House of Commons - Business, Innovation and Skills Committee

Government Assistance to Industry - Business, Innovation and Skills Committee Contents

Written evidence from Environmental Industries Commission

AN ENVIRONMENTAL INDUSTRY MANIFESTO

EXECUTIVE SUMMARY

— The Government must put green jobs creation at the heart of its plans for economic growth if it is to establish an international leadership role for UK business in the global economy of the future. It must commit to putting in place a strong policy framework that embraces low carbon and sustainable growth. It is this environmental policy framework that will be the engine of growth on which the future of the UK economy depends.

Green Growth Strategy: An Environmental Industry Manifesto for the New Government

— The UK's environmental industry is currently valued at £112 billion and employs just fewer than one million people. EIC's Green Growth Strategy sets out a clear policy framework that would place the UK at the forefront of the global transition to a low-carbon, resource-efficient economy, helping UK business secure an increasing share of the £3.2 trillion global environmental marketplace.

— David Cameron has acknowledged that environmentally friendly goods and services "take time and money to research, develop and invest in. And businesses will only put in that time and money if they are confident that there will always be a place for these products in the market."

— If the Government is to provide the confidence it acknowledges businesses need to invest in environmentally friendly goods and services, it needs to put in place a long-term, ambitious environmental policy framework right across the economy.

— If it fails to do so it risks squandering huge new environmental and sustainability investment opportunities for British business, making it increasingly likely that we will have to make the transition to a low carbon, resource efficient economy with technologies supplied from countries such as Germany, the USA, Japan and Korea which are continuing to put in place ambitious support measures for their environmental industries. This would be disastrous for our international competitiveness.

— In 2009, George Osborne highlighted the need to "bring to an end the stale argument that we have to choose between economic growth and the environment." This was a welcome commitment and must now become the foundation of all future economic policy.

— EIC recommends that the Government commit to putting in a place a regulatory, policy and fiscal framework to support the development of a world-leading environmental industry, including the following:

1. Strategic Support for the UK's Environmental Industry

An Environmental Industrial Strategy

(a) An Environmental Industry Forum to coordinate inter alia environmental industry support, environmental regulation, technology diffusion, innovation, investment, skills training and export support.

(b) A fully resourced Sponsoring Unit for the UK's environmental industry.

strategic approach to sustainable construction

2. Investing in Environmental Solutions

Green Jobs Investment Fund

Green Investment Bank

Targeted fiscal and monetary incentives

(a) Improving the Enhanced Capital Allowances scheme for energy and water efficiency technologies.

(b) Urgently improving the Land Remediation Relief to provide greater incentives for brownfield development.

(c) Immediately reversing funding cuts for programmes targeted at improving resource efficiency in business by recycling revenues from the landfill tax.

(d) Introducing an equivalent "Enhanced Capital Allowance" for retrofit technologies.

(e) Providing support for companies suffering from the challenges of the "boom and bust" five-yearly Periodic Review in the water industry.

3. Leading By Example—Stimulating Innovation Through Public Procurement

clear, long-term targets for improving energy and resource efficiency in all Government procurement

4. Improving Public Health by Tackling Poor Air Quality

National Framework of "Low Emission Zones"

National Certification Scheme of Retrofit Technologies

LAPPC Pollution Inventory

5. Improving Energy Efficiency

new measures to drive vast improvements in energy efficiency in existing non-domestic buildings.

regulatory aim for "zero carbon" for non-domestic buildings

Increasing the ambition of the Carbon Reduction Commitment Energy Efficiency Scheme.

framework to improve energy, resource and water efficiency in all SMEs.

6. Supporting Brownfield Development

legal limits for land contamination for local authorities to use to define "unacceptable risk" to human health or the environment from contaminated land and, therefore, the trigger point at which land must be remediated

National Framework for Brownfield Development

7. Using Waste as a Resource

— Publishing a Waste Industrial Strategy setting out how the Government will facilitate the huge new business and employment opportunities in the UK's waste resources management sector.

— Driving commercial and industrial waste minimisation.

— Immediately reversing funding cuts for programmes targeted at improving resource efficiency in business by recycling revenues from the landfill tax.

8. Making Water Regulation Work Better for Consumers and Industry

Water Framework Directive

Amending the regulatory role of Ofwat

Sustainable Drainage Systems

ABOUT EIC

EIC was launched in 1995 to give the UK's environmental technology and services industry a strong and effective voice with Government.

With over 270 Member companies EIC has grown to be the largest trade association in Europe for the environmental technology and services (ETS) industry. It enjoys the support of leading politicians from all three major parties, as well as industrialists, trade union leaders, environmentalists and academics.

INTRODUCTION

The range of environmental challenges we face are a product of the greatest and widest-ranging market failure ever seen. By valuing our natural environment at zero the market has effectively allowed the exploitation of the resources to such an extent that our future economic growth is now at risk.

The most appropriate way to correct a market failure is to adopt policies that ensure environmental damage is translated into immediate price signals. EIC believe that this can be achieved most effectively through active Government intervention in the economy.

David Cameron recently highlighted that "if government put a realistic cost on pollution and waste, it|would force whole industries to change in order to survive| That's why a future Conservative Government will put a real price on pollution and waste in our economy—and one that is here to stay."

By providing a strong policy framework that embraces low carbon and sustainable growth and putting an appropriate price on pollution, the Government can harness the power of markets to find effective, efficient and equitable responses to the environmental challenges we face. It is this environmental policy framework that will be the engine of growth on which the future of the UK economy depends.

Embedding low carbon, sustainability and resource efficiency into the very fabric of the economy is vital. Not only to safeguard the future of our fragile planet but to establish an international leadership role for the UK's competitiveness in the global green economy of the future.

But the UK is not alone in wanting to claim this "international leadership role" for itself. The UK's international competitors have become increasingly aware that environmental protection yields significant economic benefits as well as ecological gains. Unless the UK keeps up, these are the countries that will gain an early mover advantage in developing the green technologies that will guide the transition to a low carbon, resource efficient economy and will soon be in a position to claim a share of what is already a £3 trillion global market place—and growing rapidly at over 5% a year.

If the UK is to compete, we need to urgently establish a world-leading environmental industry—with thousands of new business, hundreds of thousands of new jobs and huge export potential. The Government must adopt a strategic approach to promoting and assisting the whole of the UK's environmental technology and services sector.

EIC would be pleased to provide more detailed briefings on any of the issues addressed below.

STRATEGIC SUPPORT FOR THE UK'S ENVIRONMENTAL INDUSTRY

EIC believes that there is a need for strategic thinking by the government with the aim of promoting and assisting the whole of the environmental technology and services sector. An overall strategic approach to green jobs and skills must address issues related to water, air quality, land contamination and soil quality, and the efficient use of resources.

It is vital that the Government plays an active role in embedding low carbon, sustainability and resource efficiency into the very fabric of the economy. We urgently need a clear strategy setting out how the government will achieve this using UK business, skills and manufacturing.

EIC urges the Government to publish an Environmental Industrial Strategy supported by:

(a) An Environmental Industry Forum to coordinate inter alia environmental industry support, environmental regulation, technology diffusion, innovation, investment, skills training and export support.

(b) A fully resourced Sponsoring Unit for the UK's environmental industry.

A STRATEGIC APPROACH TO SUSTAINABLE CONSTRUCTION

EIC welcomes the UK's far-reaching commitment for all new homes to be zero carbon by 2016 and its "ambition" for all new non-domestic buildings to be zero carbon by 2019.

EIC believe that these policy objectives must been matched with an equally ambitious commitment to improve all aspects of sustainability in development, including: a target for 80% of all developments to be built on brownfield land, a clear trajectory towards achieving "zero waste" to landfill from construction projects by 2020 and ambitious targets for energy and water efficiency in buildings.

The availability of previously developed sites clearly varies across the country. EIC believes, therefore, that a target for 80% of all developments to be built on brownfield land should be adopted on an "aggregate" basis with delivery focused on those areas largest proportion of brownfield land.

The Government should establish "burden sharing" targets for all local authorities so that on average 80% of all new development is built on brownfield land. These "burden sharing" targets should be determined by the total amount of brownfield land in each local authority area.

To provide clear leadership on the sustainable construction agenda, EIC believe that the Government should establish a new Office for Zero Carbon and Sustainable Buildings. This should bring together the interests of the Department for Business, Innovation and Skills, the Department for Energy and Climate Change, HM Treasury, the Department for Communities and Local Government and Defra.

EIC believe that the Office for Zero Carbon and Sustainable Buildings should be tasked with inter alia facilitating development on brownfield land.

INVESTING IN ENVIRONMENTAL SOLUTIONS

Green Jobs Investment Fund

EIC recognise that the Government is restricted from introducing any substantial "green new deal" investment. The Government has made clear that the bulk of the deficit reduction will be achieved through reductions in spending rather than increased taxes. However, it is vital that this commitment is aligned with the need to support economic growth through environmental protection measures. In 2009, George Osborne highlighted the need to "bring to an end the stale argument that we have to choose between economic growth and the environment." This was a welcome commitment and must now become the foundation on which deficit reduction can begin. EIC believe that a Green Jobs Investment Fund, supported by Tax Increment Financing, is viable as a measure to invest in local environmental infrastructure.

Tax Increment Financing is a mechanism for using anticipated future increases in tax revenues to finance the current improvements that are expected to generate those increased revenues. It would allow local authorities to borrow money on the back of expected uplift in revenues that new development would bring.

Tax Increment Financing works on the principle that the supply of new or improved infrastructure usually leads both to new development and to an increase in the value of surrounding property, both of which serve to increase the level of property taxation in the area. Within a designated TIF area, this anticipated increased taxation (the "tax increment") is captured and used to fund the infrastructure that has been provided.

EIC believe that the Government should launch a new Environmental Tax Increment Financing model to finance local environmental infrastructure, including:

— Low and zero carbon public buildings

(a) Energy efficiency retrofitting of low-income family homes.

(b) The construction of low carbon social and affordable homes (on brownfield land).

(d) Energy efficiency retrofitting of public buildings, such as schools and hospitals.

— The redevelopment of brownfield land.

— The construction of new waste infrastructure.

— The implementation of Sustainable Urban Drainage systems.

Green Investment Bank

The delivery of carbon targets for 2020 and beyond and the tackling the significant challenges of land remediation; water and resource efficiency; water pollution control; air quality etc presents a major financing challenge for the UK economy, the majority of which will need to be delivered by the private sector.

EIC welcome, therefore, proposals to establish a Green Investment Bank but believe this must have a remit to invest across the entire environmental industry, not just the low carbon sector. If the Government proposes to limit the Bank's mandate to the low carbon sector, it risks forfeiting the huge investment opportunities that exist across the whole of the environmental industry.

It is vital that the Government has a full understanding of the economic opportunities of "green investment". By focusing investment on "low carbon" growth at the expense of other, equally important, environmental and sustainability issues, we risk forfeiting a large share of a £3 trillion global environmental marketplace.

Targeted Incentives

As aforementioned, EIC acknowledge that the bulk of the deficit reduction will be achieved through reductions in spending rather than increased taxes. However, we believe that the Government should reform fiscal measures to put a price on pollution and better reward environmentally sustainable behaviour, at the same as faciliating innovate funding mechanisms such as Tax Increment Financing (see above). This will provide much needed support to the UK's high-growth environmental industries and help stimulate economic growth and "green jobs".

EIC urge the Government to adopt the following recommendations:

Energy Efficiency

— Improving the Enhanced Capital Allowances scheme by:

(a) Introducing an "open competition" for new technologies to be added to the energy technology list.

(b) Increasing the values of ECAs to 150% for the most innovative technologies.

Brownfield Development

— Urgently improving the Land Remediation Relief by:

(a) allowing developers to claim in year of spend;

(b) extending the Land Remediation Relief;

(d) allow the Landfill Tax Exemption for asbestos; and

(e) allow the transfer of the Landfill Tax Exemption

— The use of Tax Increment Financing to help local authorities to develop brownfield land (see above).

Waste Management

— Immediately reversing funding cuts for programmes targeted at improving resource efficiency in business by recycling revenues from the landfill tax.

— Maintaining a landfill tax escalator through to 2020, and restricting the landfilling of priority materials.

— The use of Tax Increment Financing to allow local authorities to invest in new waste infrastrcuture.

Transport Pollution Control

— Introducing an equivalent "Enhanced Capital Allowance" for retrofit technologies.

— Incentivise the early uptake of Euro VI vehicles through the continued use of the Reduced Pollution Certification (RPC) scheme.

Water Management

— Far greater support for the UK's water industry, including:

(a) In the short to medium-term providing support for companies suffering from the challenges of the "boom and bust" five-yearly Periodic Review.

(b) In the longer term reviewing the regulatory regime for the Periodic Review to provide better value for consumers and greater regulatory certainty for the industry.

— The use of Tax Increment Financing to allow local authorities to invest in Sustainable Urban Drainage Systems (see below).

These measures will help drive investment into the UK's high-growth environmental industries at a low cost to the Treasury. EIC believe that these measures should be financed by efficiency savings made across Government—combined with a direct recycling of any additional funding raised by applying the "polluter pays principle." By providing this support, the Government can harness the power of markets to find effective, efficient and equitable responses to the environmental challenges we face.

LEADING BY EXAMPLE

EIC believes that Government procurement has a very important role to play in stimulating the market for low carbon and environmental goods and services.

The recent Commission on Environmental Markets and Economic Performance highlighted that "there is a huge opportunity for the public sector to amplify the role of low carbon and other sustainability characteristics in products in their purchasing requirements, creating a credible market need for these features so that business will invest in them to gain competitive advantage."

EIC believe that the Government should make a clear commitment to sustainable public procurement, with clear, long-term targets for improving energy and resource efficiency in all Government procurement. The development of a culture of sustainability that requires a long-term view, rather than a rolling five-year horizon, will allow clarity of direction with respect to standards and technology.

To achieve this and, therefore, drive innovation in the UK environmental industries, EIC believe that the Government should adopt the following mechanisms in all Government procurement:

— The introduction of lowest whole-life-cost as a metric within procurement, specifically in the buildings, energy and infrastructure sectors.

— Switching from the specification of input-led standards to output criteria and performance with respect to sustainability targets for services, equipment and technology.

— The introduction of minimum environmental standards that all companies have to met in order to win public sector procurement contracts. Reporting against these standards should be done in accordance with a universal carbon and environmental reporting standard—see above.

— Developing Regional Procurement Networks that register local businesses once they have met procurement criteria allowing them to be pre-qualified for and have direct access to their local tenders—thus promoting local and sustainable business.

IMPROVING PUBLIC HEALTH BY TACKLING POOR AIR QUALITY

Poor air quality is estimated to reduce the life expectancy of every person in the UK by an average of seven to eight months—impacting particularly on children, the elderly and those in poor health. According to recent estimates, poor quality results in more than 32,000 premature deaths in the UK each year. Road transport is one of the most significant contributors to poor air quality. This problem is significantly worse in hotspot problem areas, such as cities.

The European Commission is pursuing legal action against the UK for failing to comply with EU air quality standards for dangerous airborne particles known as PM10. A second and final written warning has been sent to the UK for still exceeding the limit values for PM10 in a number of zones.

Transport Pollution Control

EIC believe that one of the most effective ways to meet the UK's air quality obligations is through targeted programmes focused on cleaning up the most polluting vehicles. These areas will continue to suffer from poor air quality unless measures are implemented at a local level.

EIC recommends that the Government introduce a National Framework of "Low Emission Zones—with minimum emission standards for on-and-off road vehicles—to support local authorities in taking action to tackle poor air quality in hotspot problem areas.

Such a framework would establish a nationally recognised standard for emissions and vehicle identification—supported by a national certification scheme of retrofit technologies (see below). This would then leave local authorities with the decision on whether, when and where to have a Low Emission Zone—providing that they operate within the national framework.

For on road vehicles, a National Framework would set a nationally recognised emission standard for light and heavy-duty vehicles. For off road vehicles, a National Framework would establish national emission standards for all construction and demolition sites. Compliance with these standards should be made a condition of planning consent for all sites.

EIC believe that a National Framework for Low Emissions Zones should be supported with the introduction of a National Certification Scheme of retrofit technologies for on and off road vehicles.

A National Certification Scheme would provide an independent certification and register service for all transport pollution control technologies. This would dramatically reduce the cost of introducing a Low Emission Zone, as local authorities would not have to establish their own technology certification schemes. It would also reduce costs for vehicle operators by allowing them to purchase a certified pollution control technology that is compliant with all scheme across the country.

Industrial Air Pollution Control

The Local Air Pollution Prevention and Control (LAPPC) regime is a cornerstone of environmental protection in the UK. It was introduced in the 1990 Environmental Protection Act (as LAPC) and regulates emissions to air, such as particulates, dioxins and heavy metals, from a wide range of factories and processes (known as Part B processes).

Part B processes contribute a significantly higher proportion of their emissions as PM10 and PM2.5 compared to large sources. This is due to high use of bagfilters in Part B processes which have emissions with smaller particle size than from electrostatic precipitators (as used on large power plant). Furthermore, Part B processes are significant source of oxides of nitrogen (NOx).

EIC urges the Government to introduce an inventory of emissions (particulate matter and nitrogen oxides—NOx and NO2) from LAPPC regulated installations. This can be done cost effectively and with minimal additional regulatory burden simply by expanding the scope of the existing Environment Agency Pollution Inventory to cover all Part B processes.

IMPROVING ENERGY EFFICIENCY

Ambitious carbon and energy management policy that drives vast improvements in energy efficiency—and therefore makes a full contribution to meeting the UK's climate change targets—will help position the UK as a global leader in provision of energy efficiency technologies and services. Establishing this technology and skills base in the UK will help create new business and, potentially, thousands of new jobs. The forecast growth rate for the UK's energy management sector is 36.5% over the next eight years.

If the UK is successful in establishing a domestic market for energy efficient solutions, we will start to see other Governments around the world adopt similar measures. And as they do, UK business will be ready to respond to the increasing demand for their skills and technologies—creating new business opportunities for the UK across the world.

Whilst EIC welcomes the Government's commitment to energy efficiency we still need far greater ambition from Government if we are to fulfil the full potential for energy efficiency improvements right across the economy.

Energy Efficiency in Existing Buildings

Buildings alone account for around 40% of the UK's carbon emissions, with commercial buildings responsible for approximately half of this.

EIC fully supports the UK's far-reaching commitment for all new homes to be zero carbon by 2016 and its "ambition" for all new non-domestic buildings to be zero carbon by 2019. By scaling up the construction industry to deliver zero carbon buildings by 2016 and 2019, the UK will create new and innovative technologies, services and skills that far exceed anything that has been achieved elsewhere. Establishing this technology and skills base will help create new business and, potentially, thousands of new jobs. It will also position the UK as a global leader in the delivery of low and zero carbon buildings, opening up huge global business opportunities.

Whilst EIC welcome the UK's commitment to low and zero carbon new buildings, the majority of the building stock that will exist in Britain in 2050 are already standing. The greatest challenge in improving the energy efficiency of our buildings, therefore, is in retrofitting the existing stock.

EIC recommend that the Government introduce a range of new measures to drive vast improvements in energy efficiency in existing non-domestic buildings, including:

— Long-term carbon reduction targets for non-domestic buildings.

— A Code for Sustainable Buildings to provide a national standard for the sustainable design and construction of new buildings.

— Mandatory energy efficiency requirements that all non-domestic buildings over a certain size must meet when refurbished.

— The introduction of a UK Energy Efficiency Building Retrofit Program based on the C40 initiative.

— Large-scale low carbon building "models" that will open new energy efficiency opportunities across the UK, similar to the "Retrofit Ramp-Up" in the USA.

— Extending Display Energy Certificates to all public buildings.

"Zero Carbon" Non Domestic Buildings

EIC welcomes the UK's "ambition" for all new non-domestic buildings to be zero carbon by 2019. However, an "ambition" will not drive investment in the technologies and services we need to reach zero carbon by 2019. Industry will need a far greater statement of intent.

EIC recommend that the Government makes clear its commitment to the 2019 target as soon as possible and provides a far clearer signal for investment than simply an "ambition."

It is important to note also that the 2019 target cannot be delivered through the same policy mechanisms as domestic buildings. The variation in use and speculative nature of many non-domestic buildings requires a separate structure in order that it is sufficiently flexibility to result in the best environmental options being utilised. Not all buildings will have the same path to zero carbon. Buildings with high process energy- acute hospitals for example may require a different path to domestic.

EIC recommend that the Government come forward with a regulatory aim for zero carbon for non-domestic buildings and a clear trajectory towards achieving the target as soon as possible.

Carbon Reduction Commitment

The Carbon Reduction Commitment Energy Efficiency Scheme will help reduce emissions from large non-energy intensive organisations such as banks, supermarkets, hospitals, local authorities and large offices.

EIC believe that an ambitious Carbon Reduction Commitment that drives vast improvements in energy efficiency—and, therefore, makes a full contribution to meeting the UK's climate change targets—will help position the UK as a global leader in provision of energy efficiency technologies and services. Establishing this technology and skills base in the UK will help create new business and, potentially, thousands of new jobs.

EIC believe that there are opportunities for the Government to increase the ambition of the scheme so that it drives even greater investment in carbon and energy management technologies and services, including:

(a) Reducing the coverage threshold from 6,000 MwH to 3,000 MwH.

(b) Ensuring the reduction target for the first capped phase of the scheme is increased to reflect the increase in the 2020 greenhouse gas emission reduction target (as set out in the first three 5 yearly carbon budgets).

Energy Efficiency in SMEs

In 2008, the Committee on Climate Change published a report that suggested that approximately 45% of the emissions reduction potential from non-residential buildings and industry comes from sectors which are currently not covered by existing schemes such as the EU Emissions Trading Scheme, the Carbon Reduction Commitment, the Carbon Emissions Reduction Target and Climate Change Agreements. The Committee estimated that there is the potential to reduce carbon dioxide emissions from these sectors by 7 million tonnes by 2020. This potential includes around 1.2 million SMEs, two-thirds of which employ less than five people.

Given the diverse nature of SMEs, ranging from self-employed individuals working at home, to corner shops, restaurants and hotels, offices, garages and manufacturers, achieving this emission reduction potential will be a significant challenge. There are a range of existing policies focused on improving energy efficiency in SMEs, including SME loans, the Carbon Trust's advice service to SMEs and voluntary agreements with energy suppliers (as part of Energy Services Directive). However, EIC does not believe that this is enough to reduce carbon dioxide emissions from SMEs by 7 million tonnes by 2020.

In addition to reducing the coverage threshold of the Carbon Reduction Commitment to include smaller businesses—see above—EIC calls on the Government to introduce a framework to drive energy efficiency improvements in SMEs, including:

— A requirement for all commercial and public buildings to have a Display Energy Certificates (DEC).

— Extending the Advisory Report that accompanies all DECs and EPCs to include recommendations on improving process efficiency.

— An obligation on energy companies to invest in energy efficiency measures in SMEs. Based on the Carbon Emission Reduction Target, energy companies would have an obligation to save a fixed amount of carbon in SMEs.

— A UK Energy Efficiency Building Retrofit Program based on the C40 initiative.

— A roll out of smart metering to all SMEs by 2020.

— Increasing the value of Enhanced Capital Allowances to 150% for the most innovative technologies. With an enhanced value over 100% SMEs would be more keen to obtain this additional allowance as it would be considered a real additional tax saving, rather then merely a cash flow saving.

— Driving behaviour change by requiring minimum environmental standards to be met in all public sector procurement contracts.

SUPPORTING BROWNFIELD DEVELOPMENT

In 2007 there were an estimated 62,130 hectares of previously developed land in England alone. Local planning authorities have estimated that 26,510 hectares (43%) of this is potentially suitable for housing and could provide around 1,051,000 dwellings. Given the UK's ambitious house building targets, EIC believe that it is vital that development of these sites continues to be viable and that we retain the skills to deal with the challenges they bring.

The UK's contaminated land sector is worth £1 billion a year and employs almost 8,000 people. The sector is expected to grow by almost 3.5% per year between now and 2015, with the number of jobs expected to increase to 10,000 over the same period. Despite these huge business and employment opportunities, current market conditions could drive development away from more complex and challenging brownfield sites, to what is perceived to be easier/cheaper greenfield plots.

EIC urge the Government to introduce specific measures to promote the onsite remediation of contaminated sites that have the potential to be developed once market conditions pick up. In the absence of such measures there will be a dearth of sites ready for development when the upturn arrives which will prolong the impact of the recession on house building and commercial development.

Risk Assessment of Contaminated Land

There are currently two key pieces of policy that require risk assessment of potentially contaminated land.

First, Part IIA of the Environmental Protection Act 1990, which was introduced in 2000 requires local authorities to identify existing sites that, as a result of contamination, pose an unacceptable risk to human health of the environment. Such sites may then be determined as "contaminated land" and steps should be taken to reduce the risks to acceptable levels.

Although the identification and remediation of contaminated land in this way is an important element of many local authorities' work, the vast majority of contaminated sites are dealt with through the planning process. For developers, the key policy is Planning Policy Statement 23 (PPS23), which employs the "suitable for use" approach. Developers have to satisfy the local authority planning department that contamination at the site will not pose an unacceptable risk to humans or the environment during or after redevelopment.

In both cases the definition of "contaminated land" is based on the presence of unacceptable risk. Whilst EIC supports a risk-based approach to dealing with contamination, a key barrier to developing brownfield sites is the lack of certainty amongst local authorities over what "unacceptable risk" means with respect to the risk of significant harm to human health. This adds considerable time and expense to all developments on brownfield sites running into many millions of pounds annually. The lack of guidance is a significant obstacle to local authority progress in implementing the Part IIA regime governing contaminated sites and can lead to housing on brownfield sites being blighted.

EIC urge the Government to set legal limits for land contamination for local authorities to use to define "unacceptable risk" to human health or the environment from contaminated land and, therefore, the trigger point at which land must be remediated. These legal limits must be adopted in the Statutory Guidance for the Contaminated Land Regime Under Part.

National Framework for Brownfield Development

The recent High Court decision that Corby Council was liable for birth defects in local children whose mothers were exposed to toxic pollutants in the air paints a bleak picture of the management and remediation of a Brownfield site in the UK. The case concerned the reclamation works at Corby's former British Steel plant between 1985 and 1999 where toxic waste was carried from the site in open lorries.

Although some commentators may suggest that the Corby site is a "one off", due to its size and history, others will not agree. Whatever the official view of the outcome of the Corby case, there will be some negative effects including public perception and inward investors/funders confidence on brownfield land projects.

Following Corby, EIC Members have reported that they still encounter a lack of suitable standards in Government and local authority procurement and development of brownfield land. This must be addressed as a matter of urgently to avoid any further examples of poor practice putting human health at risk.

EIC urges the Government to adopt a National Framework for Brownfield Development with criteria that should be applied to all development projects on brownfield land, covering:

— Insurance—when a local authority tenders for services, it is essential that they require evidence of relevant experience of similar projects and of the contractors or specific project insurance cover.

— Liability—contractor's terms and conditions should not be accepted if they exclude liability of the nature suffered at Corby, whether or not insurance is obtained. Advice should be sought, depending on the size of the project, as to any overall limit on liability. However, the Government's current tender requests for unlimited liability are both market restrictive and unsustainable. It is a flawed approach to procurement as the companies that agree to such contracts may be unable to respond to future claims. Whilst it is essential that central and local Government ensure that the appropriate liability is place for all development projects on brownfield land, it is inappropriate to expect contractors to accept "unlimited liability" as a condition of the contract.

— Testing—the testing of soil and waters on contaminated sites must be performed by an MCERTS accredited laboratory, which can be enforced as a condition of planning consent.

— Competency of persons carrying out remediation—EIC Members still report seeing some very poor procurement practices and a lack of understanding of the risks involved with such projects. The result can be the engagement of a consultant who may not have the level of experience required to understand all the issues and risks associated with the remediation of contaminated land sites.

USING WASTE AS A RESOURCE

As a society, we current consume natural resources at an unsustainable rate. Reducing waste can make an important contribution to achieving sustainability. Waste can be reduced by using fewer natural resources, and by re-using products and recycling the materials in them.

The waste hierarchy sets out an order of preference for waste management policy—reduction, reuse, recovery, and disposal. Where waste minimisation has reduced the waste stream to the extent practical, and recovered materials are reused or recycled, EIC believe that it is preferable to recover energy from residual waste rather than dispose of it. Disposal to landfill should only be necessary for small amounts of residual material.

EIC believe that the Government must adopt a policy and regulatory framework across the waste hierarchy that facilitates a rapid move away from a linear process of resource extraction, manufacture, consumption and disposal towards a "closed loop" economy where resources remain in use. It should adopt a material life cycle approach to waste resources management with a mix of price, regulation, demand reduction and innovation policies.

Waste Industrial Strategy

The UK's waste sector is currently valued at £11.28 billion—equivalent to 10.5% of the value of the UK's total environmental goods and services sector—and forecast to grow by approximately 3-4% a year until 2014-15 (to a value of £14.28 billion). The sector currently employs 95,800 people, equivalent to 11% of all people employed by UK's environmental goods and services sector. It is ranked 9th out of 23 sub sectors of the UK's environmental goods and services sector in terms of forecast cumulative market growth, above, for example, carbon capture and storage.

European legislation, such as the revised Waste Framework Directive will create huge new market opportunities for the UK's waste sector. Twenty-seven Member States will soon be required to, inter alia, meet ambitious re-use or recycling targets for both household and construction and demolition waste by 2020; establish waste prevention programmes and adopt end of waste criteria for a range of materials to help resources stay in use.

All of these requirements will create new business opportunities and the UK must be ready to seize these markets. However, the UK's waste sector currently faces a number of barriers to growth, which must be addressed in all waste resources policy, including: market uncertainty; an inconsistent regulatory framework; lack of rigorous and consistent enforcement; planning and access to capital for investment in new infrastructure.

EIC believes that the Government should publish a new Waste Industrial Strategy setting out how it will overcome these barriers and facilitate the huge new business and employment opportunities in the UK's waste resources management sector.

Commercial and Industrial Waste Minimisation

There are significant economic and resource efficiency benefits for business, as well as climate change and other environmental benefits, from preventing and reducing commercial and industrial waste, and from moving residual commercial and industrial waste away from landfill towards reuse, remanufacturing, composting, recycling, and energy recovery.

EIC believes that an integrated approach to resources management should focus on minimising commercial and industrial waste and construction and demolition waste—which together account for 56% of the UK's annual waste arisings by weight—as MSW has been the focus of significant intervention for the past 10 years and is now making good progress. A key part of the Government's "vision" for waste should, therefore, be the convergence in policy between commercial and industrial waste and household waste.

In addition to this EIC urges the Government to drive commercial and industrial waste minimisation by:

— Introducing resource efficiency benchmarks for all sectors reporting to the Environment Agency's Pollution Inventory.

— Introduce a mandatory requirement for companies to report and assure their environmental impacts, including waste minimisation and the efficient use of resources, with sectoral benchmarks for minimum standards that should be achieved.

— Working with the European Commission to ensure that the IPPC Best Available Technique Reference documents (BREFs) drawn up in Seville benchmark resource efficiency for each regulated sector.

Business Support for Resource Efficiency

There can be no doubt that the opportunities for resource efficiency are huge. Businesses that implement new and innovative solutions to reduce waste experience significant cost savings.

In February 2009, for example, Defra published the report Business Resource Efficiency and Waste (BREW) Programme: Disaggregated Metrics Results for 2006-07. The report highlights that resource efficiency programmes funded by BREW achieved £200 million of short-term cost savings to UK business, equivalent to an average of £3.97 for every £1 spent. The Waste and Resources Action Programme alone reports long-terms savings of £29.30 for every £1 spent.

Despite this, it remains the case that relatively few companies take up the opportunity to improve their resource efficiency.

Much of the previous funding for resource efficiency programmes was derived from Landfill Tax revenues, which when introduced were to be revenue-neutral. The recent decision to abandon the revenue neutrality of Landfill Tax has absorbed into the overall Treasury pot many of the funds previously invested in resource efficiency.

EIC greatly welcomed the announcement that the standard rate of landfill tax will continue to increase by £8 per tonne on 1 April each year from 2011 to 2013. In addition to the stimulus provided, especially for C&I to recycling, the report "The Economy and Public Finances: Supplementary Material" that accompanied the 2009 Budget forecasts that Landfill Tax receipts will increase by 60% between 2008-09 to 2013-14, from £1 billion to £1.6 billion.

EIC believe that the receipt of this additional revenue provides a valuable opportunity for the Government to, at the very least, reverse funding cuts for resource efficiency programmes made in 2008, by reinstating the hypothecation of the landfill tax.

MAKING WATER REGULATION WORK BETTER FOR CONSUMERS AND INDUSTRY

Wastewater and water management accounts for 7.4% of the Environmental Technologies and Services market in the UK, the sector's exports are worth well over £1 billion a year, and the industry as a whole is worth just under £8 billion a year. Almost 70,000 people are estimated to be employed in the sector, and this figure is expected to grow by almost 10,000 by 2014. Water and wastewater treatment is the third biggest exporter of all the sectors in the ETS market.

62% of the sector market value is contributed by supply chain companies, and manufacturing accounts for 20% of sector value. Yet the way the industry is currently regulated is having a significant negative affect on the supply chain by pushing skills and jobs out of the sector, and out of the UK economy. Furthermore, the most important legislation affecting the water treatment industry—the European Water Framework Directive—is not applied stringently enough at present. And not enough is being done to encourage the take-up of sustainable means of managing surface and flood waters, with the result that flooding and drought are both common environmental problems in the UK.

Higher Targets for Water Quality

EIC believe that the most effective way to meet the UK's water quality obligations is through targeted programmes focused on increasing the ambition of British targets and ensuring they meet the highest European standards. We will continue to suffer from poor water quality unless these measures are implemented as stringently as possible.

At present, only 21% of rivers in England, and 33% in Wales, are of Good Ecological Status according to stipulations set out in the European Union's Water Framework Directive (WFD). The Environment Agency's aim is to increase this proportion to just 26% and 35% by 2015. EU Member States are required under the terms of the Directive to reach Good Status in all rivers by 2015.

The Environment Agency prefer to cite figures from the General Quality Assessment (GQA) testing regime, which was in place before the Water Framework Directive came into play. According to these definitions, current figures for "Good" status rivers are in fact 45% for England and 51% for Wales; the Agency's intention is to achieve a status of 44% and 53% respectively.

The WFD targets are far more stringent than the GQA. They work on a "one out, all out" basis, whereby if one sample shows up negative, the rest are also determined to have failed. They describe rivers' overall ecological health, which includes chemical status as well.

EIC believe that the Government should ensure the Environment Agency uses only WFD targets when measuring water pollution, and cites WFD standards when releasing figures on water quality to the public. By doing more to drive transparency, the Government and Environment Agency can go some way to meeting the 2015 targets.

If the Environment Agency used only the more stringent WFD targets, we would see significant economic benefits as well as environmental improvement. Defra's own research has shown that implementing the WFD measures properly could bring economic benefits of £3.6 billion. The amount includes benefits to the water management companies that EIC represents. Moreover, continuing to use the old GQA system would mean £1 billion extra in costs, along with less impressive gains for river water quality. The UK's water industry leads the world in innovation, so any lack of regulatory ambition will have a direct outcome on its global competitive advantage, and a direct outcome on the sustainability of jobs in the sector.

Reform of Water Industry Regulation

EIC has consistently argued that the current regulatory regime for the Periodic Review creates a "boom and bust" financial climate for the supply chain serving the water industry in the UK as capital expenditure tends to be concentrated towards the end of the five year period.

This situation leads to financial and managerial inefficiencies and instabilities in the supply chain, and ultimately to higher costs for consumers. A consequence has been the migration of skilled resources out of the sector over the years to more stable sectors, where job security is better, resource management is easier and long-term planning can be better achieved, creating a severe and worsening skills shortage. According to EIC's own research, this could put at risk one fifth of jobs in the UK water technology sector. The "boom and bust cycle" will also have a significant effect how much the water management sector is able to export; at present, the UK sector accounts for only 3.35% of global market value.

EIC believe that the legislation governing Ofwat should be reformed so the regulator has an obligation to promote a more long-term (twenty years or more) approach by water companies to their investment programmes. Ofwat should also actively assess water companies' proposals for their encouragement of environmental innovation.

EIC support the recommendations of the 2009 Cave Review of Competition and Innovation in Water Markets, to establish an early stage public research and development programme for the water industry and water management. We believe this should be co-ordinated by Defra, rather than Ofwat.

Sustainable Drainage

Water issues are gaining increasing prominence in the public's awareness of environmental issues, not least following last November's floods in the North West of England. Added to this is the fact that climate change will mean drier summers and water resources declining in many areas. Against this background, EIC have been campaigning to improve the implementation of Sustainable Drainage Systems (SUDS) for several years.

The more widespread implementation of SUDS would do much to address the need to focus on the water aspect of adaptation to climate change (referred to in the Stern Report), and on quantitative issues concerning availability of future water supply and the efficiency of water use.

The details of SUDS differ, but in general Sustainable Drainage Systems can be seen as systems that lie some way in between reliance on engineered drainage systems and reliance on purely natural drainage. SUDS work by reducing runoff at source—thereby providing more storage in the system—and use infiltration and natural systems like wetlands to reduce and improve water quality. This results in less water arriving in rivers, and what does get there arrives more slowly and is of a better standard. SUDS can play a useful role in reducing flood risk in urban areas, but their use has been greatly hindered by legislative barriers.

Neither water companies nor local authorities are keen to adopt and maintain drainage which can include systems that are clearly not sewers, that could include a wetland, might collect runoff from a number of sources, and may not even discharge to a watercourse. Added to this is the lack of agreed design guidance and maintenance costs.

EIC therefore call on the Government to ensure that:

— Local authorities take a more proactive role in promoting the use of SUDS. This is particularly important as part of the process of considering major new development schemes. This should be achieved by requiring local authorities to draw up Surface Water Management Plans.

— This additional duty on local authorities is integrated with their responsibilities concerning climate change adaptation, in order to encourage a joined-up approach to water management issues. This should be achieved through requiring local authorities to have regard, when carrying out their duties, to Statutory Guidance on adaptation to be issued under the Climate Change Act 2008. There will also be a need for increased specialist staff dealing with water issues in local authorities, and a need for training to provide staff with the necessary skills.

— Tax Increment Financing, which uses anticipated future increases in tax revenues to finance the improvements that are expected to generate those increased revenues, is used to encourage local authorities to invest in SUDS.

— The National Policy Statement for water infrastructure drawn up under the Planning Act 2008 promote and take into account the use of SUDS and water efficiency measures in its assessment of future demand for water and reservoir capacity. This should be provided for by an obligation about the drawing up of the NPS.

— Home buyers' information packs include information about drainage arrangements, including any use of SUDS.

— Building Regulations, planning guidance and housing density guidelines include a presumption in favour of the use of SUDS in new building developments.

— Ofwat recognise SUDS as part of Water Company Assets for the purposes of Ofwat financial settlements, and review the mechanism that Water Companies use to charge for surface water drainage to incentivise the control of surface water at source. Currently there is little incentive for water companies to take part in SUDS schemes.

November 2010



© Parliamentary copyright 2011	Prepared 18 February 2011