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    A customs union solution – trade unions calling for dynamic alignment

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    (30/01/2019) Labour leader Jeremy Corbyn has revived his proposal for a customs union in a meeting with Theresa May, while UK’s Trade Union Congress is pushing for a dynamic alignment on labour standards.

    A customs union holds less guarantees for an environmental level playing field compared to the rejected Withdrawal Agreement. Taking the example of Turkey’s customs union and the proposals for its modernisation (similar to CETA provisions), one could expect rather weak environmental provisions: ratification and implementation of Multilateral Environmental Agreements, and a commitment to a high level of environmental protection, but with uncertain procedures for effective implementation. The backstop was a customs union as well, but with a non-regression clause for the whole UK and more specific environmental legislation requirements for the Northern Ireland. These environmental guarantees would then be the base for a future trade relationship negotiation, according to EU officials.

    Commission staff working document on the modernisation of the customs union with Turkey
    Draft Withdrawal Agreement

    EU Brexit preparedness: how to protect the EU-ETS, ensure environmental border controls and avoid a black out?

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    (10/01/2019) The European Commission has set out preparedness issues and measures covering climate change, environment and energy. An area of concern is the environmental integrity of the EU-ETS in the scenario that the UK leaves without a deal. UK operators would not be required to surrender allowances for 2018 emissions, although they received them for free. Concerning the environment, import and export controls have to be applied to movements from and to UK, which requires building up technical expertise, reviewing the database and ensuring stakeholders are informed. In particular, waste flows will be impacted as EU Member States will no longer be able to export waste for disposal and mixed municipal waste for recovery to the UK. UK waste exports to the EU will fall under the rules of the Basel Convention. Cooperation for Multilateral Environmental Agreements and COPs will also be impacted. The EU must use EU legislation on best efforts of cooperation with third parties and notify them before COPs or other international meetings. The UK’s exit from the internal electricity market could have serious impacts on neighbouring countries. While interconnectors can still be used, the trading platforms will not be accessible for the UK and certification of the operators will become a national matter. In particular, Ireland is concerned and will require fall-back arrangements.

    Brexit Preparedness seminars on climate, environment, energy and fisheries

    Risk of a judicial environmental protection void in the UK

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    According to the Institute for Government, the environment is the area where the UK is brought most often before the European Court of Justice (ECJ). In most cases, it is not a problem of transposition, but of implementation. Even though the UK will copy across the EU environmental acquis, the real issue is therefore the actual application, due to be monitored and enforced ensured by the Office for Environmental protection. Nevertheless, the office is already the target of critiques for lack of independence, specifically on its ability to take action against the government.

    Furthermore, NGOs and British citizens could well be dissuaded to initiate litigations, as the judicial costs are lower within the ECJ than in UK national courts.

    Institute for Government explainer on the level playing field in Brexit negotiations

    Institute for Government briefing on the UK’s relationship with the European Court of Justice

    UK Prime Minister pledges to maintain and improve environmental protections

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    (21/01/2019) Within the framework of presenting a ‘Plan B’ to Parliament, Prime Minister May pledged that environmental and social rights will not be reduced as a result of Brexit, and instead that the same level of protection will be retained and even improved. She also added that Parliament should be able to consider any modifications made by the EU in these areas, in which case legislation could even be reviewed if necessary. It follows the promise of Environment Secretary Michael Gove of a Green Brexit, which has been challenged by environmental organisations for the lack of substance and the appearance of a governance gap in the draft Environment Bill presented in December last year (see Brexit Watch nr. 5).

    May’s statement to the House of Commons on Brexit (21 Jan. 2019)

    Costs and disruptions to industry

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    The UK plans to copy across most of the EU’s environmental legislation, including the chemical safety regulation REACH. This means that companies doing business in the UK and in the EU will have to comply with two sets of rules.

    In the case of REACH, this means that companies doing business in the UK will have to register chemicals under the UK system. “If we spent €5 billion on establishing the EU’s REACH, what is there to suggest it is going to be much less for UK-REACH?” asks Peter Newport from the UK’s chemical business association. As a third country the UK will no longer have access to the EU’s REACH database and needs to set up its own REACH registration system. It is difficult to see how the UK could cut costs without sacrificing environmental and public health standards.

    EU chemical industry association CEFIC voiced its fears about supply chain disruptions in the absence of agreements between the EU and UK. Given the REACH data sharing and only representative requirements, UK registrants will need to acquire access and rights to using safety data, which will require lengthy data sharing negotiations involving multiple owners.

    ChemicalWatch on UK chemical safety framework data struggle
    Cefic statement on outcome of Brexit vote

    The governance gap – UK’s proposed Office for Environmental Protection lacks independence

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    The UK Government published before Christmas the Draft Environmental Bill which sets the base of an Environmental Bill (due to be published in 2019), meant to maintain and even “surpass” EU legislation.

    This piece of law creates the Office for Environmental Protection (OEP), due to be in charge of monitoring and reporting on environmental laws. It can also take action in case public authorities fail to comply with environmental norms. The OEP’s mandate seems to have addressed a series of concerns previously expressed by stakeholders (Bar Council, UK Environmental Law Association): the possibility of submitting individual complaints and the power of the OEP to bring the Government to court. Nevertheless, one crucial issue remains controversial: its independence. The clauses mention that non-executive members are appointed by the Secretary of State, their remuneration or compensation for “special circumstances” being also set by him/her. The Secretary of State also holds responsibility for establishing the reasonable sufficient budgets for the OEP’s functioning.

    Draft Environment Bill, December 2018
    Bar Council, response “Environmental Principles and Governance” public consultation
    UK Environmental Law Association, “Brexit and Environment Law”
    Insidetrack (hosted by Green Alliance) critique

    The regulatory gap – the case of UK’s future chemical safety rules

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    (09/01/2019) The UK government published its draft statutory instrument to establish a UK chemical safety law, copying and amending the EU’s REACH regulation. It puts in place arrangements for a two-year transition period, during which UK authorities will have no access to the world’s largest chemicals safety data base hold by the European Chemicals Agency (ECHA).

    The instrument provides that an existing registration under EU REACH “has effect on and after exit day as a UK registration” as long as the registration holds a connection with the UK. The companies, which hold this so-called “grandfathered” registrations will then have a period of two years to submit the full data package. According to the Government’s guidance note, the IT system is already being tested as to be ready for use on 29 March 2019. But companies warn about the difficulties and complexity of managing the data sharing given the complex supply chains. The EU needed ten years to master the challenges and to phase in the new system.

    Further to this safety data gap, the instrument omits essential governance elements of the REACH regulation, including the independent expert committees, the board of appeal and transparency requirements, which are seen important tools against short-term interests.

    The UK could become a dumping ground for products containing harmful chemicals that are banned in the EU, according to Greener UK.

    Draft Statutory Instrument on REACH (EU Exit) Regulations 2019
    UK Government guidance on REACH in a no-deal scenario
    Greener UK, “Environmental concerns around no deal”

    UK chemical industry to face increased trade costs under a no-deal Brexit

    150 150 ioana bere

    From a trade perspective, a no deal Brexit is bad news for the chemicals industry. The UK would fall under the WTO most favored nation tariffs, or the Chemical Tariff Harmonisation Agreement (CTHA), which the UK could join after leaving the EU. The CTHA would allow the UK to benefit from a 6.5% or 5.5% rate for most traded chemical products. But even this cannot match the EU’s lower or even zero tariffs negotiated with third countries (such as with Canada, Korea, Mexico etc.). New similar EU deals could be ratified by the UK, but this would take years. Meanwhile, increased tariffs on chemicals would significantly raise the prices of intermediate and finished goods, costs which according to EU chemical association CEFIC would be most likely borne by industry (estimated to amount almost 40 billion euros annually). This could significantly hit UK industry, with the chemicals sector the third biggest industry in the country.

    Cefic and CIA joint statement on Brexit and the future

    The EU Market Access Database

    UK choice: an EU or US system for managing chemical risks?

    150 150 ioana bere

    Though both the US (TSCA) and EU (REACH) legislation on chemicals share the objective to protect the environment and human health whilst supporting the sector’s competitiveness, they could not be further apart.

    REACH has changed risk management governance by requiring companies to demonstrate safety, increase transparency and substitute toxic substances with safer alternatives, whereas TSCA (Toxic Substances Control Act) keeps the burden of proof on public authorities and retains most information as confidential. That is the theory, though in practice the differences are less sharp given that implementation of REACH has been found to be deficient.

    Whilst the EU’s regime appears to be less business friendly, with high regulatory costs, litigation expenses are lower and the EU’s chemicals trade surplus has grown by around 5% a year since 2007. The US trade surplus is smaller and declined over the same period.

    In this context it is worthwhile looking at China, where chemical production has outpaced both the EU and US. China opted to align with the EU and put in place a China REACH system.

    REACH and TSCA description
    CEFIC fact & Figures 2018
    American Chemistry Council 2018

    No deal raises risk of regulatory divergence

    150 150 ioana bere

    After the UK’s PM decision to postpone the vote on the Withdrawal Agreement, which was originally scheduled for 11th of December, all sides are stepping up preparations for a no deal UK departure.

    Whilst a lot of focus lies on dealing with immediate consequences arising from border issues, for example interruptions to the supply of essential goods, the UK has had to speed up the legislative work needed to close the gaps in UK’s statute book for when EU laws will no longer apply. Among those rules will be the EU’s chemical safety norms, namely the REACH regulation.

    Although the UK wants to copy across REACH into domestic law, ChemicalWatch reported that a Defra official confirmed that in a no-deal scenario the UK could start to diverge from the EU’s regulations and would consider what other regions such as the US are doing and weigh this against the UK’s interests.

    One flagship case is the REACH process of identifying substances which are found to be intrinsically hazardous (named Substances of Very High Concern) and become subject of substitution with safer alternatives. The UK has been known to raise objections to identifying such substances and the US chemical safety rules (TSCA – see next article) do not promote the substitution of toxic chemicals.

    Such a scenario brings to light a high risk of UK divergence from EU legislation post-Brexit, which would be detrimental to maintaining a level playing field between the EU and UK.

    European Union (Withdrawal) Act 2018

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