Consultation on modernising environmental permitting for industry

As the UK transitions to net zero, the deployment of low-carbon technologies, such as carbon capture and storage (CCS) and hydrogen, will increasingly occur alongside existing industry to utilise shared infrastructure, supply chains and workforce. Industrial clusters - economic regions with co-located industries such as power stations, chemical plants, refineries, and manufacturing - are estimated to account for half of UK industrial carbon dioxide emissions (CO2). The transition to low-carbon development in industrial clusters must be able to operate within the context of its local environmental capacity. Local environmental and health limits, such as air quality limits and water availability, are already under pressure in some regions. These pressures could become barriers for new industrial projects seeking environmental permits, particularly where headroom is limited. Meanwhile, there is significant uncertainty around how these low carbon clusters may evolve over the coming decades due to market forces and other factors. 

Currently, the environmental permitting framework for industrial activities takes a first-come-first-served approach to permitting each site individually to, predominantly, national standards for that sector, rather than fully considering sites within their spatial context. The permitting process does not take into account future development and how it could operate within environmental constraints alongside existing industry, reflecting the overall environmental pressures in a fair way within each installation’s permit conditions. This creates a risk that existing industry takes up most of the environmental capacity in an area, leaving little available headroom for new industry - even if it is cleaner and more efficient. For example, in the Humber Industrial Cluster water scarcity is already an issue, with existing sectors abstracting all the available water. Similarly, in the Teesside Industrial Cluster, nutrient pollution from existing sectors means that new industries might find it hard to get permits that add to the nutrient loads on the environment. As a result, new industrial projects inside a cluster may face delays or challenges when going through the permitting framework.  

In setting permit conditions, regulators set upper limits for emissions to air, water and land on individual operations to protect public health and the environment, and most operators manage their businesses to come in just below those limits. As a result, existing facilities may not be operating at the highest level of efficiency or environmental performance, with permit conditions that license resources or headroom that might not be needed. This has the effect of limiting resources or headroom available for new developments.  

Without a shift in approach, there is a risk that existing, often less efficient and more polluting industry may continue to use up local environmental capacity, thereby holding up the rollout of new, cleaner industry and technologies. This could undermine progress towards net zero and compromise local environmental and public health outcomes.    

Understanding local environmental capacity and managing the cumulative impacts of industrial clusters is essential to protect public health and the environment. The EA has undertaken a four-year review of the environmental capacity needed to support CCS and hydrogen development in three English industrial clusters: Humber, Tees and HyNet (North West). This review highlights the need for more strategic coordination around industrial clusters. The project sets out findings and recommendations around strategic planning, environmental permitting, water availability, water quality, air quality and climate impacts.   

We have started to explore a range of options to better align industrial permitting with the realities of net zero industrial clusters.  

Existing regulatory mechanisms 

There are existing regulatory mechanisms that may help address this issue. It would be possible for the EA to review all the industrial permits in an area to ensure that older industrial installations are working to up-to-date standards. This would be likely to create some additional environmental headroom but probably not enough to enable significant investment in new sites, as regulated industry is generally only one amongst many sources of pollution in an area.  There are currently no mechanisms for regulators to mandate standards for an installation that are significantly tighter than national levels for each sector to reflect local pressures, unless tighter standards are required to meet a local Environmental Quality Standard. 

Non-permitting mechanisms 

In addition to voluntary industry action, there are a range of market-based non-permitting mechanisms that could, in principle, be used to increase environmental headroom such as off-setting and emissions trading but they would all have drawbacks in terms of costs and complexity of participation, monitoring and enforcement in a multi-constraint context.  

A strategic approach 

Permitting could be well placed to manage environmental capacity at industrial clusters but alone cannot solve the issue. The permitting framework does provide an effective existing vehicle for setting, monitoring and enforcement of environmental standards for individual sites.  It would be possible for legislation to allow for standards in a permit to be tighter in a local area than national requirements, if regulators could reference sufficiently detailed, established cluster-level plans with a high level of legitimacy with the businesses affected.  

In December 2024, the government’s Clean Power 2030 Action Plan committed to “explore strategic approaches to managing environmental pressures around industrial clusters which engages effectively with the planning and permitting systems. This will help to enable cluster decarbonisation within environmental constraints and address emerging issues prior to projects entering the planning system.”   

As set out in the Clean Power Action Plan, a more strategic, forward-looking approach to managing industrial clusters might be needed, especially as the net zero transition accelerates into the 2030s and 2040s. A clearer articulation of the environmental impacts from both existing industry and from the development of new industry within a cluster could make it possible for regulators to issue new, and review old, permits within a cluster area to ensure compliance with that broader plan. This could include spatial planning for industrial clusters, industrial cluster growth forecasts, and further area assessments of environmental capacity.  Such clarity could support both more robust regulatory decisions and contractual agreements between existing and new operators to create environmental headroom.