Environmental Liability Directive. The EU’s PPC (Pollution Prevention and Control) system of environmental permitting was closely modelled on and preceded in time by the UK’s IPPC (Integrated Pollution Prevention and Control) regime. The pilot UK Emissions Trading Scheme (ETS) preceded the EU ETS. The list goes on. Details of such lynchpin policy approaches may diverge over time, a good example being the environmental standards applicable to UK environmental permits (“Best Available Techniques” or “BAT”), which are currently set by EU in BAT reference documents (“BREFs”). However there is no reason to anticipate a move away from core principles that in many instances the UK was first to create, not least because the Government will have its hands more than full enough grappling with other Brexit issues without tinkering with legislation that is broadly considered fit for purpose.

2. Nature of implementing legislation

The Climate Change Act 2008 is a good illustration of this factor. In all but a Norway model, the UK’s participation in the EU ETS will fall away unless replacement steps are taken.

However, the UK has been at the forefront of EU climate change policy for many years, for example running its own UK ETS ahead of the inception of the EU ETS.

In part to achieve its independent international climate change responsibilities, the UK has enacted ambitious stand-alone primary climate change legislation in the form of the Climate Change Act 2008.

This requires the Government to achieve an 80 per cent reduction in greenhouse gases by 2050 compared to 1990 levels, independently of the EU’s package of climate change measures.

To continue to participate in the EU ETS following a non-EEA exit, it is likely that the UK would first need to establish its own UK ETS, and then link it to the EU ETS (as for example the Swiss have done). The foundations for doing so already exist under the Climate Change Act 2008 and under the EU ETS Directive. The latter prescribes strict criteria for establishing linkages, including a high degree of regulatory and policy compatibility.

3. Laws relevant to single market access

The EU accounts for 44 per cent of UK goods and services exports. Even in an extreme exit scenario such as an entirely outside WTO-style model, companies in the UK seeking to export their products to the EU will still be obliged to conform to EU product standards and other EU environmental and health & safety requirements in order to do so.

UK companies that export to the EU will therefore not be freed from the requirement to comply with REACH, the CLP Regulation, the RoHS Directive, the Batteries Directive, EU product eco-design requirements, packaging requirements and many other EU product compliance laws any more than other non-EU manufacturers are today. This is a vast swathe of EU environmental and safety laws that UK-based environmental lawyers will therefore need to remain fully engaged with.

Indeed, it will not just be exporters that must continue to comply with these laws. Just as the EU will be very unlikely to tolerate deregulated UK exporters flooding the EU market with non-EU standard compliant goods, UK businesses exporting to the EU will want the Government to keep domestic law as similar as possible to EU law in terms of product standards for fear that otherwise they will be placed at a competitive disadvantage in their domestic market compared to their non-exporting UK competitors.

Even in a non-EEA relationship, some form of negotiated bilateral agreement is of course much more likely than simple reliance on default WTO rules. While the starting point is that if the UK is not in EFTA/EEA it is not bound by EU environmental legislation, that is only true if particular items are not negotiated in.

It must be remembered that the negotiations will be first and foremost about access to the single market, not about environmental protection (the latter being instead just one of the many detailed terms to be agreed in return for such access).

It is unlikely that access to the single market will be granted by EU negotiators without the UK agreeing to comply with a substantial body of relevant EU legislation, particularly in relation to product standards.

It is not just about the compliance of end products. The EU will see it as just as important to maintain the rigour of many other laws, such as industrial emissions standards and other pollution controls, to avoid UK businesses benefiting from a reduced production cost and consequent competitive advantage.

In truth, the EU is likely to start from the point of view that maintenance of the status quo regarding all environmental laws relevant to all commercial and industrial sectors that compete across boundaries is a fundamental condition of market access.

The greater the level of access the UK negotiates to the EU single market, the greater the extent to which current UK environmental laws are likely to continue to apply.

4. Compliance history

There are certain areas of environmental law that the UK has championed and in which it has played a leadership role, such as climate change policy. However, there are others that have never been popular and/or with which the UK has historically struggled to comply.

Air quality – for instance, the impact of nitrogen dioxide emissions from cars – is a good example of this, and one in which the UK is currently subject to EU infraction proceedings. If the UK leaves the EU without joining the EEA, this is an area in which policies could be weakened, although public awareness and sensitivity over air quality standards may also tend to pull the other way.

The Urban Waste Water Treatment Directive is another example of an EU environmental law in respect of which the UK is currently subject to non-compliance proceedings and so could be a candidate for more relaxed standards/enforcement if the threat of EU sanctions is removed.

5. Relationship with wider policy objectives

It is not possible to properly consider the implications of Brexit for environmental laws without acknowledging their inter-relationship with other areas of policy.

A good example is energy security. EU environmental air quality laws such as the Large Combustion Plants Directive and its successor, the Industrial Emissions Directive are currently forcing the early closure of coal-fired and other older/less efficient power plants across the UK while other areas of EU environmental law have a significant bearing on the cost and practicality of UK shale gas exploitation and other innovations. At the same time, we see repeated warnings of critically tight capacity margins in the UK power generation sector, forcing government to enter into expensive capacity-market and demand-side-response contracts. At this delicate time, Government will be keen to avoid burdening the economy with even higher energy prices and further reduced energy security. This is an obvious area where domestic political and economic expediency might in future dictate environmental policy more than has been possible under EU membership.

Conversely, some EU environmental measures – for example, in the sphere of product regulation – actually make a significant contribution to the achievement by the UK of its carbon reduction budgets under the Climate Change Act 2008. Examples include the Ecodesign and Labelling Directives. Currently the largest contribution to electricity demand reduction in the UK’s carbon budget is expected to result from such product policies.

6. Political sensitivity

This is a major factor that is perhaps more of an issue in the environmental context than other Brexit-affected areas. It is one thing to say that the Nature Directives, Bathing Water Directive and others are not technically required to be maintained in an EEA membership scenario and so laws in those areas may be weakened. It is quite another step to incur the wrath of the public and NGOs by watering down protections in these areas.

Indeed, at a certain level this is a factor that provides a degree of protection to most EU-derived environmental laws.

Some practical consequences

Therefore, far from vast swathes of environmental law being swept away at a stroke, the changes are likely to be more subtle.

For example, while the basic need for Europe-bound substances and products to comply with REACH will remain, REACH compliance strategies may in some cases need to be reviewed. A non-EU supplier of chemical substances to the EU that has established an Only Representative (OR) in mainland Europe, or has a European subsidiary with its own REACH registrations to act as REACH importer should be unaffected. But if the OR or REACH compliance entity is located in the UK, this may need to be reviewed in due course. One would hope that common sense may prevail to allow UK-based registrations affected in this way to be transferred (as they can be for example in an M&A scenario) but this cannot be assumed. Similar considerations apply to any future domestic UK REACH regime.

The UK’s influence in Europe

One thing that will undoubtedly change, of course, is the UK’s substantial influence on EU environmental law and policy. The UK is one of the most active countries in contributing to the EU debates and decisions and has been among the most influential Member States in the shaping of EU policies, particularly on climate change.

This will be a major, and detrimental change. However, it is wrong to imagine all influence will cease. A degree of informal influence will remain, its extent depending on the exit route adopted. EEA countries are, for example, formally involved in shaping, even if not in deciding, EU policy, for example through participation in working and expert groups.

The UK will also lose probably a degree of influence on the international policy stage, in the sense that it will no longer be actively contributing to the strong negotiating hand of the EU bloc. A lot of the UK’s influence on the international climate change stage, for example, stems from its perceived ability to influence the position of the EU. On the other hand, as a substantial world economy it will undoubtedly retain influence, and will have the benefit of greater independence. The EU’s influence on international climate change policy has diminished in recent years in any event, compared to that of the United States, China, India and certain other countries.

What is frequently forgotten is that the UK’s absence from the formal legislative process will also have a considerable impact on the rest of the EU going forward.

The UK has historically had a significant impact on the direction of travel of EU policy, acting as a break on some of the more extreme tendencies of some European environmental policy makers, and in other areas (such as climate policy) leading and cajoling some EU partners into greater ambition. The UK’s departure materially changes the political and economic balance of power in Europe (for example, increasing the influence of the less ‘green’ economies of Europe). It would be naïve to imagine that the rest of the EU will continue on a business as usual basis in the absence of the UK – there will be change in direction on both sides. For example, many predict a decline in ambition on climate policy in Europe in the absence of the UK, and a consequent decline in the carbon price. So it is not only in the UK where green investment decisions may be affected.

The future of domestic UK environmental policy

A final key point to bear in mind is the scope for future fragmentation of environmental policies as between the individual devolved administrations.

At such a delicate time, particularly in relation to Scotland, it seems unlikely that Westminster will rein in devolved powers.

Given the different agricultural, industrial and political profiles in Wales, Northern Ireland, Scotland and England, however, it can no longer be taken for granted that each country will pursue the same environmental policy path going forward, particularly if Scotland finds a way to remain in the EU (as two-thirds of Scots voted to do). The weighing of all the above factors may produce different results in each jurisdiction.

Conclusion

Rumours of the death of environmental law and environmental protection in post-Brexit Britain have been greatly exaggerated. There are a wide range of legal, political, economic and other reasons to expect very little change in the short to medium term and only gradual change in the longer term. Those who have to grapple with EU environmental laws today are in most cases likely to have to continue to do so for a generation to come.

Meanwhile, freed from the shackles of the EU, exit gives the UK the opportunity to rethink environmental and climate change policy from a new position. There is good reason to hope for an era of greater innovation and international policy leadership in the area of environmental policy from Britain in the future.

Client Alert 2016-256