6167_Reg Report v14 10/8/03 2:35 PM Page iii

Traditional regulation has achieved much. But the nature of regulation has to change to keep pace with changes in the economy and society. The Environment Agency is further developing its approach to regulation to improve and protect the environment. This approach is outcome- focused and risk-based, clearly communicated and is delivered in a consistent manner. We call this ‘modern regulation’ and this booklet explains what it means and why it will make a difference.

Delivering for the environment

A 21st Century approach to regulation 6167_Reg Report v14 10/8/03 2:35 PM Page iv

Modern regulation aims to find the right ‘balance – a proportionate, risk-based response, that will drive environmental improvements, reward good performance, but still provide the ultimate reassurance that tough action will be taken on those who fail to meet acceptable standards. ’

Contents

02 Principles of modern regulation 26 Compliance assessment and enforcement

06 What regulation has achieved 32 Evaluation and information

07 Competing demands 34 Conclusion

11 Our model of modern regulation 36 Glossary

11 Defining outcomes and risks 37 Appendix

16 Choice of instruments 6167_Reg Report v14 10/8/03 2:35 PM Page 1

environment agency foreword 01

Foreword

The UK has a history of leading the way in environmental regulation. The introduction of Britain’s first Alkali Act in 1863 laid the foundation of a pollution control regime that was to be replicated by many other industrial nations. The Clean Air Acts put paid to the deadly smogs of the 1940s and 1950s. Since then the benefits of regulation have continued to be experienced, decade on decade, in cleaner and healthier air, land and water.

As times have changed, regulation has Twenty-first century consumers demand We are issuing this discussion document modernised too. Dialogue and joint sophistication and choice and expect as part of our contribution to the problem solving, and the ‘carrots’ of products and services to be delivered modernising regulation debate. We look incentive and reward are increasingly responsibly and safely. Businesses do forward to discussing the content with being used to supplement or replace the not want regulation to impinge on their our many stakeholders and hearing and traditional ‘stick’ approach. Modern ability to innovate and grow. Modern receiving your views. It is our intention to regulatory thinking has developed a regulation aims to find the right issue a final version of this document in wider and smarter range of tools than balance – a proportionate, risk-based the second half of 2004, after considering ever before – to include taxes, trading response, that will drive environmental the comments received. schemes, voluntary agreements and improvements, reward good environmental management systems. performance, but still provide the ultimate reassurance that tough action will be taken on those who fail to meet acceptable standards.

Barbara Young Chief Executive, Environment Agency 6167_Reg Report v14 10/8/03 2:35 PM Page 2

02 principles of modern regulation environment agency

Principles of modern regulation

Traditional regulation has achieved much. But the nature of regulation has to change to keep pace with changes in the economy and society. The Environment Agency is further developing its approach to regulation to improve and protect the environment. Our approach is outcome-focused and risk-based, clearly communicated and is delivered in a consistent manner.

We call this ‘modern regulation’ and this These potentially conflicting demands Any modern regulatory regime must booklet explains what it means and why can be met with a regulatory regime meet the five principles set out by the it will make a difference. Some of this is that helps business and individuals to Better Regulation Taskforce. It must be: already being implemented, some we are improve, rewards good performers • transparent – we must have rules and working towards and some we want to but is tough on those who do not meet processes which are clear to those in see developed. acceptable standards. businesses and local communities Modern regulation focuses on outcomes. Direct regulation of the kind which has • accountable – we must explain These include preventing or minimising traditionally controlled abstractions from, ourselves and our performance environmental impacts and achieving and emissions to the environment will • consistent – we must apply the same high standards of environmental continue to have an important role – but approach within and between sectors management. will become smarter through the use of and over time risk-based approaches, greater Society demands high environmental standardisation and associated charging • proportionate (or risk-based) – standards and expects companies and mechanisms. But other instruments also we must allocate resources according individuals to behave responsibly. need to be used where they are more to the risks involved and the scale of This means complying with and even appropriate, including environmental outcomes which can be achieved exceeding legal requirements without taxes, trading schemes, negotiated • targeted (or outcome-focused) – constant supervision and the threat of agreements and education programmes. the environmental outcome must enforcement action. The business world be central to our planning and in rightly expects greater regulatory assessing our performance efficiency, minimising bureaucracy, so that compliance costs are kept to a We also believe regulations must be minimum. practicable. The regulators need to be funded to let them do their job and it must be clear to businesses what they have to do. 6167_Reg Report v14 10/8/03 2:35 PM Page 3

environment agency principles of modern regulation 03

Potentially conflicting demands can be met ‘with a regulatory regime that helps business and individuals to improve, rewards good performers but is tough on those who do not meet acceptable standards.’ 6167_Reg Report v14 10/8/03 2:35 PM Page 4

04 what modern regulation looks like environment agency

Define Choice of outcomes instruments

Evaluate and Compliance and inform enforcement

We believe the following approach should specifying performance standards There are important implications for all be taken: and ensuring that operators are using involved in the regulatory process: • Define outcomes – based on legislative appropriate monitoring systems • Legislators need to be smart in devising and policy drivers, environmental needs and techniques. We will take action – laws and use the full range of policy and best practice, taking into account where operators do not meet their instruments which will achieve their specific sector and geographical responsibility to comply, using a aims while allowing flexibility in the circumstances firm and fair approach including regulator’s approach enforcement and prosecution where • Choice of instruments – sometimes necessary • Businesses and individuals need to take in combination, based on the nature full responsibility for delivering of the environmental impacts and the • Evaluate and inform – assessing consistent compliance how well the desired environmental risks. We will work with government to • Regulators need to use the flexibility inform its decision-making process outcomes and management performance are being delivered. allowed by the legislative framework • Compliance and enforcement – but Experience gained will be used to to deliver the required environmental in the context of operators being inform the development of new objectives in the most efficient and responsible for complying with laws legislation where appropriate. effective manner. and regulations. This means we will We will make information on the concentrate our resources where the environmental performance of business risks are highest, including the highest and our performance as a regulator hazards and the poorest performing widely available. Transparency and operators, and focus on the trust are vital aspects of our relationship management systems which underpin with local communities and society as the operator’s performance. We will a whole. also monitor performance – including 6167_Reg Report v14 10/8/03 2:35 PM Page 5

environment agency principles of modern regulation 05

What modern regulation looks like

polluters take responsibility

risk-based trust-based high risk, low risk, more less intervention intervention

proportionate cost effective

focused on outcomes 6167_Reg Report v14 10/8/03 2:35 PM Page 6

06 what regulation has achieved environment agency

What regulation has achieved

Direct regulation by means of issuing a permit and checking compliance on a continuing basis is an important process which will continue to deliver key environmental objectives, as it has done for more than a century.

The first Alkali Act was passed in 1863; This approach has clearly contributed to Direct regulation will remain a London’s smogs were beaten by dramatic environmental improvements: fundamental part of a modern regulation requiring smokeless fuel. • Since 1990, sulphur dioxide emissions framework. While it is particularly In recent times most of the significant to air have fallen by 75%, nitrogen appropriate for relatively small numbers polluters, in industries such as chemicals, oxides by 52% of point source emissions other power generation and waste approaches are needed where impacts management, have been regulated • Water pollution (measured by are caused from diffuse sources or large through permit regimes, which set limits biochemical oxygen demand) fell by numbers of small sources, which and impose operating requirements 65% in the five years to 2001 cumulatively have a significant impact. site by site. Since 1963, most of the • Environmental incidents fell by 30% We also know, in the light of experience, significant abstractions from surface between 1997 and 2000. that in some situations other regulatory water and groundwater have been instruments could deliver some of the regulated to ensure legitimate The Environment Agency is responsible same outcomes as direct regulation, but requirements for water are met without for more than 1,600 authorisations in with greater flexibility thus stimulating environmental detriment. process industries, more than 100,000 innovation and more cost-effective consents to discharge to inland solutions. waterways and more than 7,500 waste management licences. The Pollution Prevention and Control regime will extend integrated regulation to the food and drink sector (2004/5) and intensive pig and poultry farming (2006). In addition, we manage 49,000 water abstraction licences ranging from those for water companies to individuals. 6167_Reg Report v14 10/8/03 2:35 PM Page 7

environment agency competing demands 07

Competing demands

There are widely differing views on the need for and value of environmental regulation. At one end of the spectrum, many environmental campaigners and local communities want to see tough controls on all hazardous activities to provide the maximum protection against damage to the environment and human health. At the other end are those who warn of unnecessary red tape interfering with individual liberty and business competitiveness.

Between these extremes is a range of In the UK, a number of new laws placing Similarly, modern thinking on corporate views which reflect different attitudes enforcement duties on the Environment responsibility encourages businesses to towards risk and the value of effective Agency will be introduced by go beyond the minimum necessary to regulation. It is undeniable, however, Government in the next few years. It comply with the law. Businesses are that society as a whole increasingly is important that the Department for expected to be proactive in reducing their demands higher environmental Environment, Food and Rural Affairs environmental impacts, from sourcing standards. This is true not only in the (Defra) and the Environment Agency are materials to the disposal of their products. UK but also throughout the developed smart about how these are implemented. They are also expected to apply the same world, where a good environment is a Otherwise the Environment Agency environmental and safety standards key element in providing the expected would need a significant increase in the wherever they operate, rather than quality of life. Indeed, the ability of number of inspectors and industry would moving production to countries where economic activity to deliver a high quality face significant increases in costs and they can operate to lower standards, of life now without compromising the regulatory load. but where the environment would suffer. future is central to the concept of sustainable development. But a high-quality environment is the responsibility of everyone, not just a matter for government to mandate and regulators to enforce. Individuals have responsibilities to use energy and other resources efficiently, keep waste to a minimum and use recycling facilities. 6167_Reg Report v14 10/8/03 2:35 PM Page 8

08 competing demands environment agency

Competing demands

Companies should be regulated by government. Food safety is paramount Governments should and the pursuit of a sustainable make laws to make environment essential; any companies accountable moves to ease the burden should for their actions. Regulation alone cannot not jeopardise these objectives. deliver sustainable Public concern about health and Friends of the Earth development. But regulation the environment means that the underpins other systems and scope for extensive deregulation sets out a framework for is limited. voluntary action. Better Regulation Taskforce (Environmental National Society for Clean Air Regulations and Farmers November 2000)

The failure to understand the economic benefits of The Regulatory Reform high environmental Order process will never standards has been leading deliver the sweeping deregulation that business to the Government dragging needs. The IoD continues to its feet on protecting our press for tougher action. environment.

Institute of Directors Environmental Industries Commission 6167_Reg Report v14 10/8/03 2:35 PM Page 9

environment agency competing demands 09

Modern thinking on corporate ‘responsibility encourages businesses to go beyond the minimum necessary to comply with the law. Businesses are expected to be proactive in reducing their environmental impacts.’

There are business benefits in acting We aim to reflect this in our charging Getting regulation right in the twenty- responsibly, from cost savings through structures for environmental protection first century means getting the right resource efficiency to improved activities. In England and Wales it is balance between: reputation and employee motivation. Government policy that the cost of • providing risk-based, outcome-focused, Businesses that deliver good regulation should be borne by the cost-effective regulation to protect the environmental performance can earn a regulated. We have introduced schemes environment and human health lighter regulatory touch. For example, a in some areas of our work where the yarn dyeing operation, has achieved over charges reflect the risk and therefore the • not imposing unnecessary £100,000 cost savings from a range of regulatory effort involved. administrative burden on regulated resource efficiency measures that have businesses delivered significant environmental • ensuring the public retains confidence benefits including reduced chemical in the Environment Agency as an oxygen demand of effluent, reductions effective regulator. in solid waste and energy savings. 6167_Reg Report v14 10/8/03 2:35 PM Page 10 resource 0 our model of modern regulation 10 Our model of modern regulation ‹

environment agency Defining outcomes ‹ sector plans drivers Evaluation and >> information and risks ‹ ‹ permits Compliance and enforcement ◊ instruments Choice of approaches alternative ‹ < ‹ environmental outcomes 6167_Reg Report v14 10/8/03 2:35 PM Page 11

environment agency our model of modern regulation 11

Our model of modern regulation

Meeting the principles of modern regulation requires a smarter approach throughout the process, from developing new laws to implementing them and evaluating their effectiveness. In this section we describe the components that lie at the heart of modern regulation: • Defining outcomes and risks • Choice of instruments • Compliance assessment and enforcement • Evaluation and the provision of information

• Best practice – including reducing We already use this approach to develop bureaucracy, experience from other Catchment Abstraction Management countries, life cycle analysis, best Strategies, which set the framework for Our model of modern regulation

available techniques and working with managing water resources across the

Defining outcomes other agencies. country. Similarly, Catchment Flood Management Plans and Flood Strategies and risks ‹ look across large geographic areas to plan Adapting regulation in a flood defences that work with the physical geographical context characteristic of catchments. There are three sets of drivers: The Water Framework Directive (WFD) The ‘catchment’ approach to regulation can • Legislation and policy – national confirms use of the catchment area as the be usefully extended to some air-quality and international legislation and basis of environmental management. issues, especially where the sources and policy objectives, together with At the level of the catchment we can look receptors of air pollutants are geographically environmental standards and emission across the ecological and physical links in well-defined. Some receptors are remote limit values (for example, in the Waste the environment and we can see how a from the sources of pollution and pollution Incineration Directive) broad spectrum of businesses and entering a ‘catchment’ can even originate in • Environmental needs – such as clean communities interact. This allows us to other countries. Air Quality Management air and water, in the context of an understand the physical and biological Plans are used to address emissions not only appropriate geographical scale eg activities in the environment, and the social from industry but from other sources such Air Quality Management Plans and and economic pressures on it as well as as transport Catchment Abstraction Management looking at individual activities or sources of Strategies pollution. From that better understanding, we can design better management approaches. 6167_Reg Report v14 10/8/03 2:35 PM Page 12

12 our model of modern regulation environment agency

The Environment Agency is also We will continue to do so to protect local developing sector plans, which address water, land and air quality, to deal with the specific environmental issues Our model of modern regulation waste disposal, water and energy use associated with particular sectors. This minimisation, as well as to avoid approach allows us to prioritise the Choice of instruments accidents, noise and odours. But we regulatory workload between and believe the overall control of some within sectors. pollutants may be delivered more cost- effectively by using additional Sector plans will relate to a coherent, In many cases the instrument will be set down in legislation and we will work approaches. For instance, the long-range recognisable target group and define the effects of oxides of nitrogen (NOx) outcomes and risks that we will address with government to inform its choice of the most appropriate approach. A emissions could be controlled by for that group. The sector may be a introducing an overall ‘cap’ on mass particular industry, such as agriculture or suite of complementary instruments is available, from education to site-specific emissions from major sources such as nuclear, or a recreational sector such power stations, together with an as angling. permits, as illustrated in the diagram opposite. Once we are clear about the emissions trading system to provide outcomes we are aiming for and the flexibility in how the power stations meet risks involved, we can look for the most the cap. Power station emissions effective approach to achieve the contribute about 20 per cent of the UK environmental objective with the most total levels of NOx. Trading could deliver efficient use of resources. the overall reductions in NOx in a more cost-effective way than direct regulation Each of these approaches can have a role alone although direct regulation would to play as described later in this section. be used in combination to deliver protection of the local environment In some situations the best way of achieving the desired outcome is to use a Direct regulation combination of instruments, for example in the approach the Environment Agency This is the traditional approach to

would like to see adopted for power controlling emissions or abstractions

station emissions. with permits specifying what a company ‹ can and cannot do at a particular site. A smarter approach to A permit can also be seen as granting power station emissions a right to conduct an activity, subject to conditions of use. It is clearly the The Environment Agency has responsibility of operators to ensure they traditionally used direct regulation to comply with all regulatory requirements. control pollution from power stations. 6167_Reg Report v14 10/8/03 2:35 PM Page 13

environment agency our model of modern regulation 13

The different regulatory approaches

◊ Direct regulation – Alternative approaches permits

environmental taxes

bespoke permits ‹ ‹ ‹ trading schemes

standard permits ‹ ‹ clear negotiated or

outcomes voluntary agreements

registrations ‹ ‹

education and advice directly applying ‹ ‹ legislation environmental management systems 6167_Reg Report v14 10/8/03 2:35 PM Page 14

14 our model of modern regulation environment agency

Bespoke permits: These are used Permits will be standardised as far as Choice of instruments typically for complex activities, for unique is practicable for each sector. Permit Continued processes and where there are site-specific conditions are of two types – operating requirements. However, we will even standards required to protect the standardise bespoke permits as far as environment, and conditions which will Permits possible to minimise unnecessary effort. deliver improvements. We use In many situations the improvement standardised application and permit We use a spectrum of permits. These programme will be the most site-specific templates as far as possible to deliver range from directly applying the aspect. consistency as well as minimising the legislation to bespoke permits. We match time required to process applications. our response to the level of environmental Standard permits: In many sectors risk and the complexity of the targeted the activities are sufficiently similar to When we attach conditions to a permit, activity. The fundamental principle is that warrant completely standard permits. we focus them as far as possible on the we use the type of permit which requires Improvements in performance will be environmental outcomes we are aiming the least resource to achieve the relevant delivered by sector-wide improvement for, and set them at as high a level as environmental objectives. programmes. possible rather than making detailed prescriptions. While we maintain The various options give rise to different Registrations: The rules to be adhered appropriate scrutiny, operators are degrees of control and implementation to can be laid down in legislation or in a responsible for compliance. We costs, and are suitable for different levels set of requirements published by the encourage operators to use management of risk. Where there is higher risk or site- regulator. The requirements can be systems to monitor and report specific requirements, bespoke permits enforced just as if they had a permit. performance and ensure conformity with may be required, whilst for lower risks, the Those carrying out a particular activity the permit conditions. legislaton can be applied directly without can then register their details with the permits or registrations. Greater resources regulator, for example, who they are and We are also moving to a position where are required to administer bespoke where the activity is located. An annual the charges we apply for a regulatory permitting systems. renewal and charging system is required. regime better reflect the level of resources we need to expend on a particular site. The term ‘permit’ as used in this section Directly applying the legislation: Operators with better controls and embraces all the mechanisms we use for In some cases it is not even necessary to performance will be charged less than direct regulation, including consents, have a permit or registration. This will those, whom require more of our licences and authorisations as well as apply where the activities are simple and resources. notices, exemptions and registrations. the risks are low. We need to work with government as an advisor to consider in any situation whether such an approach can deliver the required level of protection. 6167_Reg Report v14 10/8/03 2:35 PM Page 15

environment agency our model of modern regulation 15

The fundamental principle is that we use the ‘type of permit which requires the least resource to achieve the relevant environmental objectives. ’ We review permits periodically to make • The public may have more confidence > Applicability sure they keep pace with changing in permitting and associated circumstances. It is important to make assessment of compliance as they Direct regulation based on permitting sure that permit conditions remain can be perceived to be tougher, more is applicable for the delivery of a wide protective of the environment. visible, transparent and consistent than range of environmental objectives. It is other instruments. particularly suited to addressing localised + Advantages issues such as air, water and groundwater • A permit-based regime is very pollution, and controlling noise and • Permits ensure industry operates in a effective when measures need to be odour. Direct regulation may also be way that minimises adverse effects on adopted quickly. required to underpin other instruments people and the environment. – Disadvantages such as trading and voluntary agreements • Permits can address individual and local to ensure that participants at least meet a need for resources, eg abstraction • Permit-based regimes tend to be minimum level of performance, in effect a licences. expensive to administer compared to backstop to prevent free riders. Trading • They clearly set out minimum other regulatory instruments, both for schemes also require regulatory regimes requirements. the regulator and the regulated. to describe and prescribe the boundaries and mechanisms of operation. • They are the most certain way to deal • They are relatively inflexible, requiring with high risks, especially the risk of formal revision should circumstances environmental accidents. They remove change. This makes them less useful the possibility that some operators may for situations where economic or be prepared to take greater risks than environmental conditions vary quickly. others. They prescribe action which society expects and which is appropriate to the level of risk. 6167_Reg Report v14 10/8/03 2:35 PM Page 16

16 our model of modern regulation environment agency

Taxes can be used effectively with other tools to ‘create a balanced policy package which takes account of economic as well as environmental objectives.’

+ Advantages • Taxation may result in undesirable Choice of instruments side-effects, for example, unscrupulous • Taxes promote innovation by giving Continued operators fly-tipping to avoid the firms financial incentives to change landfill tax. behaviour. • Taxes can be applied widely and > Applicability Environmental taxes can reach small and medium sized Taxation is most appropriate where the Taxation can be an alternative or enterprises (SMEs) and individuals that target sector can switch to alternative, complement to conventional regulatory are difficult and costly to regulate by readily available, less polluting practices instruments. It can be a relatively simple other means. or goods. It works best when relatively way of sending broad price signals aimed • They can bring the environment into modest price signals will have a significant at achieving fairly widespread changes in the boardroom by making it a real cost impact on the market, and when simple, behaviour, as with the Landfill Tax or (even if the charge is revenue neutral at broadly applicable rules can be applied, Climate Change Levy. a national level) and raise awareness avoiding multiple exemptions, discounts more broadly. or special provisions. Taxes can be used effectively with other tools to create a balanced policy package – Disadvantages which takes account of economic as well as environmental objectives. They • Taxation is a relatively blunt can be designed to be revenue-neutral instrument and may only result in for the government; for example modest environmental improvements. revenues can be recycled to support • A tax in itself does not guarantee an specific environmental objectives such as environmental outcome. investment in cleaner technologies, or • Long lead times and high rates may be to reward better performers. needed before prices affect behaviour. 6167_Reg Report v14 10/8/03 2:35 PM Page 17

environment agency our model of modern regulation 17

Trading can provide a least-cost solution to achieving ‘environmental objectives because participants have the flexibility to make improvements when and where they decide.’ Trading schemes There are different designs, but typically in the market to cover any excess above a scheme might consist of the following their initial allowance, or to sell surplus Schemes which allow trading of elements: allowances if they perform better than emissions, waste or resources can deliver their initial allocation. They therefore have environmental objectives at lower cost • a binding target such as a cap on total emissions or resources greater flexibility to choose which is the than alternative approaches such as most cost-effective option. traditional permit-based regulation. • a clear unit of trade eg 1 tonne of NOx, Trading can be applied to a variety of 1 tonne of waste Such a scheme achieves the issues, from individual pollutants such as • a system for distributing initial environmental objective because nitrogen oxides, to the use of resources allowances to participants in the collectively the participants must meet such as water, or to address waste scheme the overall cap, which is the sum of the management. In the UK we already have initial allocations. The cap can be a trading scheme for greenhouse gas • a penalty system for non-compliance reduced from year to year to achieve a emissions and there are plans for trading • a specific compliance period, for progressive reduction. biodegradable municipal waste, oxides example a year. of nitrogen (NOx) and sulphur dioxide The Environment Agency's role in from power stations, and water At the end of the compliance period, trading schemes may be to advise abstraction rights. participants must hold sufficient government on the scheme design, to allowances to cover their emissions or be responsible for some or all of the Trading schemes need to be carefully resources used within the period, or a operational aspects such as assessing tailored to suit the particular non-compliance penalty will be invoked. compliance, or we could be the lead environmental objectives and Participants covered by the scheme can organisation responsible for the circumstances. They will usually need choose either to operate within their effective operation of the scheme. to be supported by a permit scheme allowance by reducing emissions (or to ensure protection of the local resource use), to buy extra allowances environment. 6167_Reg Report v14 10/8/03 2:35 PM Page 18

18 our model of modern regulation environment agency

• Trading provides cost incentives to > Applicability participants who employ cleaner Choice of instruments Trading is appropriate where there is Continued technologies, because they will be able to sell surplus allowances. This can help a range of options to achieve to offset investment costs and may give environmental improvement, at a range firms with lower environmental impacts of costs so that operators are able to + Advantages a competitive advantage. choose the best option for their situation. It is most suitable for environmental • Trading can provide a least-cost – Disadvantages objectives that are global in impact, solution to achieving environmental such as greenhouse gas emissions. objectives because participants have • There are potential risks of anti- the flexibility to make improvements competitive behaviour or market Schemes require the traded item to be when and where they decide. That domination that need to be carefully measurable, for example, resource use or should mean that those who can make considered in the design, especially in emission. This allows the validation of improvements at lowest cost will do how the allowances are allocated. initial allocations and subsequently most, selling surplus allowances to firms • Trading may be less suitable for smaller reported data. where the control costs are higher. businesses, where lack of information Trading is particularly effective where • Trading means companies have more and resources can be barriers to there is high ‘liquidity’ – a relatively large options and can choose how to optimising trading decisions. number and diversity of participants who optimise costs and benefits across their want to trade – although a scheme can business portfolio, which is not possible still work when there are only a small with most instruments. number of bilateral trades. 6167_Reg Report v14 10/8/03 2:35 PM Page 19

environment agency our model of modern regulation 19

Negotiated or voluntary agreements can achieve ‘higher commitment from the parties involved than an imposed requirement.’ Negotiated or + Advantages > Applicability

voluntary agreements • Negotiated or voluntary agreements Such agreements are most suitable in Businesses sometimes jointly agree action can achieve higher commitment from industries where a small number of without legislation – usually to avoid the the parties involved than an imposed relatively major companies with the threat of legislation or regulation. For requirement. ability to deliver performance agree example the motor industry has agreed • They can be good for negotiating to achieve a small number of clearly with the European Union emission enhancements above a legislative identifiable outcomes. It is also useful reduction targets, the chemical industry minimum. to have a trade-off in the form of lighter in the UK has committed to achieve touch regulation, which would be lost, • They can secure early buy-in before or the potential to bring in regulatory certain environmental targets and there is formal regulation is required. a voluntary agreement on the use of requirements, if the agreement is not pesticides. Such agreements are called – Disadvantages delivered. This adds to the motivation to ‘voluntary’ or ‘negotiated’. They cover achieve the targets in the negotiated action in pursuit of stated environmental • They are not usually appropriate for agreement. objectives which goes beyond the managing serious risks. requirements of the regulator or the law. • For sectors where there are many The regulator may be involved in smaller businesses, considerable monitoring progress, especially if resources may be required to set up the regulatory action will be taken if the agreement and there may be significant voluntary agreement fails to deliver the difficulties in communication and required improvement. enforcement. • They are unlikely to be successful unless effective penalties are in place to deal with under performance. 6167_Reg Report v14 10/8/03 2:35 PM Page 20

20 our model of modern regulation environment agency

Education and advice are relevant across the range ‘of our activities, but especially for new initiatives, or where direct regulation does not apply, and when the target audience is very diffuse.’ will work in partnership with other + Advantages Choice of instruments organisations and trade bodies to develop and promote suitable • Education programmes are flexible Continued information and educational materials. tools, which can be developed to For example NetRegs is a partnership address issues as they arise. project helping small and medium sized • Programmes can involve two-way Education and advice business navigate environmental communications, resulting in sharing requirements. of knowledge between business and Businesses and individuals need to be the regulator. more aware of how their actions impact This approach can be particularly on of the environment and human health. effective for resource management and • Many small and medium sized Education and advice can help raise waste minimisation. For example, the enterprises (SMEs) and most individuals awareness of the issues through providing Environment Agency uses a twin track are not subject to direct regulation, so clear information relevant to specific approach to management and allocation educational programmes may be one audiences, demonstrating potential of water resources, both developing of the few ways of influencing their improvements including cost savings new resources and encouraging behaviour. through case studies, and highlighting demand-side management through – Disadvantages national, regional or sectoral initiatives efficiency measures and leakage targeted at specific areas. We also need reduction targets. • To be effective, programmes may to promote regulatory requirements so require substantial resources. that businesses and individuals are • Initiatives can raise expectations of aware of their responsibilities and the further input by the regulator rather consequences of failing to meet them. than building individual or business In many cases the Environment Agency ownership of the issues. 6167_Reg Report v14 10/8/03 2:35 PM Page 21

environment agency our model of modern regulation 21

The Environment Agency expects to see businesses ‘delivering consistent compliance with regulation.’

> Applicability Environmental • An effective EMS should permeate management systems an organisation’s culture so that Education and advice are relevant across environmental responsibility becomes the range of our activities, but especially The Environment Agency expects to see built in rather than a bolt on. for new initiatives, or where direct business delivering consistent compliance regulation does not apply, and when the • They can result in lighter touch with regulation. We think environmental regulation where environmental target audience is very diffuse, for management systems (EMS) help to example small businesses or individuals performance is consistently to the improve the management of required standard. such as fishermen. Education is also environmental risks from a site or activity. important where there are sector-specific This will reduce their risk (OPRA) profile • Businesses that actively manage their issues that are quite different to the which will be reflected in charging and environmental impacts can, in some general situation, for example a specific compliance assessment planning. Our circumstances, deliver cost savings waste stream such as fridge disposal. approach at any site will always be from waste and resource use informed by observed standards of minimisation and can avoid the cost environmental protection and associated with pollution incidents. management. We are leading a major – Disadvantages European research project, remas, that aims to show how management systems • As EMS are voluntary, standards can lead to better performance. cannot necessarily be guaranteed, although failures may be detected + Advantages by external assessments as well as by • Businesses take responsibility for the Environment Agency's continued the environmental impacts of their scrutiny of environmental activities. performance 6167_Reg Report v14 10/8/03 2:35 PM Page 22

22 our model of modern regulation environment agency

• Assessors do not always operate to the Assessment involves the scrutiny of data same standards. and information. This allows the regulator • Smaller companies may not have Our model of modern regulation to check whether an operator is adequate resources to implement and complying with regulatory requirements maintain a certified EMS, but simplified Compliance assessment and to decide whether further action is versions may be appropriate eg Acorn and enforcement required. In most situations a compliance an environmental management assessment programme will include systems for SMEs. physical inspections or site visits, which may be pre-arranged or unannounced, • Failure of a company’s EMS could The purpose of regulation is to ensure sometimes in response to an incident or undermine public confidence and that the outcomes to improve and a complaint. As well as assessing specific result in a need for even greater protect the environment are delivered. data, we review operators’ procedures resources than previously required. These requirements are incorporated in and monitor the progress of improvement > Applicability permits where appropriate. We need programmes. As far as possible we will effective ways of assessing whether that gather data electronically to minimise Robust environmental management has happened. For example, we may bureaucracy and cost. systems can be used throughout the need to assess compliance with conditions regulatory cycle, to demonstrate that a included in a permit, or with the terms The resources for compliance assessment company knows what regulations of a trading scheme or a negotiated will be allocated on the basis of risk, which require of it, has assessed its performance agreement. Assessing the effectiveness of includes management and operating against this, that environmental EMS will also be important in determining performance, complexity of the activity, monitoring has been undertaken to a how much we can rely on them. environmental impact and location. required standard, and to validate data Compliance assessment will involve the which we use. If the Environment Agency appropriate mix of: can rely on a continuing high level of • site visits, audits and review of environmental management and procedures compliance with legislative requirements • scrutiny of reports, monitoring data and we can plan to employ lower levels of progress of improvement programmes resources, for example lowering the frequency of our independent checks. • check-monitoring A robust EMS can also drive • responding to incidents and improvements that may not be directly complaints. covered in permit conditions, such as procurement and product lifecycle issues. 6167_Reg Report v14 10/8/03 2:35 PM Page 23

environment agency our model of modern regulation 23

compliance assessment

reports/monitoring data ‹

Regulated Regulator

EMS compliance plans site aspects ◊ risk-based approach records target outcomes check comply permit self-monitoring check monitoring audit system assess data

‹

visits/inspections/audits/investigations/enforcement 6167_Reg Report v14 10/8/03 2:35 PM Page 24

24 our model of modern regulation environment agency

Operators have to earn the right to lower levels of ‘regulatory attention through good management of a site or activity. ’ Our efforts are focused on correcting The essence of compliance assessment is Compliance assessment and enforcement poor performance to achieve the required to check performance against specified Continued environmental improvement and requirements. In complex situations it can protection, and improved management require considerable interpretation and systems and practices which will ensure judgement. We also periodically review It is the responsibility of operators to that improvements are maintained. overall environmental performance of a comply with legal requirements and for The purpose of a site inspection is to site or of an activity to identify areas for us to assess whether they are complying. identify items which indicate system or further improvement. But the Environment Agency must be process failures for subsequent audit or careful to maintain a clear distinction review and issues not covered by the Assessing compliance with between its regulatory role and the existing permit that should be permit conditions site management process. incorporated. It is also to ensure that no Operators have to earn the right to lower activities are carried out that should not The Environment Agency targets its levels of regulatory attention through be and to identify potential weaknesses resources on activities and operators good management of a site or activity. in environmental control measures. where risks are higher because control Compliance assessment takes into Inspection can also include emissions measures and management practices are account management systems as sampling and checking compliance with poor, but we ensure that appropriate well as environmental performance. permit conditions that can be identified levels of resources are allocated to all sites Non-compliance should be taken as a by the senses, eg noise, odour, litter. and activities. This means: symptom of poor management, not • ensuring that compliance assessment just poor performance. activities relate to national, sector and local objectives and priorities 6167_Reg Report v14 10/8/03 2:35 PM Page 25

environment agency our model of modern regulation 25

• matching compliance assessment effort Compliance assessment tools classifies non-compliance with permit to the performance of those regulated conditions according to the potential and the level of environmental risk The Environment Agency has developed impact on the environment. It provides tools which are being progressively • focusing on how the site or activity is a consistent means of escalating action if implemented to help it assess risks so it there are multiple permit breaches and it managed, recognising self-monitoring can allocate resources effectively. These or independent third party assessment can be used to help direct resources include Compliance Assessment Plans where risks are identified. where appropriate (CAPs), Operator Pollution Risk Appraisal • recognising that pre-arranged, reactive (OPRA) and the Compliance Classification The key factors in deciding the level and and unannounced site visits are Scheme (CCS). nature of compliance assessment are: important but only as part of the overall • the risks in terms of the complexity compliance assessment approach CAPs are used to ensure that compliance against all requirements of permits and of a site or activities, the potential • using occasional, in-depth audits other regulatory approaches are checked for environmental impact given • developing charging mechanisms within a defined period. They also identify the location and management which reflect the extra resources the types of compliance assessment performance record needed to deal with poor performers. activity required and the level of resources • high levels of public concern about a that will be assigned to these tasks. OPRA particular activity which is likely to is a multi-attribute risk-screening tool that require higher regulatory involvement. is used to prioritise and target regulatory effort and to assign the appropriate level of charging for regulatory activities. CCS 6167_Reg Report v14 10/8/03 2:35 PM Page 26

26 our model of modern regulation environment agency

The role of the operator is to make monitoring ‘information publicly available. Such openess and transparency help engender trust. ’

The role of the operator is to: • ensure that operators monitor Compliance assessment and enforcement • carry out monitoring and analysis to an performance properly, by checking Continued appropriate, quality-assured standard results, auditing the process and carrying out check monitoring • assess and act upon the results as part of their own management system • act upon the results in a proportionate manner Monitoring • make monitoring information publicly available (online in real time • publish information so that the public The Environment Agency monitors where appropriate). This should can see how operators are performing many activities, which potentially include both measured emissions and [see appendix: information sources]. impact on the environment, so that it visual data (eg litter from landfills). Businesses should also take responsibility can assess the risk of adverse effects. Such openness and transparency help for ensuring they are not having an We are mainly concerned with emissions to engender trust. adverse impact on the environment or to air and water, water resources, waste The role of the regulator is to: people. This may include monitoring of management and the environmental the environment beyond a site boundary. quality of air, water (surface and • specify the standards against which groundwater) and land. This information monitoring should be carried out, using Regulators must be able to have can then be used to determine if further internationally agreed standards where confidence in the accuracy and reliability action is required to protect and they exist (e.g. CEN, The European of operators’ self-monitoring. We use improve the environment. Committee for Standardisation) an Operator Management Assessment (OMA) tool to assess the quality and management of monitoring processes and to identify areas for improvement. 6167_Reg Report v14 10/8/03 2:35 PM Page 27

environment agency our model of modern regulation 27

Where businesses and individuals do not comply with ‘legislation the Environment Agency will use its enforcement powers, firmly and fairly, to prevent pollution or environmental damage or to require remedial action to protect the environment. Where required we will prosecute.’ Independent certification can deliver Action includes: Within permitting regimes the greater confidence in the equipment • legal action such as prosecutions Environment Agency makes sure that and methods used and as a consequence it does not set conditions which it is not the results obtained. The Agency has • carrying out or requiring remedial work. prepared to enforce. developed a monitoring and certification Legislation should allow recovery of the scheme called MCERTS, which provides a costs of remedial work. The Environment It is also important to record and quality assurance system for providers of Agency will always seek to recover analyse incidents to identify patterns of monitoring services, equipment and the full costs incurred from those non-compliance at a site and sector level systems. responsible for environmental damage which we can use to identify risks and • for the future economic sanctions target prevention. We classify and record such incidents using our Compliance Enforcement such as automatic fines or removal of incentive monies are being considered. Classification System and the Common Regulatory regimes should include Incident Classification Scheme. To assist penalties or incentives that act as Action specifically within permitting in this process we believe regulators effective deterrents to non-compliance. regimes includes: should set out transparently when they But where businesses and individuals • warning letters, formal cautions will and will not take enforcement action including prosecution. We have do not comply with legislation the • enforcement notices Environment Agency will use its published our enforcement and enforcement powers, firmly and fairly, • prohibition notices, where there is an prosecution policy on our web site: to prevent pollution or environmental imminent risk of serious environmental www.environment-agency.gov.uk damage or to require remedial action damage or harm to human health to protect the environment. Where • suspension or revocation of permissions required we will prosecute. • modification of permit conditions. 6167_Reg Report v14 10/8/03 2:35 PM Page 28

28 our model of modern regulation environment agency

performance to a wide audience. These audited and verified. They should provide are updated annually and are available quantified information on the significant on the Environment Agency’s web site. environmental risks and impacts at a site Our model of modern regulation Analysis of the data enables trends to be or activity level using robust performance Evaluation and monitored and fed back into the process indicators, and illustrate how information and to identify areas and activities that environmental management fits into the need further investigation and evaluation. context of overall business policy and objectives. We also encourage individual businesses to make information on their Evaluation is an essential part of the environmental performance accessible to Measurement regulatory process, providing feedback stakeholders, including neighbouring Measuring performance of the regulator on all aspects of our work. In particular, communities and investors, for example should contribute to a greater focus on it ensures that we learn from experience in the form of regular environmental the achievement of environmental and are able to adapt in the light of new reporting. We will make information on outcomes. Although it is necessary to information. business environmental performance and measure some routine activities, such our performance as a regulator widely as the number of inspection visits, it is Information available. Transparency and trust are vital important that these are not the sole or components of our relationship with local even primary measure, and that our focus We use communication tools such as communities, business and other our Pollution Inventory and Spotlight on on achieving environmental outcomes is regulators. Companies may also take the made clear to the public. business environmental performance to opportunity to report positive actions provide information about environmental taken to improve environmental performance. As far as possible, reports should be prepared to agreed standards, 6167_Reg Report v14 10/8/03 2:35 PM Page 29

environment agency our model of modern regulation 29

We encourage individual businesses to make ‘information on their environmental performance accessible to stakeholders, including neighbouring communities and investors.’ The key performance indicators should Feeding back to When developing systems to deliver new be those associated with our primary new legislation legislation or reassessing how to deliver objectives of reducing pollution and the outcomes from existing regimes, the improving the state of the environment. The Environment Agency wants to make approaches developed should be informed For example: sure that any new legislation, including by RIAs and use the most cost effective regulatory instrument or combination of • national/local air and water quality that based on European Directives, fits the model of modern regulation it has instruments, taking into account the • emissions to air and discharges to water outlined here. It should be designed so desired outcomes and the risks. • waste production that we can focus on outcomes and risk • pollution incidents rather than regulatory procedures. • non-compliance with permit conditions Legislation should: • odour and other complaints • be subject to a Regulatory Impact • company performance parameters Assessment (RIA) which defines and eg energy, emissions or waste/tonne quantifies the environmental outcomes of product including benchmarking (the benefits) and the costs, and with sectors demonstrates that the requirements are reasonable • number of sites affected by unsustainable water abstractions • consider sources of funding, aiming for regulatory activities to pay for • OPRA and OMA scores. themselves and for the polluter to pay unless the administrative cost of collecting small charges is disproportionate. 6167_Reg Report v14 10/8/03 2:35 PM Page 30

30 conclusion environment agency

Conclusion

Modern regulation focuses on outcomes and aims to achieve them in the most effective way. That means using the most appropriate instrument and putting a greater priority on higher risks, while applying fewer resources where the risks are lower.

Society demands high environmental Applying the right approach is essential There are important implications for all standards. It also expects companies to to achieving environmental objectives involved in the regulatory process: behave responsibly, complying with and efficiently and effectively. Direct • Legislators need to be smart in even exceeding legal requirements regulation of the kind which has devising laws and use the full range of without constant supervision and the traditionally been used to control policy instruments which will achieve threat of enforcement action. The abstractions from, and emissions to the their aims while allowing flexibility in business world rightly expects greater environment will continue to have an the regulator’s approach regulatory efficiency so that compliance important role – but will become smarter costs are kept to a minimum. through the appropriate use of risk based • Businesses and individuals need to approaches, greater standardisation, take full responsibility for delivering These potentially conflicting demands associated charging mechanisms, consistent compliance can be met with a regulatory regime environmental taxes, trading schemes, • Regulators need to use the flexibility that helps businesses and individuals negotiated agreements and education allowed by the legislative framework to to improve, rewards good performers programmes. deliver the required environmental but is tough on those who do not meet objectives in the most efficient and acceptable standards. effective manner. 6167_Reg Report v14 10/8/03 2:35 PM Page 31

environment agency conclusion 31

Potentially conflicting demands can be met ‘with a regulatory regime that helps businesses and individuals to improve, rewards good performers but is tough on those who do not meet acceptable standards. ’ 6167_Reg Report v14 10/8/03 2:35 PM Page 32

32 glossary environment agency

Glossary This annex explains the use of the following terms in an Environment Agency context

CAP Compliance Assessment OPRA A Compliance Assessment Plan is used This is the overall approach taken to Operator Pollution Risk Appraisal is a multi- to ensure that within a defined period check compliance with the conditions of attribute risk assessment tool developed by compliance is checked against all a permit or other regulatory instrument, the Environment Agency to determine the requirements of the permit and other including a site’s improvement and environmental hazards associated with a relevant regulatory requirements. emissions monitoring programmes. site and how well they are being managed. A compliance assessment plan can be Direct Regulation Future Agency OPRA systems will be based developed at the site or sector level and Regulation by means of a permit issued on an assessment of a site's emissions, will identify the level of resources to be by a regulator or requirement written location, complexity and recent operator assigned to the various compliance directly in legislation. performance. OPRA allows the targeting of assessment activities (currently being regulatory effort. It supports the polluter developed). Enforcement pays principle and through a cost recovery Enforcement action is taken by a regulator CCS charging framework can provide a financial to ensure an activity that is non-compliant incentive to operators to reduce their The Compliance Classification Scheme is returns to compliance. used to classify non-compliance with environmental risks. permit conditions according to the MCERTS Permit potential impact on the environment. The Monitoring Certification Scheme is a Permit is used to mean any documented The scheme helps track repeated breaches quality assurance scheme for providers of set of criteria issued by a regulator or set and provides a consistent means of monitoring services, equipment and down in regulations that require a site or escalating the action taken through links systems, that is administered by the activity to operate in a particular way. to the Agency’s enforcement and Environment Agency and accredited by UKAS. Regulation prosecution policy. All aspects of the work carried out by the CICS Monitoring regulators to achieve the environmental The Common Incident Classification This may be measurement of direct outcomes they require. It is wider than Scheme is used to classify different types of emissions into or abstractions from the Direct Regulation and includes market- pollution incidents by environmental risk. environment, as well as the impacts of based instruments, education, and those emissions and abstractions. Compliance negotiated and voluntary agreements. This is defined as “no evidence of failure to OMA meet the permit (or other) conditions”. Operator Management Assessment is An operator is assumed to be compliant a tool used to assess the quality and between inspections unless there is management of operator self-monitoring evidence to the contrary. processes and identify areas for improvement. 6167_Reg Report v14 10/8/03 2:35 PM Page 33

environment agency appendix 33

Appendix Information sources

Regulatory Instrument Spotlight on business environmental performance Regulatory instruments cover the full www.environment-agency.gov.uk/spotlight range of mechanisms that can be used to deliver environmental objectives. It implies What’s in your backyard any instrument that is used to make an www.environment-agency.gov.uk/wiyby intervention to protect or enhance the Pollution inventory environment. www.environment-agency.gov.uk/pi Sector plan A sector plan sets out the environmental OMA outcomes and targets, and the strategy to www.environment-agency.gov.uk/business/444217/444661/ achieve them, for a defined group of 444671/466158/monitoring/techoma/199726 activities over a designated period of time. NetRegs Self-monitoring www.netregs.gov.uk Monitoring that is carried out by or on behalf of a business, as distinct from that Remas carried out on behalf of the regulator www.remas.info (eg check monitoring). Please send your views on this discussion document to: [email protected] 6167_Reg Report v14 10/8/03 2:35 PM Page ii HO-10/03-5k-BHNB-EP197 Printed on Revive Matt

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