House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Memorandum submitted by Environmental Services Association

SUMMARY

1. ESA is the sectoral trade association representing the UK's managers of waste and secondary resources.

2. Our sector is primarily driven by regulation. An effective and consistent regulatory framework will be the main driver if the UK is to comply with EU law, achieve national targets for recycling and recovery, improve resource efficiency, export environmental services and create jobs.

3. ESA's Members want the Environment Agency ("the Agency") to provide a structured approach to implementation of new regulations and their consistent and effective enforcement—Investors in appropriate new infrastructure to recycle, recover and treat waste need such regulatory certainty.

4. ESA wants a single environmental regulator and the Agency is better than its predecessor at regulating waste management. An effective regulator provides a consistent national approach and partnership enabling business to align economic and environmental sustainability.

5. ESA supports the Agency's "sector planning". A "waste sector plan" should improve regulation of our sector by providing a timeline of new regulations and how they will be introduced, implemented and enforced.

6. In 1999 the ETRA Committee concluded that "the overall perception has been that progress in creating an effective, coherent and confident new body has not been as rapid in the three and a half years since the Agency was formed as it ought to have been. This perception was confirmed during our inquiry." [6]Progress has since been made in a number of respects but ESA's experience is that the Agency's evolution into an effective, efficient and modern environmental regulator remains incomplete.

(1) The Environment Agency as an enforcer of environmental regulation and controls.

7. Effective regulation is an essential precursor to sustainable waste management and the Agency is a significant improvement on the previous regime.

8. Operators need clear rules and the confidence that they will be consistently and fairly enforced. A national, coordinated approach to environmental regulation should provide consistent decision-making and certainty for waste management operators. Nevertheless progress in the decade since the Agency's inception has been slower than could reasonably have been expected, in part because the Agency has such wide responsibilities.

9. ESA would particularly welcome inspectors with greater specialist knowledge of regulated facilities and processes: the Agency should develop teams of specialist waste regulators, as recommended by the ETRA Committee[7], to ensure consistent high-quality decision-making.

10. The National Audit Office[8] opined that the Agency has three functions in regulating waste management:

— setting out what should be done;

— monitoring operations;

— enforcement, prosecution and the policing of illegal activity

(a) Setting out what should be done

11. EU law requires that landfills be permitted under the Integrated Pollution Prevention and Control regime ("PPC" in England and Wales). Between July 2003 and July 2007 more than five hundred landfill sites must be "re-permitted" to comply with the IPPC and Landfill Directives.

12. Re-permitting has been muddled and costly and has exposed existing sites to operational uncertainty as regards precise requirements of the new regime and timing of the Agency's decisions.

13. Publication of Regulatory Guidance Notes (RGNs) by the Agency was intended to help operators to understand the requirements of regulations (such as new engineering specifications and groundwater protection) but in practice RGNs often caused confusion and delay and were issued, revised and/or withdrawn without adequate notice.

14. In response to our concerns with the re-permitting process, the Agency set up Strategic Permitting Groups. This cut the time taken to process applications and improved consistency but at the expense of a risk-based approach. ESA does not believe consistency and a risk-based approach are mutually exclusive: we seek consistent decision making in a risk-based framework.

(b) Monitoring operations

15. Once regulations are in place, systems must allow operators to comply. One instance of failure occurred in July 2005 when the Hazardous Waste Regulations came into force (five years late) and the Agency's electronic registration system was not reliably functional. Last minute arrangements were required to manage the backlog and thousands of producers of hazardous waste were unregistered as the Regulations came into force.

16. In 1999 the ETRA Committee noted that "despite the `improved dialogue' with the industry of which the Agency boasts, it has still not done enough by way of training its staff to gain the confidence of the waste management industry".[9] To help to develop Agency officers' skills, ESA organises an annual placement scheme. Each year, up to 50 of the Agency's officers spend two weeks at ESA's Members' facilities to learn how the sector operates. Since the scheme's inception, over 200 Agency officials have taken part. ESA has also led joint training on new regulatory requirements for management of landfill gas and ESA hopes to extend this approach to OPRA.

17. ESA also requires our Members to exceed legal requirements for the operation of landfill through reported compliance with environmental indicators agreed with the Green Alliance and adoption of health and safety targets.

18. Fly-tipping is a major problem. Even more pernicious is ongoing illegal waste management activity where waste is mis-described by unscrupulous waste producers, waste brokers or illegal operators and inappropriately handled.

19. We are extremely concerned that, following introduction of new regulations, volumes of targeted waste habitually fall, but no-one can satisfactorily account for the reduction. For instance, in July 2002 liquid hazardous wastes were banned from landfill but have not since passed through facilities built by ESA's Members to manage these wastes in accordance with the new requirements.

20. Similarly, new requirements in July 2005 for managing solid hazardous waste were expected to lead to large volumes of waste requiring treatment: again, this waste has not materialised. Whilst some hazardous waste presumably has been "managed out" of processes by waste producers, it seems probable that some is going astray.

21. In October 2004 ESA noted in evidence to the Environmental Audit Select Committee[10] that:

"More generally, the culture of enforcement is still insufficiently strong to encourage investment. For example, the Grant in Aid budget from Defra to the Environment Agency, used to fund policing and enforcement of illegal waste activity, has been cut by £4 million for 2004-05 even though the implementation of more prescriptive EU environmental standards is so obviously bound, if inadequately policed, to increase criminal activity."

22. We instead want the Agency to devote sufficient resources to tackling illegal activity to establish a national culture of zero-tolerance. This must be a core budgetary and operational priority for a serious environmental regulator and Defra should release as much money as is necessary from its BREW budget and elsewhere to secure zero-tolerance.

(2) Whether the Agency operates efficiently and provides good value for money

23. ESA welcomes the Agency's initiative to "modernise" regulation, although we also note that tools of modern environmental regulation such as cap and trade systems are far beyond the scope and powers of the Agency.

24. The Agency's progress toward modernising its own regulatory activity was recognised by the Hampton review, although we below note that there is still room for substantial improvement on the ground, particularly regarding OPRA.

25. Modern regulation should increase efficiency, reduce costs for responsible businesses and enable the Agency to focus its resources on tackling poor environmental performers and illegal operators. Whilst its rhetoric has significantly improved, the Agency has been less successful in turning words into action. For example, responsible operators still report a high number of basic inspections rather than the more targeted and in depth regime NAO recommended in 2002.

26. Most of our Members' sites now have Environmental Management Systems in place. EMS represents significant cost to operators and operators would be better incentivised to extend EMS more rapidly if the Agency reduced the frequency or nature of its inspections at EMS sites.

(a) Costs to industry

27. In 1999 the ETRA Committee concluded that: "if the Agency is to maintain the confidence of those whom it regulates, it must ensure that the justification for its charges is clear" and that "if industry is to be charged in line with a top-level consultancy, it can reasonably expect to receive a commensurate level of service".[11]

28. The Environment Agency received approximately £250 million in charges from regulated industry in 2004-05. Fees have increased substantially in recent years—for instance, Waste Management Licence (WML) fees in April 2005 rose by up to 2,200% and in 2004-05 the average cost of application and subsistence fees for energy from waste facilities doubled.

29. High quality services require proper funding and ESA supports the principle of transparent cost-recovery from regulated businesses. That said, our Members are certainly not reporting better regulatory service.

30. Whilst nationally the Agency claims to implement its risk based approach through OPRA, in practical terms this barely moderates fees charged.

(b) Efficiency of permitting

31. In 1999 the ETRA Committee noted that:

32. The re-permitting of landfills to meet the requirements of the IPPC and Landfill Directives is largely an administrative exercise. However, it usually costs operators hundreds of thousands of pounds to re-permit each site, with some operators compelled to spend millions of pounds simply to maintain existing operations.

33. 550 landfills are likely to be required to be re-permitted by 2007. At the beginning of November 2005, 419 applications had been made, and the Agency had determined 259. Of 157 permits actually issued, 40% were subject to appeal by operators, resulting in huge costs, lengthy delays and little tangible environmental benefit.

34. In 2003, the Agency also introduced unduly prescriptive requirements for the management of landfill gas. Whilst the Agency has since improved its approach, it remains likely that regulation will cause more flaring and less recovery of renewable energy from methane than is environmentally optimal.

35. As above stated, we want the Agency to police illegal activity to a standard creating a national culture of zero-tolerance.

(d) Data

36. Effective environmental regulation is impossible without reliable and accurate data on waste flows. The Agency already gathers a lot of data from operators and others but loses much of the value of the data through ineffective systems. This must be addressed.

37. ESA is extremely concerned that even for high risk waste streams such as hazardous waste, the Agency cannot state precisely how much and where hazardous waste is produced and exactly how and where it is managed.

38. We support Defra's waste data strategy and welcome the focus on the Agency's capture, analysis and dissemination of data. An unwelcome outcome would be bureaucratic imposition of additional reporting requirements on operators with minimal analysis and reporting back by the regulator.

(3) Structure, governance and accountability

39. Because good environmental regulation is now so important, we would prefer disaggregation of the Agency's regulatory and non-regulatory functions so the Agency can become the World's best environmental regulator.

40. The ETRA Committee in 1999 noted that "if the Agency is to make a serious contribution to sustainable development, it must get involved at all levels of industry, not merely—important though it is—in the regulation of particular industrial processes".[13]

41. To give effect to this, we offer the thought that the composition of the environmental regulator's Board and the agenda of its meetings need to focus on environmental regulation and be informed by operational knowledge of regulated industries. As a minimum, we encourage non-executive members of the Agency's Board to engage in regular and structured dialogue with the waste management industry.

42. In terms of high level responsibility for waste management issues, the Agency's current staff structure remains unclear and staff often appear to assume different responsibilities at short notice. For instance there was no single point of contact for hazardous waste issues during the crucial two years leading up to the introduction of WAC in July 2005.

43. Industry is often confused by the respective roles of (and interactions between) the Agency's waste "policy" and waste "strategy" teams and the process industry team which regulates certain aspects of energy form waste. These relationships are complicated further by the national "operations"" directorate (which included responsibility for the permitting and inspection of facilities) and the role of regional offices. There were particular difficulties for operators in identifying and understanding where responsibilities lay between Strategic Permitting Groups and Area Officers throughout the PPC re-permitting process.

44. In terms of structure on the ground, we are disappointed that only slow progress has been made to develop industry specialist teams to regulate waste management facilities. Agency officers tend to be generalist and, in an area that relies on specialist and detailed knowledge, this can lead to delays, misunderstandings and additional costs for business. Operators are too often not in a position to have full confidence in the officers regulating their facilities.

RELATIONSHIPS WITH DEFRA, DEFRA SPONSORED BODIES AND THE REST OF GOVERNMENT, INCLUDING ITS ROLE IN THE PLANNING SYSTEM

45. Our view has always been that the Government should govern and the regulator should regulate. During years of policy vacuum at Defra, however, the Agency could not be blamed for wishing to make progress.

46. Better co-ordination is required for development, implementation and enforcement of waste management policy and regulation. For instance, implementation of the WEEE Directive is split between the DTi (producer responsibility), Defra (regulations) and the Agency (implementation).

47. The development of a sector plan promises to provide a focus for identifying future regulatory requirements and how they might be implemented. We urge the Agency to involve Defra, DTi and ODPM in this work.

48. Waste management facilities require both planning permission from a local authority and a permit from the Environment Agency. In some instances it makes sense to "twin track" applications by applying for consent under both systems in parallel. Where an operator chooses to twin track, the Agency and relevant local authority should work closely to realise efficiencies. Even if applications are not twin tracked there is a strong case for local authorities and the Agency to work closely together to progress applications more quickly.

49. The Agency also has an opportunity to play a more positive role in the planning system: for instance providing positive signals to authorities about likely environmental benefits and impacts of proposed developments, and providing local politicians with the confidence that environmental issues will be addressed in the permitting process.

50. Closer working is also required between the Agency and HSE to avoid potential conflicts between environmental requirements and health and safety imperatives in activities such as monitoring and testing loads entering waste management facilities.

RELATIONSHIP WITH NON-GOVERNMENTAL STAKEHOLDERS

51. Inevitably the Agency's relationship with industry is that of "regulator" and "regulated".

52. That said, there has been a marked improvement in ESA's relationship with the Agency and the relationship our Members have with the Agency through ESA. More progress is needed but the substance and tone of meetings have become much more constructive, relevant and engaged than when the ETRA Committee reported.

53. The cultural shift in the Agency's perceptions is perhaps incomplete. On the one hand there are criminals who need to be prosecuted and who are too often not prosecuted. On the other hand, the regulated waste management industry could more usefully be seen by the Agency as an extension of its role where the Agency directly regulates and the waste management industry provides regulatory compliance for waste producers.

FLOOD DEFENCE

54. As above stated, our preference would be for the Agency to disaggregate its public works and regulatory functions. The two activities are very different and we see great merit in developing a British environmental regulator demonstrably capable of enabling business to secure necessary environmental outcomes in the most economically efficient manner.

55. In some instances, there may also be a conflict of interest between the two functions: for instance, Agency regulates aspects of its own public works functions including the disposal of wastes.

AGENCY'S FORTHCOMING CORPORATE STRATEGY 2006-11

56. The Agency's priorities and environmental challenges set out in the strategy are largely defined by EU and UK legislation and policy. The Agency should therefore concentrate on how it will meet these challenges through its primary role of environmental regulation.

57. In emphasising its role as champion for the environment, the Agency risks conflict with its central function as a regulator. Others are ready, able and willing to champion the environment. We want to see one really effective and focussed environmental regulator.

58. A "greener" business world is best delivered by regulation working with markets. Developing market-oriented, risk-based regulation could enable the Environment Agency to establish itself as the EU's most effective environmental regulator but this probably requires significant changes in governance.

59. The Agency's policy word of risk-based regulation is welcome but not yet always reflected in operational deed. Rapid progress is needed to realise the economic and environmental benefits of modern regulation.

60. We want the Environment Agency to succeed in demonstrating that better regulation means effectively securing necessary environmental outcomes synergistically with a dynamic economy.

Environmental Services Association

December 2005