Environment, Food and Rural Affairs Committee - Natural Environment White PaperSupplementary written evidence submitted by the United Utilities Group Ltd

What does the planning framework need to include to ensure NEWP aims are effectively delivered?

Are you concerned that environmental protection could be used as a barrier to development within your sector?

In the National Planning Policy Framework, we are concerned about the lack of importance attributed to water infrastructure. Water and Wastewater infrastructure is essential for public health and a clean environment and an integral part of sustainable development and ecosystem service provision. We consider it is vital that the NPPF fully recognises that for development to be sustainable it must be effectively linked to infrastructure including water and wastewater services and whether the infrastructure has the capacity to support the development. Specific considerations include:

impact on water scarcity by increasing the demand for resources; and

increased load on the sewerage network increasing the risk of flooding that can only be mitigated through costly infrastructure upgrades.

Water companies are not currently statutory consultees on applications for planning permission (although we are often consulted on a non-statutory basis) despite our role in providing essential infrastructure and enabling sustainable development. We firmly believe we should have statutory consultee status.

We believe there is the potential for emerging tensions around Green Area designations and Neighbourhood Plans where water and, in particular wastewater, infrastructure can be subject to local objection. With many assets serving large populations, the benefits span a number of neighbourhoods so it is vital such assets maintain strategic level support and any requirements are built into Neighbourhood Plans to avoid any conflict. We would wish to see the same statutory consultation requirements for Neighbourhood Plans as for other Development Plans ie ensuring effective consultation with infrastructure providers including the water industry.

The planning system needs to determine the best use of land given the competing demands placed upon it, balancing both local and national social, environmental, economic considerations. Ideally solutions that promote multiple uses of land with multiple benefits should be favoured.

Is there a danger that biodiversity offsetting will compromise the ability to protect specific species and habitats?

In your sector’s experience, how far is opposition to development principally about concerns about impacts on biodiversity as opposed to concerns about loss of green space?

We consider that biodiversity offsets have the potential to provide enhanced biodiversity where it is most beneficial rather than forcing piecemeal biodiversity protection and/or enhancement into developments where it is not really needed. However, we recognise that there is the risk of unintended consequences—will developers take the easy option and invest in offsetting because they consider it more cost effective to destroy the local habitat? The risk is the offset investment will be unable to reproduce that lost habitat ie once an ancient hedgerow has gone, you cannot recreate it. Similarly, when a value is placed on nature to underpin offsetting, then there is a risk the market may drive the wrong outcomes—if, say, blanket bog is considered to have more value than a pond, will market behaviour focus on the bog yet local biodiversity needs the pond.

Regarding green spaces, I would refer you to the answer given above. We receive objections on grounds of both biodiversity and green spaces but it is green spaces that we are concerned about.

We hear good one-off examples of work to embed the valuation of natural capital in work to improve water quality. But what further analytical and policy development work is needed to enable these approaches to be adopted much more widely in the water sector?

Do we need regulatory reform to achieve this?

The valuation of ecosystem services and natural capital can help to make better informed decisions on environmental protection and expenditure. We would like to see the science base for ecosystem and natural environment valuation continue to develop and time invested in demonstrating how organisations can apply this thinking to inform their own actions and justify investment. A specific example of this relates to peat ie what is the value of the ecosystem service provided by the sequestration of carbon by peat actually worth? Is the science that underpins that valuation ie the rate of sequestration, actually agreed so an accepted value can be used?

From a regulatory perspective, we would suggest that it is necessary to remove the conflict in and between laws and regulations where possible. We consider it is important to balance social, economic and environmental elements, underpinned by sound science, in decisions and standards. We have invested significant sums to meet environmental standards but question how far the analysis has sufficiently taken into social and economic considerations. From a water sector perspective, it is important to agree the outcomes for our sector eg a sector adapted to climate change and find the best mechanisms to deliver this, not the other way round.

There is probably scope for government departments/agencies to manage the trade offs the natural environment generates. Government must act in a joined up way to act as a bridge between sound science and the competing demands of social, economic and environmental elements of sustainability.

In parallel, should the government be encouraging companies to undertake more environmental protection work in fulfilment of their corporate social and environmental responsibilities?

How far does customer and public pressure on companies motivate them to undertake environmental protection work?

As one of a number of “policy levers” necessary to ensure the effective implementation of the intentions set out in the NEWP, we believe government has a role to play in encouraging companies to recognise the importance of the natural environment. Government can play its part in helping value the natural environment and to implement good regulation. Establishing the Ecosystem Market Taskforce is a positive step in scoping out the means for business (and government) to take advantage of the opportunities to market new “greener” products that make a natural capital return for investors and the environment alike.

The need exists to raise awareness of the risks biodiversity poses to businesses and so address the current lack of understanding and general ignorance that results in risk aversion. A recent GRI report on “incorporating ecosystem services into an organization’s performance disclosure” proposes a focus on the threats to ecosystems so that organisations capture ways they could be contributing to those threats and how they are dependent upon the ecosystems that are threatened. Government, as much as business, has a role to play in raising awareness and the very existence of NEWP is a positive step.

As a regulated business that is required to invest in improving the natural environment, to some degree we are less sensitive to customer/public pressure to undertake environmental protection work.

EUROPEAN DIRECTIVES: PRESCRIPTION VERSUS OUTCOME: BRIEFING NOTE

Summary

In their approach to environment legislation the European Commission must focus on outcomes rather than prescriptions, and produce a suitable enabling framework to cater for those circumstances where the wrong holistic outcomes are driven. Balanced consideration should be given to social, economic and environmental factors, with rigorous regulatory impact assessment. Monetising the natural environment robustly and consistently will enable balanced decision making.

Background

Over half of the £90 billion investment by the water industry in England and Wales since privatisation has been to meet environmental standards in European Directives. That investment has resulted in much improved bathing beaches, rivers and drinking water quality. It has, however, come at a cost, with the industry’s carbon footprint doubling. Diminishing returns from end-of-pipe treatment mean point source improvements are increasingly less cost-effective, the resultant water quality improvements less affordable and sustainable and the carbon footprint of improvements disproportionate to the reduction in pollution achieved.

To achieve a consistent outcome, framework directives were intended to recognise the different circumstances across EU Member States and to provide the flexibility to achieve both minimum environmental requirements and sustainable environmental outcomes. However, a more flexible, considered approach is needed to ensure that Member States can better balance carbon impacts and ecological outcomes.

In influencing future European environment priorities the UK should seek to ascribe monetised value to the natural environment and ensure these are used, along with carbon costs, in Regulatory Impact Assessments (RIAs) as the basis for future recommendations.

In this briefing note United Utilities has identified a number of examples, which illustrate a lack of flexibility that has led to outcomes that may not deliver against the sustainability agenda, for the environment, or on social and economic considerations.

Examples of Directives and Outcomes

Priority Substances Directive

Outcome driven: tentative recommendations from the European Commission propose including in the Directive substances ubiquitous in our environment, implying extreme costs for very limited environmental outcomes. For example, the cost of removing oestrogenic substances and ibuprofen is estimated at £26 billion over 20 years. Instead, these substances should be put on a watch list, further work done to understand their actual impacts with due regard to both the polluter polluter pays and beneficiary pays principles. In the UK a national study is on-going to seek the most effective strategy for each of the substances whether that is natural die off, end-of-pipe removal, source control or identifying where there is no suitable technology. UU is actively contributing to this study.

Water Framework Directive (WFD)/Habitats Directive

The WFD places greater emphasis on outcomes and benefits. However it is hampered by the legislation that sits beneath it, such as the Urban Wastewater Treatment Directive (UWWTD) and the Habitats Directive, which act as constraints because neither consider disproportionate cost nor cost benefit analysis. Whilst these directives have achieved much they are not now flexible enough to recognise the ever increasing challenges of climate change and affordability. Greater flexibility is needed to achieve holistic outcomes. More thorough impact assessments are also required to ensure there is robust evidence of harm before investments are made. The use of the precautionary principle has tended to erode and distort the burden of proof such that we have examples of poor balances being struck between protection of specific habitats and protection of the wider environment.

For example:

Habitats Directive

A small WwTW situated in the Northern Lake District has been regularly updated over the years as a result of various environmental drivers. Wastewater treatment is provided for a resident population of 1,212. To meet the requirements of the Habitats Directive, we have invested £13 million to comply with BOD, phosphorous and ammonia standards. Given a true evaluation of the costs and benefits and a disproportionate cost assessment the outcome for the environment, society and the economy could have been markedly different. Cost benefit analysis needs to be consistently applied in such cases.

North East Irish Sea

There remains a future risk that pressure from the EC could lead to the North East Irish Sea being designated as Nitrate Sensitive, contrary to the previous EC decision made in 2009. If that decision had gone against the UK, or the matter was challenged again in future, over £1 billion of expenditure with massive environmental costs and questionable environmental benefit would be required. Indeed, it has never been demonstrated that it would have delivered £1 billion of benefit1 and perversely there is no requirement to assess the costs and benefits as this infraction proceeding was driven by the 20 year old UWWTD.

Combined Sewer Overflows (CSOs)

The EC has proposed a discharge frequency from CSOs of 20 times per year or lower, which appears to be an arbitrary prescription. In the worst case scenario the national cost of this maximum spill frequency has been estimated at £70–100 billion based on re-sewering to separate foul and surface water flows. Rightly, the UK Government takes account of river needs when determining spill frequencies to ensure proportionate controls are in place.

Recommendations

Water Framework Directive

The water industry has a number of concerns around the first cycle of river basin management plans (RBMP) and there are opportunities to enhance sustainability:

RBMP Benefit Valuation Tool Reform: to encourage a more visible approach through measured, weighted community engagement.

No Deterioration: the water industry discharge baseline will change from the previously agreed River Quality Objective to the reported 2009 WFD status, potentially driving investment in AMP6 (2015–2020) in areas of unthreatened, clean water. This approach requires urgent review to prevent disproportionate societal cost.

Sectoral Equity: the first cycle of river basin management plans saw the majority of investment come from the water sector, and end-of-pipe solutions. The potential for sustainable contributions from other sectors has not been properly explored. Indeed it would desirable that softer catchment type interventions should be encouraged in sooner rather than later cycles as, whilst they are more sustainable, they are inherently less certain and take longer to realise the full benefits compared to end-of-pipe measures.

Handling uncertainty: the response to long-term challenges like climate change needs to be codified to provide leadership and direction.

Priority Substances: Defra should ensure the cost of compliance is environmentally and economically sustainable and encourage “at source” solutions, rather inappropriate unsustainable end-of-pipe investment.

Timing: water companies can help tackle increasing water scarcity through integrated asset planning, where it is not disproportionately expensive. The EA is keen to develop an approach but fixed deadlines for the WFD process could serve to hamper joint innovation.

Clarification: the relationship between WFD and other directives such as the Drinking Water Directive and the Habitats and Birds Directive should be more clearly defined and outcome driven.

Regulatory Impact Assessment (RIA)

Completion: RIAs at both EC and UK level have not always been concluded before the requirements have been enacted—this should be statutory requirement. (However, the work of the Regulatory Policy Committee should improve the UK situation over time.)

Improvements: RIAs for new legislation should ensure that all impacts and benefits are valued and fully and appropriately considered.

Discharge/Water Quality Permissions

Current permissions for water company discharges and water quality should take account of wider environmental impacts, particularly energy use and carbon emissions. The recommendations of the Innovative Permitting Project (joint water industry/EA programme) will be published shortly and will identify opportunities to strike better balances.

Interpreting Directives

Approaches must be consistent across the EU, but there must be flexibility within the legislation to cater for circumstances where the wrong holistic outcomes are driven currently. This is in the best interests in delivering sustainable outcomes, in particular ensuring a level playing field for business and commercial organisations.

EUREAU: Water Industry Engagement With the European Commission

Water UK, the industry’s trade association, is actively engaged in representing the interests of its members in Europe, in particular through its participation in EUREAU, the European association representing national associations of water and waste water services companies. Water UK has a seat on the Board of Management of EUREAU and has representatives on the key committees that carry out EUREAU’s policy and technical work. Water UK also has its own representation in Brussels and has established relationships both with European institutions and the permanent UK representation in Brussels.

February 2012

1 Estimated costs were in the range £638 million to £2.2 billion depending on scope, with annual operating costs ranging from £79 million to £119 million

Prepared 14th July 2012