Policy position: Environmental Regulation
Problem Statement
Environmental regulation must support industrial innovation and growth. The downstream fuels sector has a positive record with reducing non-greenhouse gas industrial emissions, but this is not reflected by regulatory scoring systems. There is also a need to improve environmental permitting for new technologies to make sure it is proportionate and does not lead to project delays.
Following a meeting with Emma Hardy MP (then-Minister for Water and Flooding, DEFRA) in early 2025, Fuels Industry UK undertook a collaborative process with the EA to address these issues.
Current situation
Improving the scoring systems for complex sites
The downstream fuels sector has a strong record of environmental performance. Over the last decade, UK refineries have reduced non-greenhouse gas emissions at a faster rate than the national average on a per unit basis – given that there have been closures of refining capacity. Yet current compliance scoring frameworks fail to reflect this progress and refinery costs of regulation go up in line with this scoring methodology. The EA Compliance Classification Scheme unfairly penalises complex sites and treats many emissions as significant, without pragmatic consideration of context. Similar schemes are used by NRW and SEPA. It is a flawed system where minor emissions to air, water or land would be considered permitted from one location yet a serious incident from another within the same site.
Focus interventions on environmental improvement impacts
The higher costs incurred by perceived poor performance, are supposed to pay for additional resource required by regulators to monitor performance and encourage improvement. But rare, unlikely events do not need major involvement by a regulator. Instead, it is a distraction from deploying industry and EA resource to things that can actually improve environmental performance long-term, which should be the regulator’s goal.
Consider lifetime of assets and replacement plans
Regulators do not always consider the expected lifetime of assets when they make their recommendations. If a unit is coming to the end of their lifespan or is scheduled to be phased out and replaced, there is simply no business case for major investment in them. While responsible operators obviously ensure all machinery on site is safe for staff and the environment whether it is in use or not, regulators cannot reasonably expect aging equipment to be upgraded to the highest standards when it is due to be replaced. This trend is being accelerated by the energy transition and the increasing need to re-develop industrial sites and introduce a new generation of equipment.
Deliver appropriate delegation
National environmental regulators also appear uncomfortable with the delegation of local regulatory officers making decisions and enforcing permit compliance. We believe this is an important facet of the system to unlock increase the speed at which permitting decisions are made.
Sequencing to remove delays
Currently, the lack of sequencing between environmental and safety permissions from different authorities creates delays for new projects. Because certain elements of the respective applications have to wait for the other to complete, they may only be an estimate of the constructed outcome. This then requires a permit variation later with the correct, final details. For instance, from an Environment Health and Safety perspective, the project development team needs to identify and update all risks addressing the full life cycle of the project, especially those relating to novel technology and the characteristics of the location. These may not all be clear at the point of submission and will require a variation at an additional cost.
Regulate new technologies flexibly while available information is built-up
Regulation and permitting of the sector is becoming challenged due to the need for new technologies, which are themselves difficult to regulate and also due to inflexible regulatory permitting frameworks. The need to meet regulatory limits on pollutants and to be able to deliver new technologies necessary for long term profitability and delivery of lower carbon processes and products are both growing needs for refineries and fuels suppliers. In some cases, new technologies do not yet have relevant reference documents for the regulators to use. This is delaying early stage delivery, where burdensome regulatory permitting requirements have sought to fully apply information requirements, despite a lack of available information.
Best Available Techniques (BAT)
Best Available Techniques (BAT) are the most effective, economically viable, and technologically advanced methods for preventing or minimising industrial emissions and environmental impact. BAT is therefore a key component of Environmental Permitting, and it needs to be based on sound data.
The UK BAT system is slow and draws its data from a limited pool of industrial installations. With only 4 operational refineries in the UK, closer links to the European Union are needed to utilise data from a greater pool of refinery data. Fuels Industry UK also advocates for dynamic standards and a more integrated approach to permitting to reduce bureaucracy and accelerate project development.
Under the current DEFRA Environmental Permitting Reform proposals, Fuels Industry UK does not support giving drafting rights to the executive agency that it is empowered to enforce them. We also object to the removal of Ministerial approval for final BAT documents. The reforms are an opportunity to create a regulatory environment that supports the UK's transition to net zero by enabling innovation and new projects, provided that the new system offers the certainty and stability necessary for long-term investment.
Asks of government
To support industrial innovation and growth, regulators should make pragmatic use of best practice to encourage decarbonisation, applying consistent evidence-based decisions and offer bespoke arrangements where necessary. They must be agile, offering timely engagement and taking an open approach that enables the use of new equipment and ways of working. Proper consultation should deliver policies that are effective and avoid unintentionally encouraging inefficient or unsustainable processes. Risks should be managed in a transparent, consistent and cost-effective system.
Asks:
- Regulators should fairly reflect the strong record of environmental performance by the downstream fuels sector
- Regulatory timescales should be aligned to give certainty for investors
- Regulators should address industry concerns about disproportionate approaches
- Reducing the regulatory burden would provide certainty for investment in new technologies to ensure effective environmental outcomes
Regulators should fairly reflect the strong record of environmental performance by the downstream fuels sector
The EA Compliance Classification Scheme unfairly penalises complex sites and the resulting score increases permit costs for refineries. There is no mathematical adjustment for the size of a site, making it impossible for a major site to score positively. Refineries accumulate multiple small incidents that, while not harming the environment because they are less than permitted emissions, add up to a misleading total on a spreadsheet. The threshold for a refinery being awarded Band C is only 10.1 points in total and Band E is only 60.1 points, so eight is a significant score for a single incident
Actions
- Introduce proportionality based on contextualising site size, operational complexity and lifetime of assets
- Develop a consistent approach for operators to follow to assess risk and when to inform the regulators of loss of primary containment
- Aligning scoring across EA, SEPA and NRW to ensure national consistency
- Recognise long-term performance trends and mitigation actions in assessments
Regulatory timescales should be aligned to give certainty for investors
Government can use its authority to impose a new way of working on the various stakeholders that currently operate in parallel for permitting and planning. This would speed up the delivery of projects by facilitating quicker decision-making across planning, environmental impact assessment, COMAH, flood, climate and environmental risk assessment and hazardous substance consenting.
Actions
- Implement a logical sequencing for parallel requests from different agencies
- Ensure requests for information reflect the decision-making processes of industry, to reduce the need for permit variations later
- Introduce deadlines that encourage investment by synchronising with the financial timeline for project-management
- Create a new priority tracked, staged service for bigger projects
Regulators should address industry concerns about disproportionate approaches
The zero-change approach adopted by the regulators is disproportionate and would not apply to a new standalone plant. The Biodiversity Net Gain and Marine Net Gain policies appear to be interpreted by the regulators to require that there is no net increase in pollutant emissions for new projects. These disproportionate approaches increase costs and delays for decarbonisation projects, because effects are inevitable with deployment of new technologies – such as increased noise, water use and effluent pollutant levels. This is because, in the absence of Best Available Techniques, it is only when operators get to know their new plant that they will be able to improve operational performance.
Actions
- Incorporate into regulatory decision-making an acceptance that deploying new technologies for decarbonisation will have an effect
- Increase flexibility within permitting frameworks to support innovation
Reducing the regulatory burden would provide certainty for investment in new technologies to ensure effective environmental outcomes
Proposed Environmental Permitting and BAT reforms are aimed at delivering more agile, risk-based regulation, while addressing the need for certainty, transparency, and proportionate standards. However, the framework proposed offers significant challenges including resourcing.
Concerns exist that, while reform may aim for agility, it could inadvertently lead to tighter requirements which will undermine operator and investor confidence. Removing the Ministerial approval and Statutory Instrument (SI) process will undoubtably speed the BAT process up. However, the loss of Ministerial oversight may be a concern to Natural Resources Wales (NRW), who currently follow the same SI process as England.
Removal of the DEFRA and Parliament-led BAT consultations with ministerial oversight takes away a layer of governance. This could be a concern if new BAT proposals by the EA encounter significant opposition from industry. For example, if the proposal’s cost is disproportionate to implement or threatens business viability in the UK.
Actions
- Environmental Permitting reforms must be proportionate to the pollution risk. They should provide clear, predictable standards and processes for investors in emerging clean technologies and industrial activities.
- An appeal escalation process must be available to manage major disputes. This would need to involve suitably qualified independent assessors and advisors.