In “Green Law, Red Tape”i (inspired by an article in the Law Society Gazette) I drew attention, among other things, to some of the compliance obligations being imposed upon UK businesses and organisations, as a result of politicians’ concerns with climate change, achieving “net zero”, etc. Much of it is no doubt of value to lawyers who can gain expertise in the subject, and make money by selling their knowledge to hard-pressed clients. Most of it is no doubt intensely burdensome to the businesses and organisations affected, and will cost them a lot of money while distracting from the purpose for which their organisation exists, without achieving anything useful (ticks in boxes don’t count).

In comments on that article, Andy West suggested that it might be useful to collect information about climate-change compliance legislation into an organised database with full source links etc. I prevaricated, as the weather was fine (thanks, climate change!), and it seemed like a job for the long winter ahead. However, sometimes the Law Society Gazette just won’t leave me in peace, and another email this week drew my attention to a further article on the subject, with the less than under-stated title “Boiling Point”ii (complete with a picture of the earth being lapped by flames). Leaving aside the unquestioning acceptance of the “climate crisis” narrative, and the inevitable contributions from the likes of Bob Ward and Lawyers for Net Zero, it’s an interesting article providing a useful summary of some of the major legislative themes in this area. I pay due tribute to its author, Marialuisa Taddia, for leading me through the legislative maze. What follows is a brief look at some more of the legislation affecting businesses and organisations in the UK.

Climate Change Act 2008

This will be known to everyone here. It committed the UK to an 80% reduction in carbon emissions (measured against a baseline level set in 1990) by 2050. No doubt it is that baseline date that causes UK politicians continually to claim progress compared to 1990. Most, but not all, readers will be aware that the legislation was amended by statutory instrument (the Climate Change Act 2008 (2050 Target Amendment) Order 2019) on 27th June 2019, which increased the target to a 100% reduction. Not to be outdone, the Scottish Government has also passed the Climate Change (Scotland) Act 2009, which it also amended – by the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019. This (perhaps inevitably) has set its target date as 2045, and the emissions target (which is for all greenhouse gas emissions, not just for emissions of carbon dioxide) is “at least 100% lower than the baseline”. I love it that the target is at least 100% lower than the baseline. Anything Westminster can do, Holyrood can do “better”, it seems.

There’s one consolation for Westminster politicians – since the UK Act covers UK-wide emissions, should the Scots manage to achieve their target, it will slightly reduce the pressure on the rest of the UK.

Committee on Climate Change (CCC) and Carbon Budgets

As most readers will no doubt also be aware, the CCC was created by the Climate Change Act 2008, and its duties include making recommendations and advice which lead to the setting of “carbon budgets” covering five year periods, and limiting the amount of CO2 the UK can emit during each of those periods. It all seems a little like the old story of King Canute, but without the old king’s self-deprecation and awareness of the dangers of hubris. Each budget has to be enshrined in a statutory instrument. The latest – the sixth, covering the period 2033-2037, and setting a 78% reduction target by 2035 – has just been enshrined in the Carbon Budget Order 2021iii, which came into force in June.

Given the extraordinary significance of this target, with the almost inevitably huge consequences for life in the UK, the brevity of the Order is breathtaking:

Citation and coming into force

1. This Order may be cited as the Carbon Budget Order 2021 and comes into force on the day after the day on which it is made.

Carbon budget

2. The carbon budget for the 2033-2037 budgetary period is 965,000,000 tonnes of carbon dioxide equivalent.

Er, that’s it.

Still, the brevity of the implementation Order shouldn’t fool anyone. The detail is in the carbon budgetiv itself. A very lengthy document, for the first time it incorporates the UK’s share of international aviation and shipping emissions. So that’s upping the ante quite a bit, though of course it still doesn’t deal with the fact that much of the UK’s supposed CO2 emissions reductions are in fact exports rather than reductions.

UK Emissions Trading Scheme

According to the UK Government’s websitev:

A UK Emissions Trading Scheme (UK ETS) replaced the UK’s participation in the EU ETS on 1 January 2021. The 4 governments of the UK have established the scheme to increase the climate ambition of the UK’s carbon pricing policy, while protecting the competitiveness of UK businesses.

That latter claim about competitiveness might raise an eyebrow or two, especially when considering just some of the requirements of the Scheme:

If you carry out an activity covered by the UK ETS, you will need a greenhouse gas emissions permit.

You may also need:

  • a small emitter or hospital permit (if you are classed as a small emitter or a hospital)
  • an emissions monitoring plan (if you are an aircraft operator)

So who does it apply to?

The UK ETS will apply to energy intensive industries, the power generation sector and aviation.

It covers activities involving combustion of fuels in installations with a total rated thermal input exceeding 20MW (except in installations for the incineration of hazardous or municipal waste).

The aviation routes covered by the UK ETS will include UK domestic flights, flights between the UK and Gibraltar, and flights departing the UK to European Economic Area states conducted by all included aircraft operators, regardless of nationality.

Of course, there’s inevitable legislation, this time the Greenhouse Gas Emissions Trading Scheme Order 2020vi. It runs to nine parts, 77 regulations, and 11 Schedules. Suffice to say, it’s all too complex to cover in detail here. I’ll say no more on it, other than to end with another explanatory note from the Government website:

Emissions trading schemes work on the ‘cap and trade’ principle, where a cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme. This limits the total amount of carbon that can be emitted and, as it decreases over time, will make a significant contribution to how we meet our Net Zero 2050 target and other legally binding carbon reduction commitments.

Within this cap, participants receive free allowances and/or buy emission allowances at auction or on the secondary market which they can trade with other participants as needed.

Each year, installations and aircraft operators covered by the scheme must surrender allowances to cover their reportable emissions. The cap is reduced over time, so that total emissions must fall.

The Streamlined Energy and Carbon Reporting regime was covered in “Green Law, Red Tape” and the Contracts for Difference Scheme was touched on in “Counting the Cost”. There is another of these broad and sweeping bits of expensive red tape, however, that I failed to cover in either of those articles:

Climate Change Levy (CCL)

CCL was introduced in 2001 and is a UK-wide tax on electricity, gas, LPG and solid fuels supplied to businesses and public sector consumers. The main rates on these commodities are paid to HMRC by energy suppliers who pass on the costs, through billing, to their non-domestic customers. Reduced rates are available to Climate Change Agreements participants. Needless to say, there’s legislation behind this too. The main implementing statute is the Finance Act 2000, and the main payment rates are set out in paragraph 42(1) of Schedule 6 to the Act. Paragraph 2 of Schedule 1 to the Climate Change Levy (General) Regulations 2001 sets out the formula used by businesses in the Climate Change Agreements scheme to calculate their CCL relief entitlement, including the reduced rate.

So what is a Climate Change Agreement? Over to the Government websitevii:

Climate change agreements are voluntary agreements made between UK industry and the Environment Agency to reduce energy use and carbon dioxide (CO2) emissions. In return, operators receive a discount on the Climate Change Levy (CCL), a tax added to electricity and fuel bills. The Environment Agency administers the CCA scheme on behalf of the whole of the UK.

If you hold a CCA you will get a discount on your CCL

…The current CCA scheme started in April 2013 and will run until 31 March 2025.

An operator that has a CCA must measure and report its energy use and carbon emissions against agreed targets over 2-year target periods up to the end of 2022.

If an operator has more than one eligible facility in the same sector it can hold an individual CCA for each facility, or choose to group them together under one CCA. Where facilities are grouped under one CCA the target is then shared across the grouped facilities.

Once a facility, or group of facilities, is included in a CCA, it is referred to as a target unit.

If the operator’s target unit meets its targets at the end of each reporting period, the facilities continue to be eligible for the discount on the CCL.

So that’s all right, then.

Strategies

Well, there’s the Industrial Decarbonisation Strategyviii, which the Government claims “sets out how industry can decarbonise in line with net zero while remaining competitive and without pushing emissions abroad.” This does recognise that

[f]rom the UK’s ceramic cluster in the West Midlands, to the Teesside chemical plants in North East England, the UK’s industrial heartlands are vitally important to our economy, contributing £170 billion each year and providing 2.6 million jobs.

Unfortunately it goes downhill after that, with talk of low carbon clusters and a net zero cluster. Also:

low carbon alternatives such as hydrogen and electrification, deploying key technologies such as carbon capture, usage and storage, and supporting industrial sites to maximise their energy and resource efficiency to reduce costs for businesses. In parallel, we will continue to help industry overcome barriers and work with our international partners, both old and new, to kick-start the demand for low carbon industrial products.

It sounds like pie in the sky to me, but they take 170 pages to say it.

What else? Well, there’s the Transport Decarbonisation Plan. More pie in the sky, unfortunately:

And decarbonisation is not just some technocratic process. It is how we fix some of that harm. It is how we make sure that transport shapes the country and the economy in ways that are good. It’s about taking the filth out of the air and creating cleaner, quieter, healthier places. It’s about a second, green, industrial revolution, creating hundreds of thousands of new, skilled jobs, in some of the proud towns and cities that were the cradle of the first one. It’s not about stopping people doing things: it’s about doing the same things differently. We will still fly on holiday, but in more efficient aircraft, using sustainable fuel. We will still drive on improved roads, but increasingly in zero emission cars. We will still have new development, but it won’t force us into high-carbon lifestyles.

That quote was from the Foreword of “Decarbonising Transport A Better, Greener Britainix, a 216 page tome.

Any other strategies? Of course! There’s the North Sea Transition Deal. This one runs to 51 pages, so I’ll simply quote the summary from the relevant page of the Government websitex:

The North Sea Transition Deal sets out an ambitious plan for how the UK’s offshore oil and gas sector and the government will work together to deliver the skills, innovation and new infrastructure required to meet stretching greenhouse gas emissions reduction targets. The Deal aims to support and anchor the expert supply chain that has built up around oil and gas in the UK, to both safeguard and create new high-quality jobs. The Deal will transform the sector in preparation for a net zero future and catalyse growth throughout the UK economy.

Specifically, this Deal includes:

  • early reductions in offshore production emissions of 10% by 2025; 25% by 2027; and 50% by 2030, against a 2018 baseline, to meet the sector’s aim of creating a net zero basin by 2050. This will be supported by joint work to address the commercial and regulatory barriers to electrification of offshore platforms to realise these targets
  • investment of up to £14-16 billion by 2030 in new energy technologies, with supported by business models to enable CCUS and hydrogen at scale
  • a voluntary industry target of 50% local UK content across the lifecycle for all related new energy technology projects by 2030, as well as in oil and gas decommissioning. This will be supported by the appointment of an industry supply chain champion who will support the coordination of opportunities with other sectors
  • a 60Mt reduction in greenhouse gas emissions, including 15Mt through the progressive decarbonisation of UKCS production over the period to 2030
  • support for up to 40,000 direct and indirect supply chain jobs in decarbonising UKCS production and the CCUS and hydrogen sectors

Surely that’s the end of the strategies? Afraid not. There’s also the hydrogen strategyxi. This one runs to 121 pages, and as this article is more than long enough already, we’ll leave it at:

This strategy sets out the approach to developing a thriving low carbon hydrogen sector in the UK to meet our ambition for 5GW of low carbon hydrogen production capacity by 2030.

For those UK businesses trading within the EU, there is much, much more climate-change related legislation to comply with. I will mention only in passing the EU Sustainable Finance Disclosure Regulation, the EU Taxonomy Regulation, and the European Green Deal.

Task Force on Climate-related Financial Disclosures

Inevitably there is another website for you to consult if you’re interestedxii.This is a fast-moving area, and of course the UK is at the forefront of adding reporting burdens to its businesses. As the Law Society Gazette puts it:

The new TCFD rules already apply to premium listed companies on a ‘comply or explain’ basis, and the Financial Conduct Authority is consulting on how to apply this to other listed companies as well as asset managers, insurers and pension schemes… There are also TCFD proposals from the Department for Business, Energy & Industrial Strategy for unlisted public interest entities, large companies and LLPs; and the Department for Work and Pensions for pension funds.

Conclusion

There is no conclusion. There is no end in sight to all this. This will never end, unless and until the costs of “net zero” (financial, environmental and societal) finally produce a revolt on the part of voters and businesses. Until then, the politicians will continue with their Messianic mission to destroy society, businesses and the UK’s precious and fragile environment.

i https://cliscep.com/2021/07/21/green-law-red-tape/

ii https://www.lawgazette.co.uk/features/boiling-point/5109754.article

iii https://www.legislation.gov.uk/uksi/2021/750/made

iv https://www.theccc.org.uk/publication/sixth-carbon-budget/

v https://www.gov.uk/government/publications/participating-in-the-uk-ets/participating-in-the-uk-ets

vi https://www.legislation.gov.uk/uksi/2020/1265/contents/made

vii https://www.gov.uk/guidance/climate-change-agreements–2

viii https://www.gov.uk/government/publications/industrial-decarbonisation-strategy

ix https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1009448/decarbonising-transport-a-better-greener-britain.pdf

x https://www.gov.uk/government/publications/north-sea-transition-deal

xi https://www.gov.uk/government/publications/uk-hydrogen-strategy

xii https://www.fsb-tcfd.org/about/

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September 15, 2021