The Scottish Government’s position following the EU referendum in 2016 was that it will seek to maintain EU environmental standards after leaving the EU. It later set out that it will seek to use powers created in the UK Withdrawal from the European Union (Continuity) (Scotland) Act 2021 to align with EU environmental law where it believes it is appropriate.
However, it was not clear in the years between the referendum, and agreement of the EU-UK Trade and Cooperation Agreement (TCA or ‘the Agreement’) on 24 December 2020, how this would work in practice including to what extent the outcome of EU-UK negotiations would support this ambition.
Environmental protection is generally a devolved area, so in theory the Scottish Government can continue to align with EU environmental law in future. However, in practice, in the absence of any baseline of standards in the UK linked to EU standards, there have been concerns that regulatory divergence across the UK, other trade agreements, and leaving centralised EU regulatory systems could put regressive pressure on standards in Scotland. While the UK Government has also stated that it is committed to high environmental standards, it has also emphasised the desire to set its own rules.
This blog explores the implications of the Agreement for the ability of the Scottish Government, in practice, to keep pace with EU environmental law. To aid navigation, a contents pop-out is provided below.
The EU-UK TCA came into force provisionally on 1 January 2021. SPICe has published a long read on the Agreement. In the Agreement, the UK and the EU affirm the right of the other to determine the environmental protections it deems appropriate and agree to “continue to strive to increase their respective environmental levels of protection”.
The Agreement – Level Playing Field and other environmental provisions
One of the key areas of disagreement during negotiations was on the Level Playing Field (LPF) – the notion that there should be comparable standards of environmental protection, and in other areas such as workers’ rights, across the territory of a free trade agreement.
LPF provisions finally agreed in the TCA provide that some environmental and climate levels of protection cannot be lowered, so-called non-regression, in a way which impacts trade and investment between the Parties i.e. the EU and the UK (discussed further later in the blog). The following areas of environmental protection are specified, in addition to climate protection:
(a) industrial emissions
(b) air emissions and air quality
(c) nature and biodiversity conservation
(d) waste management
(e) the protection and preservation of the aquatic environment
(f) the protection and preservation of the marine environment
(g) the prevention, reduction and elimination of risks to human health or the environment arising from the production, use, release or disposal of chemical substances
(h) the management of impacts on the environment from agricultural or food production, notably through the use of antibiotics and decontaminants.
The Agreement requires parties to maintain only the “levels of protection provided overall in a Party’s law” in each of the above areas.
Any dispute, if unresolved through consultations between the Parties, would be referred to a Panel of Experts to produce a report. Findings are not binding, but the responding Party is expected to take steps to comply with them, and if it fails to do so, the other Party can ultimately take counter-measures. Separately, new State Aid rules aim to prevent distortions created by subsidies. The Agreement also establishes a Level Playing Field Committee to support governance.
A ‘rebalancing’ provision sets out that if material impacts on trade or investment between the Parties arise as a result of significant divergences in environmental or climate protection or subsidy control, either Party may take rebalancing measures, e.g. impose tariffs. According to the European Commission:
“This might be relevant, for example in a situation where one Party would significantly increase its levels of protection related to labour or social standards, the environment or climate above the levels of the other Party. This may entail an increase in the costs of production and hence a competitive disadvantage.”
Other areas of the Agreement relating to the environment include specific provisions on:
- The Parties commit to respect the Paris Agreement, have an effective system of carbon pricing and to consider linking carbon pricing systems – the UK has set up its own UK Emissions Trading Scheme (ETS) to replace the EU ETS.
- The Parties commit to give each other the opportunity to express views where one intends to classify substances. The UK has left the EU REACH system for regulating chemicals and implemented its own system (with EU REACH continuing to apply in Northern Ireland).
- The UK is no longer entitled to participate in EU funding programmes, however the Agreement provides for participation in a few programmes including Horizon Europe, a €100 billion research fund.
- Parties agree to ensure that domestic enforcement authorities give due consideration to alleged violations of environmental law, with effective remedies available.
Various other commitments cover provision of environmental information, use of the precautionary approach (a core principle of EU environmental law), and a broad commitment to ensure trade and investment takes place in a manner conducive to sustainable development.
What do these provisions mean for Scotland’s environmental standards?
The Agreement can be said to maintain a ‘floor’ for environmental protection in the UK, and also provides incentives for the UK to ‘keep pace’ with increasing EU standards, to avoid rebalancing measures. Given the Scottish Government’s aim to maintain EU standards, having a UK-wide baseline linked to existing EU standards would logically be expected to support this ambition – at least in comparison to a ‘no deal’ outcome.
Caveats, however, apply to this, relating both to the strength of LPF and rebalancing provisions, and the wider context in which the Agreement sits as one ‘pillar’ of Scotland’s post EU-exit framework.
LPF and rebalancing provisions provide safeguards only so far as divergence impacts trade
Significantly, the LPF provisions only apply where regression ‘affects’ trade or investment between Parties, or in the case of rebalancing provisions, where ‘material’ impacts on trade or investment arise as a result of ‘significant’ divergences in environmental protections.
It is too early to anticipate how strictly these provisions will be applied, and what level of regulatory ‘drift’ will in practice be tolerated between the UK and the EU. Clearly, however, a key difference between pre and post-EU exit is that these provisions only act as safeguards to the extent that divergence can impact on trade and investment between the Parties or is perceived to do so. Previously, EU standards applied in the UK regardless of those interactions.
Another difference is in relation to the strength of ways to enforce that ‘common floor’. EU membership gave UK citizens avenues to complain to EU institutions directly about an alleged breach of environmental law. Any dispute will now need to be resolved between the EU and UK Government – with resolution mechanisms yet to be tested, and any role of devolved administrations in governance of the Agreement as yet unclear.
There has been an, at best, lukewarm response from stakeholders to the Agreement. The Royal Town Planning Institute said the LPF provisions were a win for the environment in comparison to ‘no deal’ which was “feared by environmental NGOs”.
The Institute for Public Policy Research highlighted the limited reach of LPF provisions:
“Given it is notoriously difficult to prove that any lowering of protections affects trade or investment, the deal is unlikely to prevent the UK government from weakening EU-derived labour and environmental policies if it so chooses.”
GreenerUK raised similar concerns about evidencing trade impacts, and about enforcement:
“For environment-related provisions to have a real impact, they must be supported by well-designed and effective governance mechanisms that enable meaningful enforcement where appropriate. However, the full horizontal dispute settlement mechanism applying to the core of the agreement… does not apply to the environment chapter… Instead, the agreement provides for a weaker mechanism involving consultations between the parties and the convening of a panel of experts.”
Interactions with other ‘pillars’: the UK Internal Market Act, Common Frameworks and future trade deals
The Agreement is now one part or ‘pillar’ of Scotland’s post-EU exit governance framework, each with implications for the Scottish Government’s ability to maintain EU environmental standards, and more broadly, to exercise its devolved competence on those issues.
The UK Government’s UK Internal Market Act 2020 (IMA) was developed in anticipation of leaving the EU single market, which previously facilitated intra-UK trade. On the face of it, the IMA does not affect the ability of the devolved governments in Scotland and Wales to continue to regulate environmental policy as they wish. However, in practice, the market access principles in the IMA mean that any changes that lower regulation in another part of the UK, or any unilateral increase to standards in Scotland, could place Scottish business at a disadvantage. This is because products produced in or imported into another part of the UK are not required to comply with the new higher standards in order to be sold in Scotland. This could render certain policy interventions less effective, or potentially unworkable, unless pursued at UK- level. Such interactions were raised in the Scottish Parliament’s scrutiny of the Bill, which the Parliament did not give its consent to, with the Scottish Government stating the Bill would “encourage deregulation”.
This has yet to be tested through real examples of divergence. An early test case could be in waste regulation, with Scotland due to introduce a Deposit Return Scheme (DRS) in 2022, whereas the UK Parliament has yet to pass legislation enabling a scheme south of the Border. DRS in Scotland will mean businesses have to add a charge to certain drinks containers, and producers will be required to meet recycling targets, potentially requiring businesses to adjust practices in different parts of the UK. The UK Government’s White Paper on the Internal Market Bill referenced DRS as an example where future divergence within the UK could be problematic (for more detail see this SPICe blog).
Coming back to implications of the EU-UK TCA, there is clearly some interaction between the Agreement and the IMA, in that deregulation below the floor agreed in the deal should not, in theory, be possible – subject to the limitations discussed.
This brings us to the related question of how Common Frameworks feature as a ‘pillar’ in this new framework – agreements on approaches to regulation being developed in a number of areas between the UK and devolved governments. None are yet agreed, but they could be used to set out common ambitions, thus mitigating risks of competitive deregulation. Furthermore, the IMA explicitly states market access principles could be disapplied in relation to statutory provisions giving effect to a Common Framework, but only if the UK Government decides to put this in regulations. This does give a seemingly clear route for divergence in some areas, albeit through an as yet unfamiliar pathway and requiring the UK Government’s agreement where before it would not have been needed for Scotland to pursue higher standards.
A general implication of the Agreement, similar to the interaction with the IMA, is that standards in Common Frameworks, if also covered by the Agreement, will not be able to regress. Specific aspects of the Agreement may also have implications for Frameworks for example on chemicals or emissions trading. Frameworks covering use of state aid to support environmental outcomes, for example in agriculture, could interact with TCA rules on subsidies.
Finally, the EU-UK TCA is a single trade deal, albeit a unique one in the task it was set. The UK Government will go on to negotiate other trade agreements with potential implications for Scotland. The environmental implications of trade deals for Scotland were examined in a SPICe Briefing.
The Agreement can be said to provide a common floor of environmental standards in the UK, in theory supporting the Scottish Government’s aim to maintain EU environmental standards. However, the Agreement is now only one pillar within a number of factors that will influence environmental standards in Scotland and the Scottish Government and Parliament’s associated devolved competence (see Figure below). The real implications of this ‘new order’ for environmental policy are still uncertain and are only likely to become clearer over the coming months and years as these factors are played out.
Areas which might benefit from further Parliamentary scrutiny include:
- Scottish Government participation in governance of the Agreement in relation to environmental protection e.g. any role in EU-UK Committees or dispute resolution.
- Further exploration of how the Agreement impacts on Common Frameworks.
- How in practice the Scottish Government and Parliament will stay informed about developments in EU law in order to use and scrutinise the use of keeping pace powers.
- The implications of new rules on subsidies for environmental policy in areas such as agricultural support.
- How LPF provisions may interact with environmental aspects of future trade deals.
Alexa Morrison, Senior Researcher, SPICe.