The U.S. Army Corps of Engineers pauses certain Section 404 nationwide permits

On November 4, 2021, the Army Corps of Engineers (ACOE) announced that it is pausing all requests for coverage under 12 nationwide permits (NWPs) issued earlier this year, including widely used permits for utility and oil and gas projects, among others.   The announcement followed a California district court’s decision vacating the Section 401 Water Quality Certification Rule (2020 401 WQC Rule) adopted by the Trump Administration in 2020.  Important questions remain about how ACOE intends to proceed while coverage is paused.

Section 404 of the Clean Water Act (CWA) authorizes the ACOE to regulate the discharge of dredged and/or fill material into waters of the U.S.  The CWA also requires that any person applying for a Section 404 permit also obtain a Section 401 Water Quality Certification (401 WQC) from the state, confirming that the discharge of fill materials will be in compliance with applicable water quality standards.  States must also issue 401 WQCs for all activities occurring in their state per a NWP.

On January 5, 2021 ACOE released the final version of a rule revamping certain NWPs issued pursuant to Section 404.  NWP 12 (as it existed prior to January 2021) was a general permit covering a range of activities such as utility line installation, development projects, road crossings, etc.  The January rule reissued and modified 12 NWPs and issued four new NWPs, following an April 2020 decision by the U.S. District Court for the District of Montana vacating a prior version of NWP 12These permits include:

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UK product safety regime: OPSS publishes its call for evidence response

In March 2021, the Office for Product Safety and Standards (“OPSS”) published a call for evidence seeking views on possible changes to the UK product safety regime post-Brexit, including to address new methods of manufacture and distribution, new products and technologies such as artificial intelligence, and environmental considerations. Following the deadline to respond to the consultation earlier this year – the OPSS reviewed the responses and, on the 11 November 2021, published its analysis. The government intends to use the information supplied, alongside wider evidence and research, to shape policy proposals for the UK’s product safety framework to ensure it is future facing and optimised for UK consumers, businesses and enforcement agencies.

Three key themes emerged from the call for evidence, those being; the need for an outcomes-focused and risk-based approach; the need to adapt to challenges and opportunities; and the need for greater simplicity, proportionality and consistency. Taking these themes in turn, firstly, the OPSS acknowledged that the UK’s current system of regulation is in need of modernisation in order to keep up with today’s models of supply and products. This is especially true given the advance of technology and its impact on how we buy products today, as shown by the growth of third-party listings on online platforms and the ability to buy directly from abroad. The respondents suggested that, to keep up with today’s models of supply and products, the government could impose higher requirements for tests, assessment and transparency for products presenting greater inherent hazard and, where relevant, higher levels of risk in the supply chain.

Secondly, the respondents noted that the future framework needs to be able to adapt in order to keep up with future supply chain and product innovation, and to avoid gaps in enforcement and facilitate safe innovation. The government should also go further to understand the product safety challenges faced by consumers at points of vulnerability, and expand access to data and evidence. As products become increasingly energy and resource efficient, in line with consumer concerns about the environment, it is important that consumers can have confidence in their safety.

Finally, the respondents addressed the need for greater simplicity, proportionality and consistency across legislation and powers. Many aspects of the current framework, such as efficient self-declaration systems and standards that offer a presumption of conformity, work well as they are. However, the future framework needs to be as simple and proportionate as possible. The OPSS acknowledged these concerns, and supported the need for legal definitions and enforcement powers across legislation, while also ensuring that regulation is always well-aligned with real life levels of inherent hazard and supply chain risk.

The OPSS’ response concludes by noting that, while the current framework has its strengths, it is facing “significant and growing challenges and needs to be radically reformed to be more adaptable and capable of responding to accelerating change”. The government recognises the need for a long-term approach and for there to be regulatory change to fully address the challenges raised by the respondents. In the meantime, immediate action can be taken in areas where legislation is not necessarily required – such as implementing measures to ensure consumers are protected when using the internet and that online markets remain fair, and addressing the need for greater simplicity, proportionality and consistency through training and guidance for enforcement authorities, and developing voluntary standards and tools to help businesses meet their legal duties when placing products on the market.

The Call for Evidence Response is available here.

Post-COP26: A follow-up briefing on key business issues

Prior to COP26, we published an article that identified several issues being discussed at COP26 that could be of critical importance to business.

During COP26, we followed the developments of these issues in a special Viewpoints series.

And now that COP26 is concluded, people are asking: What impact did it have? Where does the world stand on these issues?

You probably read the mixed reviews with regard to success of this COP. The New York Times reported Nov. 13 within minutes of the banging of the final gavel: “Global negotiators in Glasgow agreed to do more to fight climate change and aid vulnerable nations, but left crucial questions unresolved.”

What was resolved? For those of us who have studied agreements coming out of the COPs, this agreement, called the Glasgow Climate Pact is notably weak. The parties could only agree to language that “notes” certain issues or “urges” certain actions, as opposed to strong language that “decides” any points or “commits” parties to any defined metric.

The Pact does “reaffirm” the Paris Agreement temperature goal of holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 above pre-industrial levels but that will require all nations to slash their carbon dioxide emissions by nearly half this coming decade to hold warming below 1.5 degrees Celsius.

However, the Pact merely “emphasizes” the urgent need for parties (as opposed to “the parties agree to…”) to increase their efforts collectively to reduce emissions through accelerated action and implementation of domestic mitigation measures in accordance with Article 4, paragraph 2, of the Paris Agreement and merely “urges” parties that have not yet communicated new or updated nationally determined contributions (NDCs) to do so as soon as possible in advance of the next session of the Conference of the Parties (as opposed to “the Parties that have not yet communicated new or updated nationally determined contributions agree to submit by [insert date]”).

It also “urges” wealthy nations (as opposed to “wealthy nations agree…”) to “at least double” funding by 2025 to protect the most vulnerable nations from the hazards of a hotter planet. And it explicitly mentions the need to curb fossil fuel usage, the first time a global climate agreement has done so.

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OSHA’s vaccine ETS has arrived for large private employers

On October 21, 2021, we published an article called “Waiting for OSHA: pending vaccine ETS and increased enforcement.” In the article, we discussed the then-pending Emergency Temporary Standard (ETS) regarding vaccinating the workforce OSHA was tasked with developing by President Biden in his “Path Out of the Pandemic” memorandum. The ETS is scheduled to be published and take effect on Friday, November 5, 2021. An in-depth summary of the major components of the ETS can be found here.

Waiting for OSHA: pending vaccine ETS and increased enforcement

Since President Joe Biden issued his “Path Out of the Pandemic” memorandum and Executive Order 14042 on September 9, 2021, employers have had to navigate piecemeal instructions on vaccine mandates.  For example, federal contractors and subcontractors received vaccine mandate guidance from the Safer Federal Workforce Task Force on September 24, 2021.  However, employers should not grow too comfortable with the current status of pandemic regulations, which continue to change in various jurisdictions and will again on a federal level soon.

OSHA’s Emergency Temporary Standard

In his “Path Out of the Pandemic” memorandum, President Biden specifically tasked the Occupational Safety and Health Administration (OSHA) with developing a rule to encourage vaccinations among the workforce – the Emergency Temporary Standard (ETS).  The ETS will require employers with over 100 employees to do the following:

  1. either (a) ensure all employees are fully vaccinated, or (b) require any employees who remain unvaccinated to produce a negative test result on at least a weekly basis before coming to work; and
  2. provide paid time off for any time to get vaccinated and/or to recover if they are ill post-vaccination.

State plans will be required to implement equally protective rules within 30 days.  Though not yet available for review, the status of the pending ETS remains under review by the White House Office of Management and Budget.

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COP26 – The benchmarks for its success or failure

The United Nations Framework Convention on Climate Change (UNFCCC) was established at the first Rio Earth Summit in 1992. More than 200 countries are “party” to the UNFCCC, and these countries meet every year (with the exception of 2020, due to COVID-19) at the Conference of the Parties (COP). The meeting of the UNFCCC in Glasgow in November 2021 will be COP26.

The 2015 COP in Paris (COP21) opened with the largest gathering of world leaders in history, and it closed with the adoption of the Paris Agreement: a new global accord on tackling climate change. The Paris Agreement, with measures that only took effect in 2020, is distinctly different from the Kyoto Protocol (KP), as it calls for action from all 195 signatory countries and not just the industrialized nations. In addition to mitigation (cutting greenhouse gas emissions), it also agrees action on adaptation (responding to the impacts of climate change) and loss and damage (response to climate catastrophe). It also agrees that wealthier nations should provide finance and technology to help poor and vulnerable countries to take action. Implementation of these actions will be addressed at COP26.

Among the issues that will be addressed at COP26 that have an impact on business and industry, and that Reed Smith will be watching, include:

  • Carbon market mechanisms. These would allow countries to purchase carbon credits (reductions) from other countries to allow the purchasing country to continue to emit within its borders. Carbon markets may also include trade in “negative” emissions such as carbon absorption through forestry.
  • Voluntary carbon market transactions. A hot topic and potential threat to the continued growth of the voluntary carbon market is how to deal with the double-counting question that has arisen in relation to carbon offset projects that fall within a country’s NDC activities; in particular, whether host countries must make corresponding adjustments for voluntary transactions to reflect that the offset is being “claimed” by the off-taker of the credits under the voluntary scheme.
  • Climate Finance. Discussions over the delivery of the US$100 billion finance target are likely, and again will be a critical factor for least developed countries (LDCs). Additionally, COP26 is likely to set the next target for climate finance to be achieved by 2025. Climate finance and carbon markets need to scale up in tandem to provide financial resources to developing countries, which are struggling to finance their climate action programs.

There are other aspects of the Paris Agreement that are expected to be discussed which, while not directly relevant to business and industry, could nonetheless influence the success of the agreement with regard to the above:

  • Funding for loss and damage. While loss and damage is a core part of the Paris Agreement, there is no mechanism as yet within the UNFCCC to fund responses when vulnerable countries (LDCs) experience loss and damage. This is viewed as a critical factor by LDCs to lock down in the negotiations, but it is resisted by many wealthy nations.
  • New nationally determined contributions (NDCs) and agreement on a common timeframe for countries’ NDCs. Agreement will be needed on whether the common timeframe should be five years or ten years. The shorter timeframe would mean more frequent revision of NDCs, potentially driving greater ambition than if they were only revised every decade.

How do carbon market mechanisms, voluntary carbon market transactions and climate finance affect business and industry?

  • Carbon Market Mechanism. Article 6 key outstanding issues:
    • Carryover of legacy credits from the KP Clean Development Mechanism and Joint Implementation projects
    • Accounting rules around double-counting of emissions
    • How the trading mechanisms would lead to a reduction in global emissions rather than simply shifting them around the globe

Resolution of the outstanding issues could see significant incentivization for private sector companies able to aid in the transition to net zero, and therefore commercial opportunity. Thus, Article 6 guidelines need to be completed because international markets are essential for businesses to reach net zero goals. Few companies can meet net zero alone and most will need to cooperate across sectors, regions, and international borders to access high integrity markets for natural climate solutions, geological storage, and other removals.

  • Voluntary carbon market transactions. Corporations across all industries are and will increasingly be turning to the voluntary carbon markets to acquire quality offsets that complement their carbon reduction and environmental, social, and governance programs, in many cases in order to ensure compliance with ever more stringent regulation in this area. It is key to the integrity of voluntary carbon offsets that they can be claimed as having offset value, that is, that the underlying carbon reduction giving rise to the carbon offset has not been claimed elsewhere. Anything less could reduce the effectiveness of the voluntary market as a tool to meet carbon reduction goals in the private sector, and mean that businesses have to rely more heavily on other, more costly means to reduce their carbon footprint. The major voluntary offset program operators are yet to reach a consensus on what the impact of the Paris Agreement NDC accounting and “Internationally Transferred Mitigation Outcomes” market mechanisms will be on offsets generated by projects that fall within a country’s NDC, but many are looking to the COP to resolve the question of whether a corresponding adjustment must be made to account for such offsets, thereby addressing the double-counting risk to the voluntary carbon market.
  • Climate Finance. Under the 2009 Copenhagen Accord, developed coun­tries committed to jointly mobilize US$100 billion a year by 2020, which target has yet to be met. This financing will come from public, private, bilateral, multilateral, and alternative sources of finance. The commitment was formalized in the out­come of the 2010 Cancún COP and reaffirmed as a key element of the 2015 Paris Agreement. Financing resources mean opportunities for business in the countries that receive support.

Where do the negotiations sit on these points coming into COP26?

  • Carbon Market Mechanism. Three weeks of virtual talks by the Subsidiary Body for Implementation and the Subsidiary Body for Scientific and Technological Advice occurred in advance of COP26 in June 2021. These talks were not fruitful and did not bode well for meaningful progress in advance of COP26. Article 6 removes the developed vs. developing countries differentiation that characterized market mechanisms under the KP, so negotiators have to strike the right balance and find a model that works for everyone. There are several reasons that an agreement has yet to be reached:
    • While the Parties have generally agreed on how market mechanisms should work under the framework of the Paris Agreement, there is some disagreement over guidelines on baselines and additionality under Article 6.4. The remaining differences are on the degree to which certain provisions should cover different parts of Article 6.
    • The KP’s market mechanisms create an important precedent, so negotiations frequently end up in the same kind of deadlocks that characterized KP negotiations.
    • Negotiations are highly politicized. This makes the negotiating process more difficult.
  • Voluntary carbon market transactions. As noted above, there are several important elements of the Paris Agreement market mechanisms on the table at COP26, and this is one of them. At the heart of the discussion is the principle that corresponding adjustments should be made where necessary to ensure the robustness of the Article 6 rules. However, it is not clear at this stage whether this will translate into a firm outcome on the specific question of double-counting in relation to voluntary carbon market transactions that fall within a country’s NDC. If agreement on this question cannot be reached at COP26, it may ultimately be left to the voluntary carbon offset program operators to legislate for this issue within the contractual framework of their respective schemes, which could result in a divergence of approach by the key players and create unwelcome uncertainty in that market.
  • Climate Finance. At COP16 in 2009, developed countries pledged to jointly mobilize US$100 billion per year by 2020 to address the needs of developing countries. At COP21, parties decided that, prior to 2025, the parties would set a new collective quantified goal from a floor of US$100 billion per year, taking into account the needs and priorities of developing countries. According to an Organization for Economic Co-operation and Development report, the initial US$100 billion target has not yet been met (let alone any new goal), and delivering greater financial support will be a central theme of COP26.

U.S. EPA releases Roadmap to address PFAS contamination

On October 18, 2021, the U.S. Environmental Protection Agency (EPA) announced a per- and polyfluoroalkyl substances (PFAS) Strategic Roadmap (the Roadmap) detailing steps that the EPA plans to take to address PFAS contamination. PFAS are largely unregulated, but studies linking certain PFAS to health issues and their persistence in the environment and human body are driving the push for increased regulation. Currently, the EPA has established only a non-enforceable health advisory level for two PFAS, perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS). Additionally, some states have been moving forward at different speeds to establish state-specific PFAS regulations, including drinking water standards and cleanup levels for soil and groundwater remediation. However, the EPA’s Roadmap suggests increased federal regulation looms.

The EPA’s approach under the Roadmap considers the lifecycle of PFAS, focusing not only on remediating PFAS-contaminated sites and regulating PFAS discharges or emissions, but also regulating PFAS at the upstream level where they are produced and incorporated into products. Other areas of focus called out in the Roadmap include (1) an emphasis on enforcement actions at PFAS-contaminated sites and placing responsibilities for limiting exposure on manufacturers, processors, distributors, and similar users; (2) research into PFAS over health effects and remediation technologies; and (3) an environmental justice focus on prioritization of PFAS effects on disadvantaged communities.

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UK plan for Waste Shipments updated

The UK plan for shipments of waste (the Plan) has been amended, with the key update being to emphasise that interim disposal operations should be carried out in the UK wherever possible.

Earlier this year Defra consulted on various amendments to the Plan for shipments of waste and those amendments have now been adopted following a public consultation.

The government specified that they were proposing four main updates to the Plan:

  • align the UK Plan with the government’s NORM (naturally occurring radioactive material)waste strategy by allowing imports of NORM waste of UK origin for disposal, and restricting other shipments of NORM waste for disposal.
  • clarify that interim disposal operations should be carried out within the UK where possible.
  • remove the existing exception relating to export of contaminated river sediment waste for disposal.
  • insert a new exception relating to export of mercury and mercury-contaminated wastes for disposal.

Certain amendments were also made in the light of the UK’s withdrawal from the EU.

A key change is the amendments for interim disposal operations. Where someone proposes to export waste for biological or physico-chemical treatment operation (D8/D9) or interim disposal operations this will only be permissible if such treatment results in final compounds, (which are disposed on a manner that is in accordance with the exceptions set out in the Plan) and in the case of proposed exports from the UK there are no suitable UK facilities that can provide these interim disposal operations.

This second point has been added in the revision. The responses to the consultation were broadly positive on this point, although it was noted that the UK would need to have sufficient capacity to conduct such interim operations.

The EU opened a review and public consultation on the Waste Shipment Regulation 1013/2006 in 2020, intended to facilitate recycling within the EU and make it more difficult to export waste to third countries (those outside the EU and not part of the OECD Decisions). The outcome of this review has been delayed.

UK plans carbon border adjustment mechanism

Last month, the Environmental Audit Committee (‘EAC’) launched an inquiry into a potential future carbon border adjustment mechanism (‘CBAM’) for the UK. The objective of introducing a CBAM would primarily be to address the risk of carbon leakage in the UK industrial sectors caught by the nascent UK Emissions Trading Scheme (‘UK ETS’), i.e. switching to foreign production of those goods to avoid the additional costs associated of compliance with the UK ETS passed through by UK operators. The move would be consistent with the EU, which is in the process of introducing its own CBAM for the same purpose.

The inquiry follows recommendations made by the EAC as part of its ‘Growing Back Better: Putting Nature and Net Zero at the Heart of the Economic Recovery’ report, whereby it recommended that the Government investigates the merits of a CBAM. The inquiry will assess the role of a CBAM in addressing carbon leakage concerns and meeting wider environmental objectives, such as long-term UK decarbonisation. The inquiry will also consider the impacts, risks and opportunities of introducing a unilateral CBAM in the UK, i.e. separately from the EU. The EAC is inviting written submissions on a range of questions including; whether the UK should pursue a CBAM; the form it should take; how it should be implemented; the practical and administrative challenges; and the potential impact. Evidence must be submitted by 25 October 2021.

A CBAM is a border tax on imported products based on their embedded emissions, or carbon footprint. The tax is aimed at ensuring that imported goods in energy intensive industries (‘EIIs’) are subject to equivalent carbon costs as domestically produced EII goods. A CBAM can be used to address carbon leakage, i.e.  the risk that climate policies often lead to companies relocating to countries with lower climate ambitions. Whilst the UK partially addresses this risk in the UK ETS by permitting manufacturers at risk of carbon leakage free allowances for emissions, this may not be enough to incentivise long-term UK decarbonisation in line with the UK’s wider environmental objectives. It is worth noting that any CBAM would need to comply with the obligations under the Paris Agreement and WTO rules relating to discrimination between domestic and imported products.

The EU has proposed to introduce its own CBAM from 2023, under which importers would purchase CBAM certificates that mirror the EU ETS price, to bring the carbon price on imports to the EU in line with the carbon price paid by EU producers. Some form of CBAM has also been considered by other countries: the US considered the introduction of a CBAM within its 2021 Trade Policy, and Canada also recently explored the establishment of a CBAM, with the aim of opening a global dialogue on the mechanism. Whilst no country currently applies a CBAM, COP26 President Alok Sharma has stated that a CBAM has the potential to affect the overall context of the upcoming climate conference, despite not being a formal part of the programme.

Following a review of the evidence submitted in the inquiry, the EAC will make recommendations to the UK Government on the possibility of introducing a unilateral CBAM in the UK. The inquiry is available here.