In this latest Environmental Law News Update, Christopher Badger, Nicholas Ostrowski and James Harrison consider the Government’s commitment to a 78% reduction in emissions by 2035, the publication of a climate change strategy by the Pensions Regulator and a case which rules that fluff is subject to landfill tax.
Government commits to 78% reduction in emissions by 2035
The Government has accepted the recommendations of the Climate Change Committee and committed the UK, in law, to reduce emissions by 78% by 2035 compared to 1990 levels. This now forms part of the sixth Carbon Budget, aimed at taking the UK more than three-quarters of the way to reaching net zero by 2050.
For the first time the Carbon Budget will include emissions from international aviation and shipping.
The UK has already committed to reducing emissions in 2030 by at least 68% compared to 1990 levels through its most recent Nationally Determined Contribution, although this did not include international aviation and shipping. On an equivalent basis, the 2030 would be a 64% reduction relative to 1990.
There is obviously a political element to the announcement, coming as it did just before President Biden’s Climate Summit held on Earth Day (22 April). It also comes at a time when the UK will be the President of COP26, still scheduled to take place in Glasgow later this year.
The key concern is that the Government doesn’t have the policies to be able to meet this legal commitment. We don’t yet have the Treasury’s Net Zero Review or an overarching Net Zero Strategy, both of which are to be published ahead of COP26. The Committee on Climate Change has published a report on potential policies to drive us towards Net Zero and has suggested that the move to a green economy will be cost neutral, despite the fact that it will require £50 billion of investment each year to achieve that target. It will be interesting to see how many of these suggested policies are adopted.
The Government’s announcement can be found here
The 6th Carbon Budget and related documents can be found here
Pensions Regulator publishes climate change strategy
On 7 April 2021, The Pensions Regulator (TPR) published its climate change strategy (CCS), which outlines TPR’s strategic response to climate change and how it will help pension trustees “meet the challenges from climate change” and ensure that decisions made on behalf of pension savers are in their best interests. The proposals made within the CCS are (as one would expect) focused on the potential for investment performance to suffer if trustees fail to consider risks and opportunities from climate change or fail to exercise effective stewardship.
The CCS is shaped by the government’s Green Finance Strategy (GFS). The GFS aims to encourage investment in green and low carbon technologies, services and infrastructure intended to help achieve net zero domestic greenhouse gas emissions by 2050. To ensure climate and environmental factors are fully integrated into financial decision-making, recommendations drawn up by the Taskforce on Climate-related Financial Disclosures (TCFD) should be followed. The Pension Schemes Act 2021 develops the picture as it facilitates the making of new regulations for prescribed schemes based on TCFD recommendations, for instance, to require mandatory disclosure of climate risks to trustees and savers.
Against this backdrop, the CCS addresses three primary aims, the most significant of which is the aim to “create better outcomes in later life for workplace savers by driving trustee action on the risks and opportunities from climate change”. There are three timescales cited in the CCS in which achievement will be measured. In the first period (ending in 2024), it is expected that schemes will implement, disclose and continue to refine their policies on climate change, that the new Pension Schemes Act comes into force, and that trustees will take climate goals into account. Initially, not all schemes will be expected to meet these targets (approximately 90% of defined contribution scheme memberships and approximately 60% of defined benefit memberships). However, it is reasonable for us to hope that the TPR will take effective action against non-compliance in those schemes that are being regulated because the CCS explicitly states that trustees “must clearly evidence that words and intentions translate into action” or risk enforcement action.
In addition to regulating the industry, TPR will work to understand and inform debates about green finance and to be a strong voice highlighting climate-related risks and opportunities for savers and the pensions industry. TPR will also take steps to reduce its own impact upon the climate.
Sceptics amongst us might expect that the TPR would seek to do the bare minimum to mitigate the risk posed by climate change and take advantage of potential investment opportunities. Indeed, this fear could be realised because TPR will set its own “milestones” and check progress against its objectives, which carries with it the inherent problems of TPR marking its own homework. However, the impression given by the CCS is that this is not mere lip service being paid to the problem. Time will tell if effective steps are being taken but in Autumn 2021 we can at least expect a Climate Adaptation Report outlining findings on how those running pension schemes are responding to and managing the risks and opportunities from climate change. We can also take heart from the fact that other sustainability-related financial risks (e.g., biodiversity loss or UN Sustainable Development Goals) could be encompassed in future iterations of the CCS.
Landfill fluff case – Court of Appeal decide fluff is rubbish and is subject to landfill tax
Landfill operators create cells lined with thick impermeable membranes to prevent leachate from seeping out of the cells and into the ground. In order to prevent any sharp objects from protruding through the impermeable membrane, landfill operators place a layer of ‘fluff’ which is compacted black bag waste and which is laid underneath and on top of the other waste in the cell to protect the cell from being punctured. The short point raised in this appeal was – is the fluff laid at the top of the cell waste (and hence liable to landfill tax) or not?
Keen eyed readers (see previous blog post here) will recall that in May 2018 the First Tier Tribunal found that was waste and hence the HMRC was entitled to landfill tax arising from that waste. The Upper Tribunal overturned the First Tier Tribunal’s decision in January 2020 (see previous blog post here) and held that, in fact, fluff was not waste.
The Court of Appeal has now come along and held that, in fact, the Upper Tribunal was wrong and the First Tier Tribunal was right and, all along, fluff is actually waste that is subject to landfill tax.
The see-sawing between these difference judges tell us one thing right at the start – any case involving the definition of waste is difficult. It is rare for a decision of Mr Justice Fancourt (President of the Upper Tribunal Lands Chamber) to be overturned on appeal. If an eminent judge of the High Court could get this wrong what chance, one may ask, does a humble waste operator have of correctly identifying what is and what is not waste?
Interested readers can peruse the detailed judgment of Rose LJ (now elevated to the Supreme Court) at their leisure. Principally it revolves around a careful consideration of the four key authorities and makes the point that even if a material is to be ‘used’ in some way that does not necessarily mean that there is no ‘intention to discard’ it (the key test) and Lady Rose warns us against relying too heavily on analogies when ascertaining the meaning of ‘discard’ in the legislation. There is also a very useful judgment from Nugee LJ about the limitation of relying on previous authorities.
Standing back though and given the trouble this apparently straightforward issue has given to the judiciary one can only imagine that the waste operators will seriously be considering an appeal to the Supreme Court. Watch this space!
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