UK: Environment Newsletter – February 2011

The Energy Performance of Buildings (Certificates & Inspections) (England & Wales) Regulations 2007 – Airconditioning Systems

Part 4 of the Energy Performance of Building Regulations (Certificates & Inspections) (England & Wales) 2007 imposes an obligation on those who have control of airconditioning systems (with a maximum output of more than 12kW) to make sure that the system is inspected at least every five years by an accredited energy assessor.

The requirement to have an air-conditioning system inspected was introduced in stages from 1 January 2008. The final deadline for inspection of systems in service before 1 January 2008, and with an output of more than 12kW, was 4 January 2011.

For any systems put into service after 1 January 2008, inspection must take place within 5 years of the system being put into service.

The inspecting energy assessor must provide a written report as soon as practicable after the inspection, containing information on the efficiency of the system, the size of the system compared to the building's cooling requirements and advice on how the system might be improved.

The local weights and measures authority in each area is responsible for enforcing these regulations. Enforcement is normally carried out by Trading Standards Officers who issue penalty charge notices to those who fail to comply.

Environment Agency: Civil Sanctions and New Enforcement Policy

From 4 January 2011 the Environment Agency (EA) has started using civil sanctions as well as a new enforcement and sanctions policy, consisting of documents which set out how the EA enforces environmental offences, how it chooses the appropriate criminal or civil sanction and how it proceeds with enforcement.

The Regulatory Enforcement and Sanctions Act 2008 gives certain regulators, including the EA, the power to impose civil sanctions in certain circumstances in England and Wales, rather than prosecuting in the criminal courts. Using civil sanctions gives the EA considerable additional flexibility in enforcement and will also help businesses and individuals resolve offences without the stigma of a criminal prosecution.

Civil Sanctions are mainly available to the EA for offences in the hazardous waste, water resources, and packaging waste sectors committed after 6 April 2010. Civil sanctions are not available for offences under a number of environmental regimes, including:

  • Offences under the Environmental Damage (Prevention and Remediation) Regulations 2009 (SI 2009/153), which implement the Environmental Liability Directive (2004/35/EC).
  • The Environmental Permitting (EP) regime offences. The government has consulted on whether civil sanctions should be introduced for EP regime offences but these are unlikely to be in place before April 2011.
  • Some water pollution offences.
  • Some waste management offences.

The following civil sanctions, which can be used on their own or in combination, will be available to the EA:

  • Fixed monetary penalty (FMP), for minor offences, of £300 for businesses and £100 for individuals.
  • Variable monetary penalty (VMP) for more serious offences than those for which a FMP would be appropriate. The level of the VMP is set by the EA using a methodology set out in its new enforcement and sanctions policy.
  • Compliance notice (CN) requiring the offender to come back into compliance.
  • Restoration notice (RN) requiring the offender to take steps to put right any damage caused as a result of its non-compliance.
  • Stop notice (SN) which might be used to put an immediate stop to any activity that is causing, or poses a significant risk of causing, serious harm to human health or the environment and where an offence is being, or is likely to be, committed.
  • Enforcement undertaking (EU). This is a written agreement between an offender and the EA for the offender to take action within a specified period to make amends for the non-compliance and its effects.

Safety in the Oil Industry

The final report from the presidential commission investigating the causes of BP's Gulf of Mexico disaster recommended that the US oil industry adopt the North Sea approach to safety.

The US government is likely to overhaul its discredited regulatory regime covering offshore operations, which had only required companies to fill out standardised box-ticking safety audits. It is also expected that the commission will recommend the setting up of an independent safety institute responsible for auditing companies' plans.

In the UK, The Energy and Climate Change Committee has examined whether the Government was right to rule out a moratorium on deepwater drilling in the North Sea in the wake of the Gulf of Mexico oil disaster. This inquiry also considered:

  • The implications for the UK oil industry of the explosion on BP's Deepwater Horizon rig;
  • The hazards and risk of drilling in the North Sea and whether the existing safety regime and environmental rules are fit for purpose; and
  • Whether deepwater oil and gas production is necessary as the UK attempts to move to a low-carbon economy, and to what extent those fossil fuel resources would add to the country's energy security.

The report, published on 6 January 2011, raises doubts about an oil spill response in the UK and concludes that extra precautions should be considered to ensure that a deepwater drilling disaster does not happen here – but that a moratorium on deepwater drilling would undermine energy security and is not necessary.

The Committee welcomes the development of devices to respond to a deepwater blowout in the UK, but urges the Government to recognise that oil spill response equipment is not a substitute for a fully functioning blowout preventer, particularly as there are concerns about the ability of oil spill response equipment to function in the challenging environment found in the seas West of Shetland.

The Committee also commented that there needs to be absolute clarity as to the identity of the responsible party (should an oil spill occur in the UK), and liability legislation needs to ensure that those affected are compensated as soon as possible.

Given the high costs of the Gulf of Mexico incident, they believe that the Offshore Pollution Liability Association (OPOL) limit of $250 million is insufficient and are also concerned that the voluntary requirement of OPOL membership—despite it being a pre-requisite of the licensing process—weakens any legal control over it, allowing polluters to claim that any damages to biodiversity and ecosystems are "indirect", and therefore do not qualify for compensation.

This report comes at a time when OPOL has recently increased the limit of liability mutually guaranteed by the industry from US$120m to US$250m per incident.

CRC Energy Efficiency Scheme

The CRC is a new, UK-wide, mandatory, "cap and trade" emissions trading scheme for large businesses and public sector organisations. The scheme came into force on 1 April 2010.

Organisations affected by the CRC (depending on their electricity consumption in the qualification year of 2008) were required to register for the Introductory Phase of the CRC, or to make an Information Disclosure, by 30 September 2010.

Failure to register is a breach of article 95 of the CRC Energy Efficiency Scheme Order (CRC Order). Penalties include an immediate fine of £5,000 and a further fine of £500 per working day for each subsequent working day of delay up to a maximum of 80 working days. If, for example, a participant did not register by 30 September 2010 and still had not registered by 25 January 2011 (i.e 80 working days from the registration deadline) it would incur a fine of £45,000 and the administrator would publish the fact that the organisation had failed to register.

Failure to make an Information Disclosure, where an organisation does not submit the necessary list of Settled HHMs by the registration is a breach of article 103 of the CRC Order and the organisation will be liable for a penalty consisting of a one off £500 per Settled HHM that the organisation is responsible for.

Changes to the CRC Energy Efficiency Scheme announced in the government's Spending Review on 20 October 2010

On 20 October 2010, the coalition government announced in its Spending Review 2010 that the:

  • First sale of allowances under the CRC Energy Efficiency Scheme (CRC) for 2011/12 would take place in 2012 rather than 2011; and
  • Revenue raised from the sale of CRC allowances would not be recycled to participants in the scheme but instead would be used to support the public finances. Further announcements regarding these changes are anticipated.

Aviation and the EU Emissions Trading (EU ETS)

The EU ETS was established pursuant to Directive 2003/87. On November 19, 2008, the European Parliament and Council adopted Directive 2008/101 (the "Directive") which amends Directive 2003/87 to include aviation in the scheme for greenhouse gas emission allowance trading within the EU. Member States are required to implement the Directive. The U.K. government elected to implement the Directive by a two-stage legislative process. First, the Secretary of State for Energy and Climate Change issued the Aviation Greenhouse Gas Emissions Trading Scheme Regulations 2009 (the "Regulations"), which entered into force on September 17, 2009, and implement certain provisions of the Directive. Following a lengthy consultation process with regard to the second stage, the Aviation Greenhouse Gas Emissions Trading Scheme Regulations 2010 came into force in August 2010.

Monitoring and reporting

All aircraft operators included in the EU ETS should have complied with the obligation to submit an emissions plan outlining how they will determine their reportable annual CO2 emissions by 12 November 2009. Aircraft operators also had the opportunity to choose to submit a separate monitoring plan outlining how they will determine their benchmark emissions data by 31 December 2009 (in order to obtain free allowances).

The first monitoring period for annual emissions and benchmark data commenced on the 1 January 2010 and ended on 31 December 2010. The second monitoring period for annual emissions commenced on 1st January 2011 and will end on 31 December 2011.

At the end of each monitoring period, operators need to collate data on their CO2 emissions for the period. The verified emissions reports must be sent to the Environment Agency before 31 March each year. Failure to submit an emissions report could result in a civil penalty being served. The first report for annual emissions data and benchmark data collected during 2010 will need to be submitted by 31 March 2011.

For those operators wanting to apply for an allocation of free allowances, data on flight distances and payloads for the monitoring period 2010 must be collected. Failure to submit the report by this date could result in no free allowances for the period 2012-2020.

Is the European Union's Application of its Emissions Trading Scheme to Aviation Illegal?

The EU is proceeding with its plan to include non-member state airlines in the EU ETS, notwithstanding the agreement reached in October 2010 among the 190 contracting states of the International Civil Aviation Organization (ICAO) to reduce greenhouse gas emissions from aviation on the basis of 15 agreed principles.

Predictably, the inclusion of aviation within the EU ETS has been both legally controversial and politically significant. John Byerly, until recently U.S. Deputy Assistant Secretary for Transportation Affairs, recently stated that the U.S. government recognises "the efficacy [and] the potential utility of market based measures[,]" but seeks a global agreement through ICAO that would persuade the EU to exclude aviation from the EU ETS. "If we don't get there at ICAO, the consequences are going to be serious," he warned.

At the 37th assembly of ICAO in Montreal in October 2010, International Air Transport Association (IATA) Director General and CEO Giovanni Bisignani insisted that "the only effective long-term solution remains a global approach". EU Commissioner for Climate Action Connie Hedegaard stated that the EU is committed to "fighting for the inclusion of aviation in the ETS." She noted that, in Montreal, ICAO refrained from adopting language that would make the application of the EU ETS to airlines dependent on the mutual agreement of other states. The EU, however, agreed to engage in constructive dialogue with third countries during the implementation of the EU ETS, most notably regarding how to address emissions from incoming flights from outside the EU.

On December 16, 2009, the Air Transport Association of America (ATA) and three U.S. airlines (American, Continental and United) commenced their long-threatened legal action in the U.K. against the inclusion of aviation in the ETS. The English court permitted various entities to intervene in the case, including IATA, which represents about 230 airlines comprising 93% of scheduled international air traffic; the National Airlines Council of Canada (NACC); and five environmental, non-governmental organizations (the Aviation Environment Federation, WWF-UK, the European Fund for Transport and Environment, the Environmental Defense Fund and Earthjustice). The U.S. carrier claimants brought the case in London because the U.K. is the first EU member state to implement the EU ETS. As expected, however, the case was referred to the Court of Justice of the EU (CJEU).

Mark Bisset and Georgina Crowhurst have written an article which assesses the claimants' main legal arguments and the U.K. government's response thereto. The article concludes that, even if the claimants only prevail on some but not all of their arguments, such an outcome could have profound implications for the future of EU climate change policy relating to aviation. Please contact us for a copy of this article.

Suspension of the EU ETS

On 19 January, the European Commission suspended transactions on all EU ETS registries, except for the allocation and surrender of allowances. The suspension was to continue until at least the end of January 2011. The suspension has been imposed because of recurring security breaches in some national registries involving the theft of EU allowances. National registries affected include the Czech Republic, Greece, Estonia, Poland and Austria.

We are acting for clients that have had several thousand allowances stolen and pursuing legal proceedings on their behalf.

The Flood and Water Management Act 2010

The Flood and Water Management Act 2010 (Commencement No. 1 and Transitional Provisions) Order 2010 (SI 2010/2169)) was made on 31 August 2010 and published on 3 September 2010. This order brought a number of provisions of the Flood and Water Management Act 2010 into force. From 1 September 2010 ministers were, amongst other matters, able to make regulations concerning flood risk management functions and temporary hosepipe bans.

From the 18 January 2011, the Flood and Water Management Act 2010 (Commencement No 2) Order 2011 gave Ministers powers to make regulations providing a right of appeal from penalties.

Shipping and Asbestos*

The Maritime Safety Committee (MSC), at its 88th session held from 24 November to 3 December 2010, approved information on prohibiting the use of asbestos on board vessels, as set out in IMO Circular MSC.1/Circ.1374.

Asbestos containing materials are continuing to be a significant problem from a transactional and occupational risk perspective, in particular on vessels built before 2002 under the terms of the Safety of Life at Sea (SOLAS) Convention.

Under the doctrine of caveat emptor ('buyer beware'), the buyer cannot recover from the seller for defects on the property that rendered the property unfit for ordinary purposes (although some statutory protection does exist). The only exception is if the seller actively concealed latent defects or otherwise made material misrepresentations amounting to fraud.

Since 1 January 2011, all uses of asbestos are prohibited on new vessels and installations. However, classification societies have testified that asbestos containing materials are still being employed by many shipyards, particularly in China.

A meeting of the IMO's flag state implementation subcommittee earlier this month considered the case of the Caroline Essberger, the 2009-built, 8,400 dwt vessel operated by John T Essberger of Dordrecht and built by Eregli shipyard in Turkey. The IMO draft report reveals it took almost six months to remove the huge quantity of asbestos containing materials on board the vessel. It also confirms that the ship was misleadingly declared asbestos free when commissioned for service.

According to the report: "The [Dutch] delegation reported that they were, recently, confronted with a new-building ship, provided with statutory certificates, and with an asbestos free declaration, that appeared to have more than 5,000 gaskets containing asbestos in the piping systems on board''.

Shipping and Emissions*

Uncertainty continues surrounding the impending obligatory assessment of emissions from shipping, as owner/operator organisations are beginning to suggest that the approach currently being proposed within the EU will be met with resistance.

The IMO Marine Environment Protection Committee (MEPC) is due to meet in July 2011 and will continue discussions around Market Based Measures (MBM) for reducing emissions from shipping.

Due to increased pressure from the EU, the IMO is assessing ten differing proposals for a global system to introduce MBM and limit the potential for 'carbon leakage'. The pace at which these measures are being assessed, agreed and enacted leads many to believe that sub-regional and local policies will ultimately dictate emission criteria for vessel owners and operators.

Speaking recently, Dan Sten Olsson, CEO of Stena AB, questioned certain elements of the EU approach that may be adopted should IMO proposals fail to materialise by 2015. With regard to northern European ferry operators, Mr Olsson suggested that 'adding 30-40 percent on the price of a ticket, virtually overnight on the first of January 2015, will definitely not be absorbed by the travelling consumer or by the transport companies'. The inference and implication being that road transport will become a more viable economic solution but less sympathetic to carbon reduction.

With individual flag states and ports pursuing vastly different strategies it is becoming increasingly vital to gain an appreciation of how vessels are to be suitably equipped, thus ensuring commercial entities appropriately hedge against their own carbon footprints.

* Written by Roxburgh Environmental, which has been recently incorporated and may be able to help clients to make informed decisions regarding the technical aspects of their maritime assets. Please visit Roxburgh Environmental's website, www.roxburghenvironmental.com, for further information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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