The post-BREXIT outlook for manufacturing will depend very much on the replacement trading agreements negotiated with the EU and other nations. Given the very real issues of global and national concern in respect of climate change, resource availability and pollution, and the significant improvements in the UK environment and economy since the 1970s/80s when the UK was known as 'the dirty man of Europe', it is unlikely that the UK jurisdictions would seek to dismantle much of the environmental regulatory framework that has secured so much of these improvements. However, the majority of this has been built during UK membership of the EU and new legislation would be needed in all UK jurisdictions to avoid legal vacuums in environmental law following revocation of the European Communities Act 1972.
The future direction of environment and energy policy and law in an independent UK would be heavily influenced by new trading arrangements, international treaty obligations, devolution and the political make-up of the governments and administrations in the UK. As the Referendum draws closer this article looks at potential implications of a BREXIT vote for the extensive body of environmental law that applies in the UK, with a particular focus on the manufacturing sector.
Environment, trade and the potential for change
The extent to which BREXIT could deliver sovereignty for the UK in terms of environmental law would not be known for some time after a Referendum vote in favour. Much would depend on the nature of replacement trading arrangements. Where the EU concludes a trading agreement with another country that covers topics in respect of which both the EU and Member States have competence – such as the environment and energy - then, as well as agreement by the Council and Parliament of the EU, all Members States must ratify the agreement following approval from each national parliament. The EU publication Trade_negotiations_step_by_step explains how EU trading agreements are negotiated, how long they may take and and who has to agree them.
The terms of the post- BREXIT trading arrangement with the EU would determine:
- The level of access the UK retained to the Single Market, whether free or market restricted movement of manufactured goods, agricultural and fishery products, and services
- The extent to which there would be free movement of people between the UK and the EU
- How much the UK contributed to the EU budget for access to the Single Market and/or paid in tariffs for access to agreed markets
- The extent to which EU environmental laws would continue to apply to the UK and be enforceable by the EU (NB all exports to the EU must comply with product quality standards)
- The extent to which the UK would have representation in future EU environmental law and policy
- The extent to which the UK could negotiate its own trading agreements, including environmental provisions, with other nations and have the benefit of EU negotiated free trade agreements
The replacement trading arrangements would be negotiated separately from, and are outside the scope of, the withdrawal treaty. In the absence of agreed UK-EU trading arrangements when BREXIT takes effect, the World Trade Organisation's General Agreement on Tariffs and Trade would apply.
The EU, the UK and the environment
Under the EU subsidiarity principle action should only be taken at EU level when objectives cannot be sufficiently achieved by Member States acting alone. The growth of EU environmental law reflects the cross-border nature of many environmental issues and the desirability of preventing countries from seeking competitive advantage by allowing harmful environmental practices. EU environmental law has developed to set common rules for product standards, to require that polluting activities are regulated through permits and to set targets (e.g. improving air quality, reducing landfill of waste, reducing greenhouse gas emissions and raising bathing waters standards) to influence investment and behaviour. This, in turn, has enabled environmental objectives to be included in competition and trade arrangements and provided longer-term strategic frameworks and market scale to encourage investment in innovation, new markets and technologies, and the generation of employment and economic growth.
The European 7th Environment Action Programme is currently guiding EU environment policy for the period to 2020. It focuses on the protection, conservation and enhancement of the EU's natural capital, turning the EU into a resource-efficient, green and competitive low-carbon economy, and safeguarding citizens from environment-related pressures and risks to health and well-being. Proposed legislation and amendments to existing EU legislation are focused on the following "enablers" to help deliver these goals:
- better implementation of legislation,
- better information by improving knowledge base,
- more and wiser investment for environment and climate policy, and
- full integration of environmental requirements and considerations into other policies.
The UK has not been alone in challenging the EU on unnecessary burdens from EU legislation. A number of environmental directives, including the Habitats Directive, are currently under scrutiny by the European Commission as part of its Regulatory Fitness and Performance Programme, strengthened following the launch of the EU 'Better Regulation Agenda' in May 2015. Some changes to EU environmental law have been proposed and more are expected.
The UK is active in the development of EU environmental policy and law. In the recent EU consultation on the Circular Economy package of measures, the UK made clear that Commission proposals should be "developed with Member States, allow flexibility, ensure that costs are justified by expected impacts, avoid unnecessary burdens on business and create an environment that welcomes innovation, improves resource productivity and helps increase business competitiveness". In some areas of environmental law the UK has gone further than the minimum standards required by European law. The Government's Better Regulation drive has identified a number of provisions for relaxation, for example from 1 April 2016 the removal of the requirement to register premises in England that produce hazardous waste.
Independently of EU environmental law, the UK became the first country in the world to introduce legislation to set legally binding carbon reduction targets. The Climate Change Act 2008 and the Climate Change (Scotland) Act 2009 are examples of UK environmental laws that do not rely on the European Communities Act 1972 for their effect and so would not require legislation to remain effective post BREXIT.
Environmental law post BREXIT
Whilst the nature of the UK's relationship with other countries will be determined by future agreements, it is possible to consider the likely status of the different EU environmental legal and policy instruments post BREXIT together with the scope for changes to be made to environmental laws within an independent UK.
The European Treaty would cease to have effect two years after the UK gives notice of its intention to leave the EU, unless either an extension is unanimously agreed by all Member States or the withdrawal treaty between the UK and the EU has been completed. Notice of withdrawal could be given some months after the Referendum to give time for the EU and the UK to prepare for the complexities involved. The withdrawal treaty (which is separate from any new trading agreement) would need to be approved by a qualified majority of the Council and Parliament of the EU (55% of EU country votes, which must represent at least 65% of the total EU population). Pending withdrawal, the UK would be subject to EU environmental laws including new provisions and amendments to existing laws.
Article 6 of the European Treaty requires that "environmental protection requirements must be integrated into the definition and implementation of the Community policies in particular with a view to promoting sustainable development". Article 6 does not apply to domestic legislation in Member States, so would make no difference to law-making in the UK post BREXIT. Article 6 would continue to apply to policy and law developed by the EU post BREXIT.
EU Regulations would need to be complied with. EU Regulations are immediately enforceable in Member States without the need for national legislation. All would cease to apply in the UK on withdrawal from the EU. Under any departure scenario the UK would need to legislate to set the same binding standards for products exported to the EU. Regulation (EC) No 1907/2006 of the European Parliament and of the Council on the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) prohibits the entry into the Single Market of any chemicals, substances and products that do not meet these standards. Other restrictions include hazardous substances in electrical products, vehicle emissions and fuel quality.
Compliance with EU Directives would depend on future trading arrangements with the EU. Most EU environmental law takes the form of directives, which are binding as to the result to be achieved but leave Member States a choice of form and methods. Some EU product standards, e.g. packaging and packaging waste, are set out in directives and would need new UK laws. Directives are usually transposed in the UK by statutory instruments. Along with Urban Planning, Housing, Economic Development and Agriculture, Forestry and Fisheries, competence for Environment policy and law is devolved to each of Scotland, Wales and Northern Ireland, who can act independently albeit within the common framework of EU law. Some instruments, like the Energy Savings Opportunity Scheme Regulations 2014, apply throughout the UK. In contrast, England, Scotland, Wales and Northern Ireland have separately transposed the EU Waste Framework Directive, with some differences between jurisdictions; England is the only UK jurisdiction not to provide for the separate collection of food waste.
Virtually all environmental directives are transposed under the European Communities Act 1972, section 2(2). Some UK environmental law refers to EU directives for definitions and other provisions, for example the definition of waste in Article 3.1 of the Framework Directive in Waste. Legislation would be needed to avoid legal vacuums and to ensure that the UK complied with its existing international environmental treaty obligations. The sheer scale of environmental law within the UK and its reliance on EU law would make a law-by-law assessment of changes a significant and time consuming piece of work. Instead, UK jurisdictions could legislate that all laws relying on the 1972 Act should continue to have effect unless revoked or amended. It is reasonable to assume that the UK would not be permitted access to the EU Single Market under conditions that would enable it to gain a competitive advantage by reducing environmental (and other) standards. The incorporation of future EU environmental law to which the UK is subject after BREXIT would need to be addressed, as would the status of past, present and future decisions of the European Court of Justice on relevant environmental law. Unless otherwise agreed, the UK would be unable to seek rulings from the ECJ itself.
UK obligations under international treaties would be unaffected but where the UK relies on EU legislation to comply, e.g. on climate change, new UK legislation would be required. Following BREXIT the UK's emissions reductions commitments under the UN Framework Convention on Climate Change would need to be removed from the EU obligation and a UK Nationally Determined Contribution submitted to the UN. Depending on the terms of the trading agreement(s) reached with the EU the UK may or may not remain subject to EU renewable energy and energy efficiency targets, and may or may not participate in the EU emissions trading scheme. Withdrawal from the latter would require transitional arrangements to be agreed.
The UK would lose influence over EU environmental policy, which is developed by the European Commission in consultation with Member States. The UK has been active and relatively effective in contributing to the development of EU environmental policy and law. The EU Circular Economy Package, published on 21 December 2015, included a number of ideas that the UK Government had supported during the consultation phase. The trading agreement between the EU and the European Economic Area (EEA) allows EEA members to be consulted on proposals but their views have no formal influence. A new trading arrangement with the EU could include provisions for consultation with the UK.
The extent of true UK sovereignty over environmental law and policy will depend on new trading arrangements. Following BREXIT UK jurisdictions could be empowered to develop their own environmental visions and associated policy and legislation, to the extent compatible with international treaty obligations and new trading agreements with the EU as well as other countries. The EU has strict controls on the growing of genetically modified crops, using the precautionary principle to require detailed, evidence based evaluations on a crop-by-crop basis. Subject to the terms of any trading agreements, an independent UK could decide to take a different approach – more lenient or stricter – although how this would work if devolved administrations disagreed would need to be addressed.
The much criticised EU Common Agricultural Policy and Common Fisheries Policy would cease to apply within the UK on withdrawal from the EU. As agriculture and fisheries are devolved competencies, future UK policies would need to be negotiated domestically, along with replacement funding streams. Tariffs to be applied to agricultural and fishery products exported from the UK to the EU, and vice versa, would be the subject of the future trade agreement(s). Reciprocal agreements with other countries would be needed to permit UK fishing boats to operate in their waters, including any controls over sustainability of fish stocks.
Devolution within the UK poses particular challenges for post BREXIT scenarios. Unless a joint UK environmental regulatory framework is established post BREXIT to set common standards and to provide longer-term stability, the loss of the common EU environmental law framework could lead to greater divergences between regulatory regimes in UK jurisdictions, whether in the interests of encouraging new investment or in reducing regulatory requirements. For example, the waste law aspects of developing a circular economy are devolved. Wales and Scotland are actively promoting circular economy policies in contrast to DEFRA's decision to "step back" from implementing any new policies around waste and recycling in England.
EU law has little influence over Town and Country Planning in the UK. Two aspects of environmental law that do have an effect on development control within Member States concern the provision of environmental information to inform consenting decisions and the attainment of specified standards, for example in respect of air quality, water quality, habitats and species.
The process of environmental impact assessment (EIA) is intended to ensure that, prior to the grant of development consent for projects that are likely to have a significant environmental effects, the decision-maker is presented with full information on such effects, gathered during a process in which the public is consulted along with statutory consultees. The revised Environmental Impact Assessment Directive 2014 is required to be transposed by 16 May 2017. Following BREXIT, it would be up to each of England, Scotland, Wales and Northern Ireland to retain as much or as little of the EIA process as they wished in their respective planning systems.
The Habitats Directive and the Wild Birds Directive are seen by some as vital for the protection of habitats and species across the EU but by others as impediments to development. The Habitats Directive prohibits the grant of consent for any development that would adversely affect the integrity of a European site of nature conservation importance (forming part of the pan-EU Natura 2000 network). It is the only legal provision within any UK planning regime where the outcome of an assessment is capable in law of determining whether or not consent can be granted. Post BREXIT, it would be up to individual UK jurisdictions to decide whether they retained the substance of these directives.
The balance of competencies between the EU and the UK
Between December 2012 and December 2014 the Coalition Government conducted a review of the UK's relationship with the EU. This led to the publication of 32 reports. The review was not undertaken to predetermine or prejudge proposals for changes to the EU or about the appropriate balance of competencies. Many stakeholders were consulted.
The Executive Summary to Report 10 on Environment and Climate Change stated that "the Government has recognised the need for an open-minded debate around EU competence on the environment and climate change within the context of finding an appropriate balance and exploiting synergies between the need for economic growth and a sustainable approach to the future. Whilst there can be tensions between environmental standards and competitiveness, the evidence paints a more nuanced picture in which some sectors of business welcomes some degree of cross-EU environmental regulation. For example, EU targets on waste and on climate change were seen by many as providing greater certainty for investors and an important spur for growth in the rapidly expanding environmental and low carbon services and products sector. In addition, EU regulation on chemicals and other environmental standards was also seen by many businesses as important in providing a level playing field across the Single Market".
Environmental law at international, EU and UK level has evolved from controlling point source pollution in the 1970s and 1980s to setting up mechanisms to intervene in markets and change behaviour. Whether a business will fare better in the environment of an independent UK or a UK within the EU will be determined by many factors in addition to environmental considerations. Whatever the outcome of the Referendum, it will remain the case that the businesses likely to be most successful are those best able to adapt to their environments. More information on the implications of BREXIT for businesses in the UK will be found in the Bond Dickinson BREXIT Briefing.