National Carbon Trading System (Germany)

The FT reports (this morning) higher inflation in Germany, and cites (amongst other components) the carbon tax introduced Jan 1 (2021).

This Blog doesn’t often report on domestic policies in non-UK/Ireland jurisdictions. However, in this case, we comment as follows –

A new national carbon trading system was introduced in Germany, to start Jan 1 2021. In many places, this is cited as a carbon tax. The German National Emissions Trading System sits alongside the EU ETS (and is influential in terms of possible extension of the EU ETS to transport and buildings). The new German system applies to GHG emissions from fuel distribution and supply. Fuel distributors and suppliers based in Germany are obliged to participate (there are exemptions). Specifically, the obligated parties are those that place fuels on the market include fuel wholesalers, gas suppliers or companies in the mineral oil industry that are liable to pay energy tax. For each tonne of CO2 produced by the combustion of these fuels, the party placing the fuel on the market must acquire a corresponding emissions certificate and surrender it to the DEHSt – here.

Further information is set out – here (English).

As you are aware, the UK national carbon trading scheme based on electricity through half hourly meters, was abolished, and the material removed from Cardinal Environment EHS Legislation Registers & Checklists.

Building Safety Regulator (England)

Clause 2 of the Building Safety Bill (not yet enacted), appoints the Health and Safety Executive (HSE) as the Building Safety Regulator in England.

The Building Safety Regulator will be an independent regulator with its own powers, strategic plan, and programme of work. It will give expert advice to local regulators, landlords and building owners, the construction and building design industry, and to residents.

The Bill proposes that the Building Safety Regulator will have two objectives:

(1) securing the safety of people in and around buildings in relation to risks from buildings

(2) improving building standards.

The Building Safety Regulator will:

* implement a new, more stringent regulatory regime for high-rise buildings in England (high-rise buildings are residential buildings of 7 storeys or more or 18 metres or more in height and in the design and construction phase only, including care homes and hospitals that meet the same height threshold)

* be the building control authority in England for building work on high-rise buildings

* oversee and enforce a new regime for occupation of high-rise buildings

* oversee the safety and performance of all buildings. This has two aspects:

(1) overseeing the performance of other building control bodies (local authorities and registered building control approvers (currently known as approved inspectors))

(2) understanding and advising on existing and emerging building standards and safety risks

* promote competence among industry professionals and regulators to raise standards in the design, construction, and management of buildings.

The HSE published on 14 October 2021 a fact sheet on its proposed enforcement approach – here.

This fact sheet states the HSE intends that –

* the Building Safety Regulator will deliver evidence-based, proportionate, and targeted engagement and interventions with dutyholders,

* the Building Safety Regulator’s programme of work will include communication activities to advise and support dutyholders and residents,

* enforcement activities and sanctions will be targeted to improve the safety and performance of buildings.

The Building Safety Bill provides for greater regulatory scrutiny and the HSE expects a series of hard stops at key stages during design and construction to be introduced by separate regulation (enacted under the Bill when it is an Act and commenced).

During occupation of the buildings in scope, the Bill requires dutyholders to demonstrate ongoing management of building safety risk through a safety case report. The HSE fact sheet states this will give the Building Safety Regulator a wide range of tools to achieve improved building safety performance and to deliver the culture change identified in Dame Judith Hackitt’s review Building a Safer Future.

The Building Safety Regulator will be responsible for the regulatory decisions during the design, construction, occupation and refurbishment of high-rise buildings.

Per the HSE fact sheet – the Building Safety Regulator’s activities to achieve building safety and performance outcomes will include:

* granting permission to proceed with construction work and issuing completion certificates at appropriate points in the construction and occupation phases

* a process of providing certification following assessment of the in-occupation safety case

as well as formal enforcement and sanctions.

There will be a published Enforcement Policy Statement (EPS). But it may be the HSE arrives at a position that it’s existing HSE EPS is sufficiently flexible to accommodate its new responsibilities as the Building Safety Regulator or it requires some amendment but is still the right vehicle.

Re the building safety report – the bill requires a building specific safety case report to be produced (high rise buildings in the design and construction phase). This safety case report will identify the fire and structural hazards associated with the building. It will set out how the risks they present are being managed to prevent the risks materialising and reduce the severity of any incident resulting if the risks do materialise. The adequacy of the safety case will be assessed by the Building Safety Regulator, working with multi-disciplinary teams, as part of the building assessment certification process.

Re oversight of existing building control inspection – the Building Safety Regulator will monitor the performance of local authority building control bodies and private sector building control approvers. The fact sheet states the HSE will also oversee and regulate all individuals working as building inspectors. Building inspectors and building control approvers will be subject to a registration requirement and the Building Safety Regulator may suspend or remove inspectors from the register and address performance and professional misconduct. The fact sheet states there will be improved competence and accountability through the creation of a unified professional and regulatory structure.

Environment Act 2021 OEP (England & NI)

Today (17th November 2021) section 22 of the Environment Act 2021 and Schedule 1 which establish the Office for Environmental Protection (“OEP”) as a body corporate are commenced.

Commencement also brings into force today:

* section 23 which defines the OEP’s principal objective when exercising its functions and provides that the OEP must prepare a strategy that sets out how it intends to exercise its functions

* section 24 which sets out the process by which the OEP must publish, revise or review the strategy and how it must consult on it

* section 26 which sets out that the OEP and the Committee on Climate Change must prepare a memorandum of understanding which sets out how the OEP and the Committee intend to co-operate.

In addition, certain terms used in Part 1 of the Act are now in force:

* section 44 (meaning of “natural environment”)

* section 45 (meaning of “environmental protection”)

* section 46 (meaning of “environmental law”)

* section 47, which provides for the interpretation of further terms.

An interim OEP is already established.

Here is the OEP website

Here is the statement from DAERA (Northern Ireland)

CORRECTION : Fuel Duties changes (UK)

The red diesel and biodiesel fuel duty changes (recent blog) are located in the Finance Act 2021, which is enacted but not yet commenced. The blog post is corrected.

There are further changes proposed in the Finance (No 2) Bill. Further information is here.

The changes to the duties on rebated fuels apply from 1 April 2022.

Fuel Duties changes (UK)

CORRECTION : the Finance Act 2021 is enacted. The Finance (No. 2) Bill is being debated. The changes identified below are located in the Finance Act 2021. The text below is amended.

Yesterday 16th November, the government issued information on its proposed changes to fuel duties – here.

The taxation of hydrocarbon oils is regulated by the Hydrocarbon Oil Duties Act 1979 (HODA) and numerous Regulations. It provides a rebate on heavy oils but this rebate is not allowed for any oil that will be used as fuel for a ‘road vehicle’.

Road vehicles not allowed to use red diesel or rebated biodiesel in any circumstances, unless they are ‘excepted vehicles’ as defined in Schedule 1 to the Act. Excepted vehicles include agricultural vehicles and specialist vehicles, such as those used in construction, haulage and some manufacturing.

Biodiesel, bioblends and fuel substitutes are subject to duty if set aside for a chargeable use and rebates are provided for in specified circumstances. Heating is not a chargeable use for these fuels.

The Finance Act 2020 made changes to HODA that are not yet commenced. These relate to private pleasure craft.

The Finance Act 2021 changes HODA (not yet commenced) –

• Only ‘excepted machines’ (new Schedule 1A instead of Schedule 1) will be able to use red diesel and rebated biodiesel.

• Heating will be a chargeable use for biodiesel, bioblends and other fuel substitutes (rebated rates when used in non-commercial heating).

Companies, individuals and civil society organisations that will lose their entitlement to use red diesel will need to switch to white diesel. This will include sectors, for example, such as construction, mining and quarrying, ports, manufacturing (e.g. ceramics, steel, timber), haulage (for transport refrigeration units on lorries), road maintenance, airport operations, oil and gas extraction, plant hire, logistics and waste management.

Environment Act 2021 – summary (UK)

The Act is not yet published, neither is any commencement order, nor any regulation.

The closest text is the text as introduced to the House of Lords – here. Note, Environment is a devolved matter, which means the bulk of the Environment Act 2021 provisions relate to England only.

Key points –

(1) the government must set long-term targets in priority areas for England (and may set other long-term targets) – by regulations – air quality, water, biodiversity, resource efficiency and waste reduction. The government must then review these targets in the context of the significant improvement test in section 6.

(2) the government must publish a statement of environmental principles, to be used in policy making.

(3) the government must publish a report (at specified intervals) on developments in international environmental law.

(4) an Office for Environmental Protection (OEP) must be established in England, to carry out certain scrutiny and advice functions. Schedule 3 deals with the OEP as respects Northern Ireland.

(5) Schedule 4 confers powers to make regulations on producer responsibility, replacing authority in earlier legislation which is revoked. Schedule 5 confers powers to charge for disposal costs.

(6) Schedule 8 confers powers to make regulations to create deposit schemes.

(7) Schedule 9 confers powers to make regulations about charges for single-use plastic items.

(8) the Environmental Protection Act 1990 is amended with provisions about the separate collection of recyclable waste in England – glass, metal, plastic, paper and card, food waste.

(9) the Environmental Protection Act 1990 is amended with updated provisions for hazardous waste in England and Wales.

(10) the Waste and Contaminated Land (Northern Ireland) Order 1997 is amended with updated provisions for hazardous waste.

(11) the Environmental Protection Act 1990 is amended with updated provisions for transfrontier waste shipment.

(12) the government may make regulations to recall vehicles or engines on environmental grounds (section 73).

(13) the Water Resources Act 1991 (applicable England and Wales) is amended to require sewerage undertakers to publish and maintain a drainage and sewerage management plan. These provisions were strengthened slightly following consideration in the House of Lords (final Act text not yet published).

(14) the government (and the relevant authorities in the devolved administrations) may make regulations to change water quality standards.

(15) Schedule 14 provides for biodiversity gain to be a planning condition.

(16) the Natural Environment and Rural Communities Act 2006 section 40 duty to conserve biodiversity (England) is substantively enhanced.

(17) local authorities in England must publish biodiversity reports at specified intervals.

(18) there must be more local nature recovery strategies so that they cover the whole of England.

(19) Natural England is empowered to publish a strategy for improving the conservation status of any species of flora or fauna (a special conservation strategy).

(20) Natural England is empowered to publish a strategy for improving the conservation and management of a protected site (a protected site strategy).

(21) local authorities in England must consult before felling street trees.

Environment Act 2021 (UK)

The long awaited Environment Act 2021 finally received its royal assent on 9th November. The government press release is here.

The document is not yet published, and its provisions will need to be commenced. The detail will be in Regulations, which are not yet available.

I had written extensively when the document was first promulgated, and I will write further blog posts on the subject once the Act is published and we see the provisions that are commenced now.

Company Sustainability Disclosure (UK/International)

With COP26 underway a slew of announcements are being made on the topic of business disclosure of environmental impact.

UK

In October (ahead of COP26), the government responded to its consultation on mandatory climate-related financial disclosures by publicly quoted companies, large private companies and LLPs. The response is here. Hitherto, on 9 November 2020, the government had announced it would implement TCFD recommendations across the economy – this announcement is here.

Re the need for better alignment between SECR (UK) and TCFD (International – see below under International) requirements, HMG will consider how best to achieve that. Any changes to the SECR regime to facilitate that alignment will require a separate consultation process, and that process will run in due course, but will take into account the proposed introduction of the Sustainability Disclosures Requirements (SDR) Regime, as set out in Greening Finance: A Roadmap to Sustainable Investment published on 18th October 2021 (see below) and the requirements introduced in the June 2021 Procurement Policy Note that require mandatory Scope 3 disclosures in carbon reduction plans when bidding for major government contracts. HMG will look to implement any changes to the SECR regime by 2023. A Q&A guidance document will set out to in-scope companies and other stakeholders to what extent current SECR requirements meet TCFD recommendation 4b, regarding the disclosure of emissions. This document is not yet published.

On 18 October (ahead of COP26), the Chancellor published a roadmap setting out details of new Sustainability Disclosure Requirements applicable to businesses, pension schemes, investment products and asset managers and owners. This roadmap is here. The document focuses on the “informing” first phase (of the road map), which it states will be delivered through new economy-wide Sustainability Disclosure Requirements. Public consultation is to follow, and thereafter there will be rules.

On 3rd November (within COP26), the Chancellor announced the UK will be the first net-zero aligned financial centre. Initially this means asset managers, regulated asset owners and listed companies must publish transition plans. Standards for these transition plans are being developed. A q&a about this process is here (dated 2nd November)

International

On 3rd November (within COP26), the IFRS Foundation (the International Financial Reporting Standards Foundation, a non-for-profit incorporated in Delaware US) announced the establishment of an International Sustainability Standards Board (ISSB) to develop global baseline sustainability reporting standards. The IFRS Foundation confirmed consolidation of two sustainability reporting organisations, the Value Reporting Foundation and the Climate Disclosure Standards Board, to create a global standard-setter for sustainability disclosures for the capital markets.

The Foundation also published two prototype standards to enable the ISSB to build on existing frameworks, including the Task Force on Climate-Related Financial Disclosures (TCFD) (set up by the Financial Stability Board, an international body), when developing its standards. Standards will be subject to public consultation and can be considered for adoption by jurisdictions on a voluntary basis. Jurisdictions will have their own legal frameworks for adopting, applying or otherwise making use of international standards.

This announcement is welcomed by the UK and a number of other countries – the UK press release is here.