MEMORANDUM SUBMITTED BY THE MINISTRY OF
AGRICULTURE, FISHERIES AND FOOD, THE DEPARTMENT OF THE ENVIRONMENT,
TRANSPORT AND THE REGIONS AND HM TREASURY (V23)
1. This Memorandum describes the development
of Government policy on the Integrated Pollution Prevention and
Control (PPC) Directive and the Climate Change levy, describes
the roles of the departments in implementing these policies and
addreses the expected impact of the measures on intensive farming.
The Department of the Environment Transport and the Regions leads
on implementation of IPPC, although its responsibility extends
only to England. HM Treasury leads on the Climate Change levy.
INTEGRATED POLLUTION
PREVENTION AND
CONTROL (IPPC)
Background
2. Integrated pollution control is a concept
developed in the UK. Part I of the Environmental Protection Act
1990 established two systems of industrial pollution control in
the UK: the local air pollution control (LAPC) system operated
by local authorities and the integrated pollution control (PC)
system, operated by the Environment Agency. The latter regulates
emmissions from more technologically complex or potentially polluting
processes to land and water, as well as to air. The UK encouraged
the adoption in Europe of the concept of integrated pollution
control and EC Directive 96/61 on Integrated Pollution Prevention
and Control (IPPC) was adopted on 26 September 1996.
3. IPPC closely resembles the UK's IPC system.
Both require operators, through a system of prior permitting,
to use the best available techniques (BAT)—subject to an
assessment of the costs and benefits—to prevent or reduce
emissions to air, water and land. However, there are some important
differences. IPPC extends the range of environmental impacts to
be considered in issuing a permit to include site restoration,
noise, waste minimisation and energy efficency—aiming to
regulate the effect of an installation on the environment as a
whole. It also applies to a large number of installations, including
some currently regulated under LAPC, as well as some sectors new
to control under this type of system.
4. The intensive pig and poultry sectors
are amongst the sectors which are being brought into the system
for the first time. Both pig and poultry farms have the potential
to cause pollution if manures are not handled, stored and spread
in accordance with good agricultural practice. Animal housing
may also represent a point source of air pollution from ammonia,
dust and smell.
5. During negotiations on the Directive
the UK argued unsucessfully to keep the sector out of the scope
of IPPC on the grounds that these risks were better controlled
through other channels. Once it became clear that there was insufficient
support from other Member States to maintain this position, MAFF
and DETR agreed proposals for amendments to the draft text designed
to minimise the burdens which the Directive would impose on agricultural
businesses. Some but not all of these proposals were incorporated
in the final version of the Directive.
6. The amendments which were negotiated
provided for:
— an increase in the size of pig and
poultry units covered by the proposal from 30,000 poultry places,
1,600 production pigs and 600 sows in the Commission's proposal
to 40,000 poultry places, 2,000 production pigs and 750 sows in
the Directive as adopted;
— practical considerations to be taken
into account when emission limits values set, and the replacement
of some emission limits with technical control measures (it is
impossible to measure accurately or contain effectively many of
the emissions from farming); and
— a requirement for account to be taken
of costs and benefits in determining emission monitoring requirements.
Implementation
7. The IPPC Directive required Member States
to transpose the Directive into national legislation by 30 October
1999. The UK opted to implement the Directive through a short
Act and accompanying regulations. These will create a new Pollution
Prevention and Control (PPC) regime that will replace Part I of
the 1990 Act—allowing the requirements of the Directive
to be implemented whilst maintaining a coherent pollution control
system. The detail of the new system has been the subject of four
DETR consultation exercises. The intensive farming sector will
be regulated by the Environment Agency under PPC (rather than
by local authorities) because of its potential to discharge to
water.
8. Once the Directive has been agreed, MAFF
gave immediate consideration to the measures which would be necessary
to implement it in relation to the pig and poultry sectors. With
DETR agreement, MAFF produced in July 1997 a consultation paper
specific to the pig and poultry sectors in parallel with the separate
DETR consultation papers which dealt with more general issues.
The MAFF paper gave practical examples of controls which might
be required on farms. This paper stimulated useful discussion
on the application of IPPC to the pig and poultry sectors and
encouraged those potentially affected by the new controls to consider
how they might need to take account of them in future investment
decisions. Feedback from that consultation, and subsequent meetings
with the farming sector, contributed to the Government's decisions
on the implementation of the Directive into UK law.
9. Responses to the MAFF consultation paper
highlighted concerns about:
— the potential competitive disadvantage
for the industries concerned which would result from more stringent
enforcement of IPPC in the UK than in other Member States of the
EU; the need for farmers to be kept informed of plans for the
implementation of IPPC in the UK;
— the burden on the industries of meeting
the requirements of further legislation. (This is particularly
engaging the industry in the light of their current economic situation.
In the pig sector farmers are currently losing around £10
on each pig they sell and many are going out of business or reducing
the size of their operations. The economic position in the poultry
sector is not as bad as for pigs, although margins at present
are minimal.);
— the need for detailed guidance notes
for the use of the regulated industries; and
— the need for enforcement staff to
be aware of the special requirements of applying IPPC to agriculture.
10. The PPC Act received Royal Assent on
27 July 1999. The PPC Regulations will be subject to affirmative
resolution of both Houses of Parliament and are expected to be
laid before Parliament in the Spring. It is expected that by agreement
with the National Assembly for Wales the regulations will cover
both England and Wales. It is expected that the Scottish Parliament
will make comparable regulations to implement the Directive in
due course.
11. The Directive requires that all existing
installations be made subject to its requirements by 30 October
2007. The majority of respondents to the third DETR consultation
exercise agreed that sectors should be phased into the new system
over the period until 2007. They also agreed that the main criterion
determining the phase-in date of a sector should be the availability
of the BAT reference documents, or BREF Notes, being prepared
for each sector by the European Commission, upon which national
sectoral guidance will be based. Work on the BREFs for the pig
and poultry sectors is likely to be concluded in 2002. In order
to give the Agency time to develop national guidance, all installations
in the poultry sector will become subject to the Directive in
2003, and those in the pig sector in 2004.
12. However, any installations which are
new or substantially changed after 30 October 1999 will require
a permit immediately. A substantial change is one having a significant
negative effect on the environment. We do not expect that there
will be many new or substantially changed installations in the
intensive farming sector. Any that there are between 30 October
1999 and the PPC Regulations coming into force will need to apply
for a permit as soon as the new regime is in place. As the sector
is new to this type of system, the Agency is currently preparing
interim guidance, in consultation with MAFF and the industry,
for any that may require a permit before the phase-in date for
existing installations.
LIKELY IMPACTS
ON THE
INTENSIVE FARMING
SECTOR
Installations Covered
13. The IPPC Directive applies to installations
with more than 40,000 places for poultry, 2,000 places for production
pigs of over 30 kg, and 750 places for sows. Horticulture is not
covered by the Directive. Estimates based on the MAFF census returns
suggest that about 400 holdings producing pigs and 500 producing
poultry may be covered by the Directive accounting for approximately
13 per cent of the UK sow population, 40 per cent of finishing
pigs, 74 per cent of laying hens and 56 per cent of broilers.
The exact number of farms brought into IPPC control will depend
to some extent on the technical definition of an "installation".
Consultation with the industry suggests that the number of farms
affected may be considerably higher than the initial estimates,
partly because the holdings identified in MAFF census data can
represent more than one IPPC installation.
14. The main impacts on these installations
will be the requirement to prepare, present and discuss the permit
application, ensuring that the permit conditions can be and are
complied with and meeting the charges made for a permit.
Permit Application
15. Staff time and resources will be required
to prepare an application for an IPPC permit. In response to the
outcome of the third DETR consultation exercise, the Environment
Agency will be preparing standard application forms that will
appear in guidance notes and be the subject of consultation with
the industry. These forms should ensure that the time spent in
preparing an application is spent effectively, reducing the chances
of the operator providing incomplete or inappropriate information.
The Agency is also conducting IPPC implementation trials in installations
from different sectors affected, including a poultry farm. The
results should help to give a clearer idea of the amount of effort
that will be required in preparing an application in this sector
and inform the development of standard application forms. If general
binding rules (see paragraph 18) are introduced, they should reduce
the amount of effort required to prepare an application.
Permit Conditions
16. The Directive requires the emission
limits (or equivalent measures) set out in permits to be based
on the best available techniques (BAT). Although the EU Commission
has started work on the BAT reference documents (BREFs) for the
pig and poultry sectors, with the participation of MAFF and the
Environment Agency, these documents are not expected to be complete
until 2002. The national guidance prepared for these sectors by
the Agency will be guided by the BREFs, and will be the subject
of full consultation with the industry. The Agency is currently
preparing interim guidance, in consultation with MAFF and the
industry, for any new or substantially changed installations that
will require a permit before the Directive is applied to the sector
as a whole. BAT will reflect the costs and advantages of particular
techniques, and their economic viability. The examples of sector
specific guidance included in the MAFF consultation document drew
on the MAFF Codes of Good Agricultural Practice for the Protection
of Water, Soil and Air. It is expected that Agency guidance will
draw on the original MAFF drafts.
17. As the Agency's interim guidance notes
which prescribe the measures required have not yet been decided,
the resultant costs to farmers are not known. In any case the
financial burden placed on individual farmers will depend on current
practice in comparison with BAT. It seems likely that many farms
will have to bear costs such as investment in new equipment or
employing contractors to undertake slurry spreading using machinery
that would meet likely BAT requirements on spreading techniques.
Other costs may be incurred for on-site surveys or changes to
the farm waste management systems. Some increased record keeping
may also be necessary.
18. The Directive enables certain requirements
for certain categories of installation to be prescribed by a Member
State in general binding rules (GBRs), rather than individual
permit conditions . As they are fairly homogeneous, pig and poultry
installations are thought to be prime candidates for the development
of GBRs. Although either an operator or regulator could opt out
of the use of GBRs where site-specific considerations meant they
would be unsuitable, they would require the support of a critical
mass of operators in order to be viable. GBRs would reduce both
the amount of work required in preparing an IPPC application and
the amount of regulatory effort required by the Environment Agency,
which would lead to reduced permit charges. MAFF, the Agency and
the industry are currently discussing the development of GBRs
for pig and poultry installations.
Permit Charges
19. IPPC charges have yet to be settled.
However, the Environment Agency is under a duty to recover the
costs it incurs in carrying out its regulatory functions. The
Agency has recently consulted on options for an interim charging
scheme whilst it develops a longer-term scheme that should be
in place from April 2001. The Agency's stated preference for the
interim scheme is an extension of the charging schemes already
in place for IPC and other related regulatory systems such as
waste management licensing and water discharge consents.
20. It is important that the charges imposed
are a fair reflection of the costs actually incurred by the Agency
but also that these costs are kept to the minimum compatible with
the proper implementation of the Directive, in accordance with
the principles of better regulation. Farmers affected by IPPC
are particularly concerned at the level of interim charges being
proposed by the Agency because of the present state of the pig
and poultry sectors and have made strong representations about
the proposal.
21. Under the Agency's published proposals
an intensive livestock installation would be charged under the
IPC fixed-cost component system and would be required to pay an
initial application charge of up to £18,000 and an annual
subsistence charge of around £7,000. The Government has asked
the Agency to look at these proposals again. The results of this
review are awaited. As the provisions of the Directive are to
be applied to all relevant poultry and pig installations in 2003
and 2004 respectively, only new or substantially changed installations
would be subject to any interim charges. As mentioned in paragraph
12, there are expected to be few such installations.
Other Issues
22. In addition, respondents from the pig
and poultry sectors have raised two other main concerns during
the last consultation exercise about the impact of IPPC on their
sectors.
SITE REPORTS
23. The IPPC Directive requires the necessary
measures to be taken on definitive cessation of activities to
avoid any pollution risk and return the site to a satisfactory
state. In order to fulfil these requirements operators will be
required to submit a site report identifying any contamination
both with the initial permit application (to establish a baseline)
and with an application to surrender a permit (to identify any
contamination arising as a result of IPPC operations). There will
be costs associated with undertaking these reports, which will
depend on the extent of the survey required. The Environment Agency
is preparing guidance on the characterisation and assessment of
sites on which it intends to consult in the New Year.
PUBLIC REGISTERS
24. The Directive requires that permit applications
are available to the public for an appropriate period to enable
comment, and that any decision; including a copy of the permit,
are also made publicly available. This requirement will be met
through the continuation of public register system currently operated
under Part I of the 1990 Act. Eventually, as the pig and poultry
sectors are phased in to the new system and report on their emissions,
their details will be included on the Environment Agency's Pollution
Inventory. Representatives of the pig and poultry sectors have
voiced concerns that making details widely available in this way
could make installations more vulnerable to interference, for
example by animal rights activists. However, details can only
be excluded from the public register on the grounds of national
security or commercial confidentiality.
CLIMATE CHANGE
LEVY
Background
25. Climate change is perhaps the greatest
environmental threat facing the world today. The Inter-Governmental
Panel on Climate Change predicts that if no action were taken
to limit the emission of greenhouse gases which contribute to
climate change, global average temperatures could rise by up to
3.5C by the end of the next century. This rate of warming
could have potentially catastrophic effects across large parts
of the world through its impact on sea levels, land use, agricultural
patterns and population displacement.
26. Following the Earth Summit in Rio 1992,
when developed countries agreed to take measures to reduce emissions
of greenhouse gases to 1990 levels, a protocol was agreed at Kyoto
in December1997 under which further legally binding reductions
were set. As its share of the EU commitment under the Kyoto Protocol,
the UK took on in June 1998 a legally binding target of a 12.5
per cent reduction in greenhouse gas emissions on 1990 levels
by 2010. The Government also has a more challenging domestic goal
of a 20 per cent reduction in carbon dioxide emissions over the
same period.
27. The Government believes that all
sectors of the economy will have to play their part in helping
reduce greenhouse gas emissions, and that a range of policy instruments
will be required. The Government's draft climate change programme
will be published early next year.
28. The Climate Change Levy will form an
important part of that programme alongside other existing regulations,
voluntary arrangements and incentives, as well as any future initiatives—designed
to encourage energy efficiency in business. Its design follows
closely the recommendations made by Lord Marshall in his report
published in November 1998. The levy will be introduced in April
2001 and will apply to all businesses and the public sector.
29. The Government has carried out a widespread
consultation exercise on the design of the levy since it was announced
in the March 1999 Budget. These views fed in to the further details
on the design of the levy announced by the Chancellor in his November
1999 Pre-Budget Report (PBR).
30. The Government's aim has been to design
the levy in a way that maximises its environmental effectiveness
whilst taking account of the competitiveness of UK firms. The
environmental effectiveness of the levy will be increased by:
— exempting from the levy electricity
generated from "new" forms of renewable energy, like
solar and wind power, and in "good quality" combined
heat and power plants;
— trebling the support for energy efficiency
measures arising from the levy package, from £50 million
to £150 million in 2001-02, to allow for the introduction
of a system of 100 per cent first year capital allowances for
firms making energy saving investments.
31. As a result of these refinements, the
levy package is expected to save at least two million tonnes of
carbon a year by 2010—a greater saving than associated
with the proposal announced at Budget time. The negotiated agreements
with energy intensive sectors could save as much again.
32. To protect competitiveness, the Government
is:
— lowering the overall size of the
levy from the £1.75 billion announced in the March 1999 Budget
to £1 billion on 2001-02, with a commensurate reduction in
the main levy rates;
— offering an 80 per cent discount
to energy intensive sectors as defined by the IPPC Directive that
agree targets that meet the Government's criteria; and
— recycling all the revenues raised
to business through a 0.3 percentage point reduction in employers'
National Insurance Contributions and the increased support for
energy efficiency measures.
33. The levy package will overall therefore
be revenue neutral as its introduction will entail no net financial
gain for the public finances.
MAFF RESPONSIBILITIES
IN CONNECTION
WITH THE
IMPLEMENTATION OF
LEVY
34. Policy responsibility and implementation
of the Climate Change Levy fall to Treasury (who are responsible
for the development of policy on new environmental taxes), DETR
(negotiation of energy efficiency agreements) and Customs and
Excise (detailed design and implementation of the levy). Representations
to Government about the Climate Change Levy should be dealt in
acccordance with this distribution of responsibility.
35. MAFF, as sponsor of the UK food and
drink chain, has a role to play in listening to the concerns expressed
by farmers, growers and food and drink companies about the impact
of the levy on their businesses, and in ensuring that these concerns
are represented within Government.
IMPACT ON
FARMING
36. It is not possible to say with precision
what the effects of the climate change levy, the associated NICs
cut and the additional support for energy efficiency measures
will be on individual firms or sectors of the economy when it
is introduced in 2001-02.
37. The net effects on particular sectors
will depend on a number of factors, including:
— future energy usage and employment
trends in the sector;
— whether a sector is eligible for
a discount from the levy by entering into a negotiated agreement
on energy efficiency;
— the take-up of electricity from "new"
forms of renewable energy and "good quality" combined
heat and power plants; and
— the use made of the enhanced capital
allowances for firms making energy saving investments and the
other energy efficiency measures under the climate change levy
package.
38. The impacts are likely to vary between
agricultural sub-sectors given the variation in energy use and
employment patterns across these sub-sectors.
39. Like firms in other sectors, firms in
agricultural sub-sectors will be able to reduce their levy liabilities
through the proposed exemptions from the levy for electricity
generated from "new" forms of renewable energy and in
"good quality" combined heat and power plants, and through
the enhanced capital allowances for firms making energy saving
investments. For example, some firms in the horticulture sector
may be able to take advantage of electricity generated from combined
heat and power plants, which will be exempt from the levy. All
sectors will also benefit from the lower overall rates for the
levy announced by the Chancellor in his Pre-Budget Report.
INTERACTION BETWEEN
CLIMATE CHANGE
LEVY AND
IPPC
40. The Government has indicated that an
80 per cent discount from the levy will be available to those
sectors covered by the Integrated Pollution Prevention Control
(PPC) Directive if they sign energy efficiency agreements which
meet the Government's criteria. The rationale for this is that
sites in these sectors are subject to a regulatory requirement
that other non-IPPC sites are not subject to. This definition
also provides the legal certainty required from the point of view
of determining which sectors are/are not eligible to enter into
negotiated agreements. The Government has indicated that small
sites in sectors covered by the IPPC Directive, but which fall
beneath the Diretive's size threshold, will be eligible to be
covered by a negotiated agreement.
41. In the case of agriculture, pigs and
poultry are covered by the Directive and so are eligible to enter
into a negotiated energy efficiency ageement. Discussions on a
possible agreement are underway at present between representatives
of the pigs and poultry sectors and the DETR.
42. The Government remains willing to consider
suggestions for alternative definitions which would target the
relief on energy intensive sectors exposed to international competition.
But any alternative definition would have to have a clear rationale,
provide legal certainty, administrative simplicity and be consistent
with EU State Aids rules.
January 2000
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