The potential consequences of Brexit for environmental law and the impact on the automotive industry

05 September 2018

This article assesses the impact on UK environmental law of the UK's decision to leave the European Union (commonly known as "Brexit") and the likely direction the negotiations (in terms of environmental standards) will take in anticipation of the departure on 30 March 2019. At this stage, we can only speculate on Brexit's impact on environmental law and what this means for automotive manufacturers.



Which environmental laws currently apply to the automotive industry and where are these environmental laws derived from?

The UK's environmental law is comprised of a mixture of domestic legislation as well as EU Regulations (which are legally binding on the UK in their own right) and Directives, which have been implemented through acts of UK law. UK manufacturers are already bound by these laws.

Some examples are set out below:

EU Regulations that are directly applicable in the UK:

  • REACH Regulations (1907/2006) relating to the registration, evaluation, authorisation and restriction of chemicals.
  • Noise Reduction Regulations (540/2014) affecting the sound level of motor vehicles to reduce noise by 25% over 10 years by 2026.

EU Directives that have been implemented in the UK:

  • Type-approval Directive (2018/858) setting out the safety and environmental requirements that motor vehicles have to comply with before being placed on the EU market. Type-approval authorities regulate various aspects of the performance of motor vehicles, such as CO2 emissions from cars and light commercial vehicles, pollutant emissions and safety standards.
  • Car Labelling Directive (1999/94/EC) relating to information about fuel efficiency and greenhouse gas (GHG) emissions to be given to customers to encourage drivers to choose cars with low fuel consumption.
  • Renewable Energy Directive (2009/28/EC) which provides that at least 10% of overall transport fuel consumption must come from renewable sources.
  • Air Quality Directive (2008/50/EC) on cleaner air.
  • Waste Framework Directive (2008/98/EC) setting out the basic definition of waste and principles of waste management.

UK environmental laws:

  • Climate Change Act 2008, which has set a target to achieve an 80% reduction in greenhouse gas emissions by 2050 compared to 1990 levels.
  • The UK also has targets to ban the sale of new petrol and diesel cars by 2040 and to achieve zero emission cars and vans by 2050 in order to tackle air pollution.

What will happen post-Brexit?

There have been some concerns that there will be a lowering of environmental standards and possibly a vacuum where key EU environmental Regulations would no longer apply. There have also been concerns as to who will enforce environmental law as this is currently the responsibility of the European Commission.

For the time being at least and during the transition period between 30 March 2019 and 31 December 2020, most EU law will continue to apply in the UK but it is unclear what the position would be during the transition period if no withdrawal deal is agreed before March 2019 resulting in a "no deal Brexit."

In March 2017, the UK government stated in its Brexit White Paper that they would ensure that "the whole body of existing EU environmental law continues to have effect in UK law."

Following the transition period, the UK has agreed that all EU environmental law will be copied into domestic law, which has been enshrined in the European Union (Withdrawal) Act 2018.

There is a general consensus that environmental standards should not regress. On 2 May 2018, Theresa May announced that the UK would maintain environmental standards "at least as high as the EU's."

The government's White Paper on the future relationship between the UK and the EU (July 2018) referred to the provision of common standards to provide for frictionless trade at the EU borders.

However, the EU has declared that the UK vehicle certificate authority (VCA), (which certifies cars are fit to be sold in the EU) will cease to be recognised as an EU type-approval authority following Brexit. This means that UK car manufacturers will need to obtain type approval from one of the remaining EU countries to be able to sell vehicles in the EU.

The 25-year plan

In January 2018, the UK government published its proposed 25-year plan seeking to establish a new, independent statutory body, the Environmental Enforcement and Audit Office, to monitor environmental standards and overtake the European Commission's role in holding the government and others to account for environmental targets. The 25-year plan will need to implement a number of current European environmental principles, for example, principles of sustainable development and taking preventative action to avert environmental damage and ensure that environmental protection requirements are integrated in all UK policies and activities.

Why will be the impact on the automotive industry?

The EU is one of the UK's largest automotive trading partners. 53% of all UK vehicle exports and 94.1% of commercial vehicle exports are made to the EU. Continued trade with the EU is vital for business stability in the automotive industry.

Checks will need to be made to ensure that products being exported to the EU comply with EU environmental and product standards. It would be too simplistic to assume that, because all EU environmental laws are to continue to apply, all products will also comply with EU standards. Particularly, in the event of a "no deal" Brexit, the UK will be required to trade under World Trade Organisation (WTO) Rules with border checks and trade tariffs would apply.

The automotive sector is largely dependent on just-in-time delivery systems where products are delivered directly to the assembly line with little or no requirement to warehouse stock, which minimises costs and maximises efficiency.  Whilst the automotive sector is trading non-perishable goods, delays at the border due to environmental compliance checks are likely to result in delays, added costs and a potential need to warehouse stock. Additional regulatory checks will be administratively cumbersome, time consuming and expensive.

Will there be any impact on competition?

The Brexit negotiations are likely to focus on access to the single market rather than environmental protection. However, environmental policy is important and access to the EU market is not likely to be granted without the UK agreeing to comply with EU legislation relating to product standards.

The fact that environmental standards will broadly be aligned will maintain competitiveness. It also means that the industry can manufacture products to common acceptable standards (emission standards, eco-design requirements and energy labelling systems).

The EU will want to see that industrial emissions standards and other pollution controls are maintained, to avoid UK businesses benefiting from a reduced production cost and consequent competitive advantage.

However, if, in the future, either the EU or the UK was to ban a specific chemical or product or implement more stringent environmental standards and product regulations, this might significantly hinder businesses' ability to trade within Europe.

Conclusion

The UK is already a world leader and innovator in setting high environmental standards and contributing to EU environmental legislation.

The government's commitment to the 25-year plan and to transpose all existing EU law into UK law envisages that Brexit will not result in a lowering of existing environmental standards.

Whilst there may be a more onerous administrative impact on EU cross border trade (e.g obtaining type-approval certificates from remaining member states), the EU is one of the largest trading markets for the UK and it is likely that the UK will want to continue EU cross-border trade with as little disruption as possible.


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