Environmental Law: news and regulatory developments from the U.K and U.S

There has been plenty of environment and climate news hitting the headlines in the last few weeks. Our Environmental law specialist William Wilson shares some of the important changes to have been announced in the U.K and U.S affecting businesses, regulation and environmental protection.

1. U.S. Securities and Exchange Commission consults on Climate-related Financial Disclosure

On 21 March 2022 the U.S. Securities and Exchange Commission (S.E.C.) proposed rule changes to require financial firms to make climate-related disclosures in their registration statements and periodic reports. The framework of regulation is based upon the Taskforce on Climate-related Financial Disclosures, ‘TCFD’, as are similar rules now applicable to larger U.K. financial institutions.

U.S. firms will be required under the rule, if it is adopted, to include information on climate-related risks, if material to their business, results or financial condition, and to include climate-related metrics in their audited financial statements.

This proposed rule may yet be altered before it is adopted, and it will probably be subject to legal challenge. However, the real significance of it may be that it constitutes evidence of the way in which major financial markets are changing in their expectations. Climate-related risks and opportunities are now assumed to be materially relevant to firms’ investments, performance and financial statements, and both investors and regulators will demand that they be properly addressed.

For further reading please read our previous article on the legal reporting requirements for companies affected by the TCFD

2. U.S. Supreme Court ruling in West Virginia v Environmental Protection Agency

Towards the end of a tumultuous week, the U.S. Supreme Court delivered a judgement in the case of West  Virginia v Environmental Protection Agencywhich President Biden described as ‘another devastating judgement that takes our country backwards.’

The case concerns the powers of the EPA to make wide-ranging rules under the Clean Air Act to prescribe “generation shifting” from coal to renewables. The conservative majority of the Supreme Court, applying an ‘originalist’ reading of the U.S. Constitution, ruled that the EPA as a federal agency had no such wide authority under the statute, without the clearest possible authority from the Congress. Instead its powers were limited to addressing regulatory issues ‘within the fence’ of power plants. The case thereby does much practical damage to the administration’s efforts to deliver radical reductions in greenhouse gas emissions as a means to address climate change.

In a twist with major implications for other federal agencies dealing with such matters as health and vaccines, the majority held that “major questions” of economic and political importance had to be settled by Congress, which in practice under the current gridlock means that they may not be settled at all. A strongly worded dissent from the liberal minority in the Court pointed out that the Biden administration’s EPA did not even have a rule in place to challenge: which did not stop the activist majority from setting aside the Court’s previous ‘deference’, from earlier cases, to the technical expertise within federal agencies, and intervening anyway.

The ruling comes at a time when atmospheric CO2 levels at the Mauna Loa observatory are now regularly above 420 parts per million, the highest level for over 4.1 million years.

3. Climate Change Committee report on U.K. government’s delivery on net zero targets

On 29 June 2022 the UK Climate Change Committee published its benchmark progress report to the UK Parliament on the UK government’s progress towards its net zero target. Introducing the report, the Committee stated that,

“This landmark 600-page report represents a shift in focus from the Climate Change Committee away from target-setting and towards delivery. The UK has shown global leadership in the ambition of its climate goals. However, despite positive progress in some sectors, we assess that the current programme of policies to reduce emissions will not achieve Net Zero. The CCC has revamped its framework for monitoring the UK’s climate progress, enabling us to closely monitor delivery and identify critical gaps in policy.”

Lord Deben, Chair of the Climate Change Committee, commented that,

‘The UK is a champion in setting new climate goals, now we must be world beaters in delivering them. In the midst of a cost-of-living crisis, the country is crying out to end its dependency on expensive fossil fuels.”

4. Environment Agency Chair attacks companies’ greenwashing

The outgoing Chair of the Environment Agency, Emma Howard Boyd, was reported as making a strong attack on greenwashing by businesses in a speech on 5 July 2022 to the UK Centre for Greening Finance and Investment Annual Conference.

She said that ‘deception’ gives the false impression that firms are addressing the climate crisis.

“Widespread greenwashing by businesses is compromising efforts to prepare for climate impacts such as floods and heatwaves”…

She said that businesses were embedding liability and storing up risk for their investors by giving the false impression they are addressing the climate crisis, and warned that,

“The danger is, that people “won’t realise this deception until it is too late”.

The sharper tone adopted by someone in this position of regulatory responsibility reflects the diminishing patience with greenwashing across government that I predicted in an earlier post in February on ‘Six good reasons to avoid greenwashing ESG financial products

5. Environment Act 2021 and Environmental Targets

I submitted some short comments on the UK government’s public consultation on Environmental Targets, to be set under the Environment Act 2021. Some of these targets are new and welcome, but others reflect limited ambition and take a deal of time before promising any progress.

The environment will suffer if long-term targets are set under the Environment Act 2021, and detailed standards addressing media such as water, air, waste, in the form of “EU retained law” are then swept away under the Brexit Freedoms Bill.

– Biodiversity and wildlife
It is welcome to have a target to halt the decline in the abundance of species, but some environmental NGOs have been critical of the way that this is worded, requiring little progress up to 2030, and then limited progress up to 2042.

– Water Quality and Availability
It is 22 years since the enactment of the EU Water Framework Directive in 2000, which originally required the achievement of “good chemical status” and “good ecological status” in all rivers by 2015 – since delayed until 2027. Yet, of England’s rivers, 0% achieve good chemical status, and 86% fail to achieve good ecological status. The consultation proposes selective and partial targets for pollution from sectors such as agriculture and water and mine workings, stretching out to 2037, with no overall target to improve water quality, or even to prevent its further deterioration.

– Air Quality
The consultation proposes targets for PM2.5 particulates for 2040. The Mayor of London has questioned why this consultation does not cover other pollutants, and why it does not attempt to deliver WHO standards on air quality. The Mayor notes that,

“A child born this year will have their 18th birthday in 2040. A target set this far into the future consigns yet another generation of children to the lifelong health effects of early exposure to excess air pollution.”

6. Convention on Biological Diversity ‘CBD’

The 15th Conference of Parties of this Convention, COP15, has now been moved from Kunming, China to Montreal, Canada for December 2022. Work Continues on negotiating a far-reaching Global Biodiversity Framework, which will in turn influence national and international efforts on biodiversity, including the Taskforce on Nature-related Financial Disclosures.

William Wilson

William Wilson has over 25 years’ experience working as a senior lawyer on environmental and energy laws and regulation within government, private practice and consultancy.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

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