Globalisation versus Populism, and the Future for Environmental Regulation

The dialogue around environmental law has long been bound up with that of globalisation: the inherently global nature of environmental impacts and the need for supranational cooperation (for example, on ozone depletion and climate change); de-industrialisation of developed countries and rampant industrialisation of tiger economies; growth in international ethical finance; ever-lengthening cross-border supply chains; instant and uncontrolled media coverage and NGO pressure. These drivers have led inexorably towards a more concerted and international environmental regulatory framework that, through greater use of “market access” and “transparency” mechanisms, has arguably promoted a “race to the top” in standards.

Two recent seismic political events – characterised as having arisen from inward-focused populist movements – have called this trend into question. Brexit will see the UK step back from the EU environmental sphere to possibly strike its own path. Donald Trump being elected in the US has apparently (at least in the short term) changed the course of certain of the US’s own environmental policies, seen not least in its withdrawal from the Paris Agreement. Both movements have placed a heavy emphasis on promoting local industrial production and on institutional change. Might we now be entering an era where populist movements begin to see the boundaries of environmental regulation drawn more starkly?

This article considers these questions through the lens of the UK’s exit from the EU. Three oft-repeated pre-conceptions connected to Brexit and environmental regulation will be challenged. It will be argued that we are now too committed – or inevitably forced towards – a globalised approach to environmental issues for the direction of travel to drastically change now.

BREXIT PRECONCEPTION 1: Brexit will lead to a roll-back of environmental regulation in the UK

Following the Brexit referendum, there has been widespread concern that an environmental de-regulatory agenda will emerge in the UK. The freedom to “cut the red tape” of EU laws was heavily promoted by the Leave campaign during the referendum. Since then, the UK government’s promise to preserve all current EU law through the Great Repeal Bill has gone some way to assuaging fears – but the potential for the bill’s secondary legislation mechanics to allow a weakening through the back door, and for a longer-term roll-back of environmental protections, remains.

However, there are compelling reasons why an environmental de-regulatory agenda arising out of Brexit seems unlikely at this time:

• Products: much of the environmentally focused regulation derived from the EU relates to products and chemicals. UK businesses exporting to the EU (or other markets with aligned standards) will still need to comply with rules such as the Restriction of Hazardous Substances Directive and the REACH Regulation. Reducing domestic standards to a lower level could in effect discriminate against those exporting businesses, whose cost base will then be higher. It is for this reason that many non-EU countries, such as South Korea, have been adopting standards aligned with the EU (part of the so-called “Brussels effect”).

• Agreement with EU: the EU will be wary of the UK undercutting its “cost of production” via an environmental de-regulatory agenda and may seek to restrict the rolling back of environmental protections. The EU has also proven itself to be an outward-looking force on environmental matters. Expect environmental restrictions to feature highly on the agenda in UK-EU discussions.

• Compliance cost: conversely, it is questionable how much there is actually to gain for businesses in “cutting the red tape”. Some of the calls for a de-regulatory agenda during the referendum were arguably rooted in a misunderstanding of the true costs of compliance. This is seen, for example, in the blaming of the EU Emissions Trading Scheme (EU ETS) for contributing to the Tata Steel difficulties and Port Talbot plant crisis – now convincingly disputed by subsequent studies. Indeed, when the European Commission recently considered incentives to stop “carbon leakage” – companies leaving the EU to operate in countries with less onerous climate-focused regimes – it simply could not find evidence that this was happening.

• Public will: there may not be any wider public will for a de-regulatory agenda. Opinion polls in the immediate wake of Brexit found an overwhelming majority of the public – even of those who voted to leave - wanted environmental laws “at least as strong” as those imposed by the EU. Recent UK public reaction to the prospect of lower food standards allowing “chlorinated chicken” to enter the market (as the result of a mooted free trade agreement with the US) show how quickly these issues can grow in prominence. The tragic fire at Grenfell Tower in the summer of 2017 has undoubtedly further put the spotlight on cost-cutting and the merits of de-regulating areas such as environment, health and safety. Future actions by government in this space will be closely scrutinised.

• International obligations: the UK remains subject to various environmental international conventions. While the UK’s precise legal status under a number of these is unclear (where it entered them through the auspices of the EU), this is in some respects a technicality. The UK will not wish to lose its strong standing on the world stage on environmental issues and will be keen to abide by these conventions and find practical solutions to any legal lacunae.

These principles are not confined to UK/Brexit. The interconnected nature of environmental issues to trade and commerce calls into question any purely inward-looking domestic agendas. Early experiences of the Trump administration are an interesting comparator in this regard. There, moves to promote a US-focused environmental agenda – retrenching from international carbon commitments under the Paris Agreement – have met with widespread opposition, not only from other countries but also many sectors of its own industry.

BREXIT PRECONCEPTION 2: The long-arm nature of EU legislation in environmental/product regulation (as well as other areas) contributed to Brexit

While in general environmental issues were relatively low-profile during the referendum, the “interfering” role of the EU in setting product standards (the “bendy bananas” debate being a classic example) and the impact of regimes such as the EU ETS on domestic industry (discussed above) were occasionally areas of focus in some parts of the Leave campaign. This may tap, more broadly, into a populist resentment within the UK of EU interference in “domestic” affairs.

Nevertheless – in specifically environmental terms – it does seem that the EU’s “long arm” was and is viewed positively in the UK. It can be intuitively understood that the impacts of environmental issues are by their nature cross-border. Indeed, early EU environmental legislation in part resulted from acid clouds going from UK industry (then, lest we forget, the “dirty man of Europe”) across to Scandinavia. The obvious benefits of supra-national cooperation on environmental issues is now best seen in the climate change consensus – the public, as well as political, outcry that followed Trump’s withdrawal from the Paris Agreement was striking.

Indeed, where the UK has had the legislative space to do so, it has proven very willing to itself wield the “long arm” in the linked area of social policies. Both the Bribery Act 2010 and the Modern Slavery Act 2015 seek to alter behaviours on a global scale, putting the onus on businesses with a UK nexus to root out corruption and servitude from their overseas businesses and (significantly) supply chains. New technologies and social media also add another incentive to businesses to look beyond their own borders in seeking strong environmental and social compliance – for example sourcing wood from unsustainable destruction of primary forest can have its own reputational impacts, quite apart from the “long-arm” requirements of the EU Timber Regulation.

In short, notwithstanding Brexit, it seems doubtful that the UK will turn its back on a globalised approach to environmental issues. We can expect to continue to see the use of “long-arm legislation” on both sides of the Channel.

BREXIT PRECONCEPTION 3: Even if the UK doesn’t de-regulate, thanks to Brexit the enforcement regime will be de-powered

The UK government has been clear that the existing “rules” – the regulations and laws coming from the EU – will be preserved. However the architectural framework that will administer and enforce these is far less clear.

The mechanics of disentangling the UK from the EU environmental institutions and framework (critical, for example, to administering chemical regulations) is too complex to discuss here, but will need to be an area of major and urgent focus as exit talks progress. Depending on how this is resolved, there could be a weakening in the degree or thoroughness of administrative oversight, at least in the short term.

A more general concern, from a traditional legal standpoint, is the potential loss of the EU Commission as an enforcement body with the power to hold the UK to account over EU environmental laws. Over 30 environmental-related cases have been brought by the EU Commission against the UK and resulted in judgments against it. The mere threat of such proceedings has been a driving force behind a range of hugely important other domestic initiatives that might not otherwise have happened (or at least not have happened so soon) – from increased recycling targets and revised national air quality plans, through to £4 billion super-sewers to reduce pollution of the Thames.

Possibly, an independent environmental body, empowered to hold the UK government to account, could be established to fill any such enforcement void left by the EU Commission. However the UK government clearly does not think this necessary and regards the existing domestic legal infrastructure as adequate. A recent government publication on the Great Repeal Bill and environmental protections states:

The UK has always had a strong legal framework for enforcing environmental protections… regulators to enforce our existing environmental regulations, and our system of judicial review and its body of public law that enables decisions and actions of public authorities to be challenged through the UK courts… [and] Parliament to hold the executive to account.

Among other things, a surge in activity on environmental issues in the domestic courts therefore seems likely. The recent, high-profile Client Earth cases against the government on air quality may be just the beginning.

More importantly, perhaps, the “non-legal” enforcement mechanisms should not be overlooked. There are other incentives on the UK, and its businesses, to be a “good environmental citizen”. These include liability and reputational risks in a more transparent world, the growing role of ethical finance and investment, and NGOs becoming ever more innovative in their tactics to force businesses to consider broader environmental issues (beyond mere compliance). From our own perspective, more and more clients are for these reasons asking us to broaden our diligence to consider not only the legal compliance of businesses but also their wider environmental, social and related governance impacts.

In short, there could perhaps be (at least in the short term) a weakening in domestic conventional enforcement infrastructure as a result of Brexit/populist movements, but the growth of commercial, reputational and governance levers in a “globalised” world may well continue to expand to fill any gap.

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While we have in this article sought to challenge some of the concerns about environmental regulation in the midst of recent political developments, there seems little doubt that we are entering a period of uncertainty. Any political or economic fallout from an event such as Brexit risks derailing, or at least delaying, progress being made on environmental issues. Indeed, reduced UK government bandwidth to address various regulatory issues in light of the sheer scale of the Brexit task is already being felt.

However, concerns about domestic political movements leading to
de-regulatory environmental agendas do need to be placed in context. The increasingly globalised nature of environmental regulation and growing links to trade and commerce, the progress by businesses in adopting a proactive cross-border approach to these issues, and the developing arenas of accountability in our increasingly interconnected and transparent world march on regardless.