Established regulatory systems for environmental protection must contend with workplace and other restrictions necessitated by COVID-19.
However, it is vital, even in the immediacy and seriousness of the COVID-19 crisis, that the controls in place for wider environmental protection prove resilient and that disruption is minimised. How is the environmental regulatory system coping? What might changes in installations’ activity levels means for environmental quality? Is there normal liaison and communication between environmental regulators and their Licensees? What does the crisis (and the anticipated economic downturn) portend for commitments and policies on climate change and for the financial underwriting of environmental risk and liability? Will the flexibilities on enforcement practices and the time limits freeze introduced for the system of Planning and Development also be needed in environmental regulation?
This article looks at these and other questions that are beginning to emerge:
1. A positive, but likely short-lived, boost for environmental quality:
In many regions there has been a big drop reported in air pollution. Levels of pollutants like sulphur dioxide, nitrogen oxide and particulates are, unsurprisingly, way down following rapidly contracting economies. With the crisis at its height, there is little sense yet that governments, environmental regulators or industry bodies are actively persuading industry to explore ways to continue the reduced pollution levels into the other side of the hiatus. So far, the overriding sense is of the necessity to effect a traditional recovery as soon as public health and governmental restrictions allow.
2. A test of resolve on climate change:
Undoubtedly the economic slump is going to test governments’ and international organisations’ commitments on climate change.
There will undoubtedly be calls to relax those sectoral greenhouse gas measures that proceed from very recent (2020) emissions reduction ‘baselines’. The argument will be that 2020 baseline emission levels, being associated with a COVID-19-induced economic trough that no one predicted, are artificially low. There is an early example. The International Air Transport Association (IATA) has recently advocated for a review of the 2019/2020 emissions baseline (against which airlines’ future greenhouse gas offsetting efforts are to be measured under the new ‘market-based mechanism’ for aviation emissions). The IATA argues that a 2020 starting point can no longer be regarded as ‘business as usual’.
The EU (carbon) Emissions Trading System (EU ETS) covers almost 50% of EU greenhouse gases and over 11,000 large industrial installations and power plants. How recession-proof will its rules and allowance allocations prove to be for Phase 4 (2021 to 2030)? Will the Market Stability Reserve provide the necessary resilience this time? That reserve was put in place after trading in Phase 2 (2008-2013) was completely undermined by the last recession.
On overall carbon pricing, there are ominous signs from the market, with the price of carbon narrowing significantly in recent weeks. Inevitably, this will translate into a further time lag in the development of, and switch to, renewable technologies.
3. Locating environmentally-regulated installations on the Government’s List of Essential Services (List):
In some cases, specific environmentally-regulated sectors (or environmental service businesses) are easily identifiable on the List and in other cases, less so. The Utilities category on the list is a basis for ensuring the continued treatment and supply of public water and the treatment of waste water. The essential service category termed ‘Manufacturing’ is extremely broad. Several of its sub-categories, such as the manufacture of ‘pulp, paper, paperboard and wood’; of ‘coke and refined petroleum products’; of ‘alumina, chemicals and chemical products’ and of ‘pharmaceutical products and preparations’, correspond closely to classifications/terminology used in the EPA’s scheduled list of activities licensable under the EU’s ‘Industrial Emissions Directive’ (IED). It is not apparent why other IED scheduled activities were not included on the List.
4. The challenges of down-scaling large plants:
Many large complex installations’ previous experience of closure (or significant downscaling) will have occurred under scenarios of long-planned down-time for annual or biennial maintenance and not a potential shut-down with a few days’ notice. In addition, many plants’ optimal environmental performance is achieved under conditions of full or near-full operational efficiency. These challenges and considerations have loomed in recent weeks for several plants whose status (by reference to the List) has been unclear.
5. Impact of reduced activity and staff levels:
Many EPA licences include, as standard conditions (the precise wording may vary from licence to licence), an obligation on the operator to notify the EPA where there are changes to operations, management or personnel that are, or could be, ‘of significance’ for emission levels and/or for environmental protection. For those facilities faced with re-organising operations due to environmental personnel or teams being affected by COVID-19 (directly infected and/or self-isolating) these notification conditions need to be considered.
6. Interpreting Licence conditions in light of COVID19 and potential need for EPA guidance or legislative relief:
Other standard environmental licence conditions (never intended for a COVID-19 world) may need to be considered in the event of a prolonged closure. Many standard EPA licence conditions trigger de-commissioning requirements on plant closure for a period of six months. A COVID-19 disruption of that scale appears unlikely at this point although not entirely inconceivable, bearing in mind that in the sphere of Planning and Development the Government’s COVID-19 response envisages regulatory impact/response running, potentially, out as far as November 2020. If business interruption for EPA licensees approaches anything of that scale, regulatory guidance or legal clarification will be required.
7. Communicating with the EPA:
The EPA has notified via its website that a number of its staff are working remotely and that there may be delays in replying to queries. The principal communication channels for licensees to communicate with the EPA remain open (e.g. via the EDEN and the normal email communication channels that apply between licensees’ and their designated EPA inspectors). This is important for licensees to be able to communicate any logistical difficulties being experienced in continuing to monitor and report; in understanding and implementing EPA expectations regarding activity levels and core site safety and maintenance; in knowing whether already-scheduled meetings or audits/visits are proceeding; and to understand if there is flexibility allowed on the implementation of corrective actions already imposed. The EPA’s emergency lines for the public remain open. The EPA expects, in general terms, to be able to progress licence applications already made as well as licence reviews, and technical amendment applications. EPA-related public events will be affected. For example, the EPA public hearing into the Irish Cement plant application, scheduled to be held in May, is now postponed.
8. Flexibility in environmental regulation time-limits and steps:
In the Government’s recent emergency legislation, the Emergency Measures in the Public Interest (Covid-19) Act 2020, an effort is made to stabilise the system of Planning and Development through the introduction of a pause period on the running of all planning and development-related times limits. It runs initially from 29 March to 20 April 2020 and may be extended. This freeze in time periods reflects the extent to which planning and development is fundamentally centred on numerous public participation and other steps that are time-specific and time limited. The introduction of the freeze in time periods reflects how that is undermined by COVID-19-related social and workplace disruption. The time limits freeze in planning and development has the potential to impact on environmental regulation in certain ways. There will be delays to planning permissions and construction for facilities that will ultimately also require an EPA licence. Also, many environmental impact assessments (EIAs) are conducted in parallel with the planning process. To take the core environmental regulation system though, a number of its most important procedures, including environmental licensing and environmental enforcement, are also heavily prescribed with statutory time limits or involve public consultation; so, in the event of ongoing COVID-19 disruption, the Government will have to consider flexibility for environmental regulation similar to what has been introduced for planning and development.
9. COVID19 and Environmental Finance:
There is a broad acceptance that serious economic impacts will result from COVID-19. What it will mean for the financial aspects of environment regulatory systems is too early to predict; that will depend on the economic sectors most affected and on how sustained the downturn is.
In general though, the 2008 financial crisis is recent enough to recall that a number of important legal issues arose out of receiverships and liquidations of businesses and operations that were heavily regulated from an environmental perspective.
A serious COVID-19-induced economic downturn will bring into focus the fact that many financial security instruments in place between the EPA and its licensees envisage a licensee’s insolvency being a ‘default’ event entitling the EPA to enforce its security.
Clearly, a sustained economic downturn will severely test the current trend towards green finance and carbon finance. On the other hand, the European Commission’s Consultation on a Renewed Sustainable Finance Strategy (launched yesterday, 8 April) strongly emphasises that a sustainable finance strategy must transcend economic cycles including, the Commission stresses, the current economic trough arising from COVID-19.
10. Accuracy and Currency of Environmental Assessments after COVID-19:
At the outset of the COVID-19 crisis many environmental studies and analyses will have been underway (or planned for around now) by project applicants and their technical consultants. These will have been intended to form part of Environmental Impact Assessment Reports or other environmental studies to be assessed by decision-makers like planning authorities when granting development consents. With some environmental assessment or impact areas, including current/background air quality, traffic movements and noise levels, the influence of the recent COVID19-related social and economic effects will need to be reflected in the timing, design or content of studies and of modelling.
For further information or to discuss the impacts on your business, please contact Conor Linehan or your usual William Fry contact.