Seizing the environmental moment

The UK’s environmental law relies heavily on EU legislation. What shape will it take post-Brexit and what will it mean for the real estate sector? Helen Bowdren, environmental partner at Dentons, attempts to find out Michael Gove talked about “an unfrozen moment” in a speech in June 2017 – referring to the opportunity that he sees in Brexit to change the UK’s environmental law, currently frozen in ice by the EU. The government developed this theme in its 25-Year Environment Plan, published in January 2018. The plan looks forward to delivering a “green Brexit”; seizing this chance to change the UK’s environmental law and to reshape it to better fit a 21st century Britain. Not everyone is positive about Brexit’s environmental implications and some fear it could lead to weaker standards and reduced protection for the environment. But what would a green Brexit involve, and will it lead to a wholesale change in the UK’s environmental law? If so, what does that mean for the real estate sector? EU law and the environment The UK’s policies on energy efficiency, climate change, waste management, water protection and industrial emissions are closely linked with Europe and often refer to European standards. All of this is relevant for the real estate sector. The law requires property developers to make buildings energy efficient, to consider waste and recycling solutions at the design stage, to make room for green spaces within developments, and to consider sustainability when designing and building new developments. If the law changes, this could lead to increased cost. The government has introduced the European Union (Withdrawal) Bill to Parliament. If passed, it will end the primacy of EU law in the UK (as at the Brexit date), and will incorporate all EU legislation into UK law. The government would then decide over time which parts to keep, change or remove. The devil is in the detail. Business as usual? Let’s start with energy efficiency in buildings. This is a live topic in the UK property market, and changing fast. The Minimum Energy Efficiency Standards (MEES) regime is in force, and from 1 April 2018, it will be unlawful to issue a new lease for properties rated F or G on their EPCs. The MEES regime implements an EU Directive (the Energy Performance of Buildings Directive 2010), which will continue to apply even after Brexit. The government is scrapping the CRC Energy Efficiency Scheme following the 2018/2019 compliance year, and the final date for surrender of allowances will be October 2019. It isn’t being replaced, instead, the main rates of the climate change levy will increase from April 2019 to recover lost revenue. The government also plans to introduce a new streamlined energy and carbon reporting regime, which will combine elements of the CRC and mandatory greenhouse gas reporting under the Companies Act 2006. The government could, in theory, decide to relax its approach to energy efficiency – but that seems unlikely. The 25-year plan states that it wants new homes to be built in a way that reduces demands for water, energy and material resources, improves flood resilience, minimises overheating and encourages walking and cycling. Moreover, the Climate Change Act 2008 (not EU derived) requires the UK to reduce carbon emissions by 80% compared with 1990 levels by 2050 (and by 34% by 2020). Therefore, we expect energy efficiency to continue to be a priority for the sector. Environmental permitting The environmental permitting regime requires those carrying out certain types of activity to hold an environmental permit. This includes waste management activities (landfills, waste transfer stations, recycling plants, or incinerators), water activities (private sewage treatment plants that discharge to groundwater or to rivers) and anything else that cause emissions to land, air and water, or that involve waste. Environmental permits won’t change at Brexit date, but the emission limits in permits are set by reference to European standards, and so as we move away from the EU, these limits could well change. Devolution Environmental matters are devolved so are already dealt with differently in England, Scotland, Wales and Northern Ireland. Scotland and Wales have ambitious environmental strategies, with Westminster often playing catch up (for example, the plastic bag tax). Devolution is contentious in the Brexit discussions, and the devolved administrations have described the actions of the government as a “naked power grab”. We expect that after Brexit, the devolved governments will continue to drive the environmental agenda. Could we see a “race to the top” in terms of environmental standards? This could lead to further differences in the law in each of the home nations – something which is more difficult to track for those affected by regulation. There are some areas that won’t change with Brexit. The contaminated land regime under Part 2A of the Environmental Protection Act 1990 is domestic and is likely to stay the same. Likewise for green belt land. About 12% of land in the United Kingdom is designated as greenbelt, and the environmental plan states that the government remains committed to protecting it. A final (non-Brexit) point to consider is the current review of the Building Regulations, which was launched following the Grenfell Tower fire, with a particular focus on high-rise residential buildings.  Dame Judith Hackitt’s interim report declared the current system “not fit for purpose”. We expect the review will lead to major changes in safety regulation, and the overhaul is likely to require a systematic approach to fire safety responsibility throughout the construction and life cycle of a building.