26 May 2020

Dr Emily Lydgate is a Senior Lecturer in Environmental Law at the University of Sussex and a Fellow of the UK Trade Policy Observatory.

The fundamental difference between the EU and UK positions on environment and climate is that of tradition (in the UK) versus innovation (in the EU). In fact tradition is somewhat of an understatement – the UK has made good on its aspiration for a ‘Canada-style’ deal by copying the environment chapter from that Agreement in its proposed EU Free Trade Agreement (FTA) more or less verbatim. This chapter is relatively mild in the level of obligation it imposes. It requires parties to uphold and enforce their own domestic environmental laws, but only if failing to do so would encourage trade and investment. Violation of this commitment does not lead to trade sanctions or fines. This raises some questions.

First, despite the UK Government insisting Covid-19 does not slow it down, how much thought has gone into this? For example, the only thematic section is on forest products (Article 28.10). Is this particularly important to UK-EU relations or, more likely, there because deemed significant in the FTA it was cribbed from? Second, why is the UK, which for example suffers severe air pollution when low winds blow in from the Continent, so uninterested in acknowledging specific shared environmental interests ? Finally, a notable omission in the copy-paste is all mentions of climate change (Articles 24.9(2) and 24.12(1)(e) of CETA) – why? The UK Government has indicated that it will address climate change in an Energy chapter, but it is also an environmental issue, so should logically be included in the Environment chapter too.

This brings us to the EU’s innovative proposal. In contrast to the UK’s, Section 6 of the EU’s proposed level playing field chapter calls for the maintenance of existing common levels of protection in a wide range of areas. It eliminates the link to trade and investment, making it look  less like an agreement aimed to preserve fair competition and more like a general environmental cooperation agreement. And yet, it is enforceable through the Agreement’s dispute settlement system, meaning that non-compliance can result in sanctions.

The EU draft states that, if both parties raise levels of protection, this will be locked in as a new shared baseline (Article 2.31), a very rudimentary form of dynamic alignment. It also contains requirements for both Parties to enforce effectively their own environmental laws, presumed met on the EU side (Article 2.32). The rationale for this is clearly that, for several decades, the UK has relied upon EU bodies in its environmental monitoring and enforcement, and must now come up with domestic institutions to replicate these functions. Finally, and for the first time in any EU FTA, Section 7 requires both Parties to uphold their net-zero targets and have a system of carbon pricing of equivalent scope and effectiveness.

Innovative inclusions to FTA raise questions

The innovative nature of these requirements raises many questions – such as, how would a lowering of a common level of protection be assessed? It’s also unclear whether the UK meets EU requirements on environmental enforcement. The EU’s proposal specifies that an independent body ‘shall have the right to bring a legal action…with a view to seeking an adequate remedy (Article 2.32 LPFS)’.  But the UK’s proposed independent body, the Office of Environmental Protection (OEP), is unable to make binding recommendations, even if it finds that a UK public body has seriously failed to enforce environmental law (Draft Environment Bill, Sections 26-34). This contrasts with the EU Commission, which is required to ensure enforcement of EU rules. This has often resulted in the UK facing the European Court of Justice (ECJ) for environmental non-compliance, a process that can ultimately result in fines. In contrast, the draft Environment Bill allows for judicial review, a more limited form of scrutiny. I have written in more length about these challenges in a paper on Non-regression clauses.

The irony of these approaches should not be lost on us. During the first phase of negotiations, the EU Commission insisted that there were rigid, ready-made models that the UK had to choose from – including steps for a ‘basic FTA’ or Canada-style agreement – but has now come up with something unlike any other FTA, and completely specific to the UK. Meanwhile the UK was full of interesting and innovative ideas for regulatory cooperation (does anyone remember the three baskets?), but is now insisting that it should not be required to do anything beyond a ‘basic FTA’.

The lesson is that, on both sides, achieving your priorities can inspire creative thinking. For the UK, this has been product standards and regulation: it wants to diverge whilst limiting regulatory barriers and border checks (a goal sometimes described as ‘cake-ism’). For the EU, this is the so-called Level Playing Field (LPF), which includes conditions on the environment and climate change, but not on product standards and product regulation, areas the UK particularly wants flexibility in. The EU already requires goods entering its market to conform to its product regulation, and is largely uninterested in accommodating UK creativity in this area. Instead the LPF focuses on broader production conditions – eg, companies facing effective regulation limiting their emissions, or the pollution they discharge into lakes and rivers. Such regulation can drive up prices, so the underlying concern is to prevent the UK from getting a competitive advantage from environmental de-regulation.

How to find a common ground?

Why are two countries which both consider themselves environmental and climate leaders at such odds? They seem to have come to the opposite conclusion from the same starting point: the UK’s insistence that it won’t lower standards. If you won’t lower standards, goes the EU line of argumentation, why do you object to our requirements? As we won’t lower standards, argues the UK, why do you need to tie us down?

If cooler heads can prevail, finding room for a landing ground between these proposals should not be difficult.

For the UK’s part, it should recognise that the EU’s agreement in practice will probably impose few if any constraints, in part because of the complexity of enforcing such a broad obligation (how do you assess a common level of protection?) and in part because any complaints are likely to be limited by an implicit causal link with concerns about competitive deregulation. The previous Withdrawal Agreement suggests particular concern lies with marine fuels, atmospheric pollutions and, most notably, industrial emissions (the Commission estimated that relaxing EU requirements could provide UK industry with a €4.7 billion per year gain.) Indeed, if the EU implicitly accepts the UK’s OEP as meeting its environmental enforcement requirements, this already indicates a very light touch approach. But more fundamentally, if the UK is indeed committed to environmental protection, why should any of this pose a problem?

Further, the UK should think constructively about the potential benefits of cooperation, particularly in the climate area, and particularly in the wake of Covid-19. The independent UK Committee on Climate Change has called for a ‘green recovery’ and one way of achieving this is to introduce wider and higher carbon taxes to prevent an emissions rebound. Yet if UK ambitions outstrip those of the EU, a large export destination, it will put UK producers at a competitive disadvantage. Why not try to coordinate in this area, and tie the EU to at least the UK’s level of carbon tax?

Another potential area of concern is that the EU has listed upholding the Paris Agreement as an essential element of the Agreement (Article 5 of the ‘Common Provisions’ in the EU draft FTA), meaning that it could suspend the Agreement for non-compliance. This is not specific to the UK, and poses virtually no threat unless the UK withdraws altogether from the Paris Agreement, particularly considering that it allows countries to determine their own contributions to mitigating climate change. Indeed, as a climate leader, the UK might well advocate the inclusion of such conditionalities in its own FTAs.

For the EU’s part, there are a few requirements that raise eyebrows and should be dropped. These include the fact that Sanitary and Phytosanitary (SPS) standards are listed as an area in which common level of protection should be upheld. This makes little sense. SPS standards, which encompass food standards, are already dealt with at length in a separate chapter. Also, SPS stands out on the list of covered areas as being clearly product-related. The EU already requires that any goods exported from the UK or any country meet its SPS standards. Even if some UK constituencies would thank them, the EU itself gains nothing trying to multilateralise the UK’s commitment to upholding SPS standards through an LPF provision.

The EU should also consider how realistic it is to enforce obligations on common levels of environmental protection, when environmental regulation is so complex – for example, would eliminating a public participation requirement or swapping a performance standard for a market-based regulation like permit trading represent back-sliding or not? Instead, the EU could achieve its goals through identifying a smaller range of enforceable negotiated quantitative targets such as emissions requirements, and/or limit enforcement to the areas of the Agreement that deal with the effectiveness of both sides’ domestic environmental enforcement.

Most of all, the two sides can hardly avoid climate cooperation. The UK, in particular, must hold its nose and recognise that increasingly frequent trade wars and trade restrictions push it into the EU’s geopolitical camp. Coordinating a strong approach to carbon pricing is good politics and is good for UK competitiveness.

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