Scottish Government

5. COSTS AND BENEFITS

The following summary information relates to the Scottish Government's preferred option (option 3 above), hereafter referred to as the draft regulations. For more detailed information on costs and benefits of this and the other options, please refer to Annex 1.

Approach to assessing costs and benefits

There are two main direct effects of the ELD expected that may give rise to costs to businesses and benefits.

• The first is that businesses may take 'anticipatory' action in response to changes in liability.

This would include any additional measures that businesses take to assess and reduce the risks they run or to transfer risks for example by taking out insurance. A best estimate of £0.7m is made for these anticipatory measures There are likely to be benefits to the extent that environmental damage does not occur or is less severe as a result of any measures taken.

Additionally there are likely to be costs associated with operators familiarising themselves with the new requirements. An estimate of £0.3m is made.

• The second is that additional action will be required in response to imminent threats and actual damage.

We have considered records of past environmental damage to assess how many and which cases of environmental incidents would have fallen within the scope of the ELD. We have then assessed what additional measures would have been required the likely costs of dealing with these cases. We estimate that up to 10 cases of environmental damage will result in additional works under ELD on average each year. Together these are estimated to lead to additional remedial costs of about £1.4m per annum in the early years after transposition. This estimate includes the costs of assessing damage, developing remedial measures and administering works as well as the substantive works themselves. We have also assessed the value of the environmental benefits which arise with an estimate of £2.3m.

Details of the costs and benefits can be found at Annex 1.

The methodology for assessing costs and benefits can be found in the Annex 2.

In summary, the key figures from Table 7 ( Annex 1) are as follows.

Sectors and groups affected

For the purpose of the Directive, the obligations to avert and, where necessary, to remediate, significant damage falls upon the operator. The operator is the person who operates or controls the 'occupational activity' that risks or causes damage. The 'occupational activity' is defined quite widely, extending to any activity carried out in the course of economic activity, a business or undertaking, irrespective of its private or public, profit or non-profit character. This includes NGOs and the public sector as well as businesses.

The sectors most likely to be affected by environmental damage as defined in the directive are agriculture and land management, manufacturing, the waste and water industries which are assessed together to account for over 70% of damage. The distribution of costs across these sectors is discussed in detail in Annex 1.

Removal of permit defence for GMOs

Whether or not there is a permit defence is unlikely to have a significant bearing on how much damage is covered by the directive. This is because it is difficult to identify cases from the past where damage would qualify under ELD and has been caused within a permit. Where this has occurred it has generally been under permits that have since been updated.

There are a very small number of GMO licences in Scotland and these licences are considered to be strict, therefore, the risk of damage being caused by GMOs is likely to be small. However, if there were an incident relating to the release of GMOs subject to a GMO licence, the damages are potentially significant, including damage relating to the loss of biodiversity.

It has not been possible to estimate these damages as there are no existing cases of such damage on which to base an analysis. The Scottish Government considers it prudent to remove the permit defence for GMO licences as any breech of permit could cause potentially significant levels of damages, which may affect several elements of the ecosystem and damages may persist over time.

There may be wider effects from providing a permit defence for all other types of licence. These would include the possibility that competent authorities would tighten permit conditions, that there would be more legal action over uncertainty as to whether operators had complied with the relevant conditions and that it would make the insurance sector more willing to offer products.