Amendments to the Executive Regulations of the Environment Law
On 19 April 2015, the Prime Minister issued a decree amending the Executive Regulations of the Environment Law, the third amendment in the last four years.[1] The latest set of amendments is targeted primarily towards regulating the use of coal as a source of energy. The use of coal had sparked heated controversy between authorities and members of civil society groups concerned with potential environmental and health hazards, as well as between different ministries among each other. While supporters of the decision to use coal focused on the energy crisis Egypt is facing and the role that coal can play to alleviate such crisis, especially for energy-intensive industries, opponents of the decision highlighted its negative environmental and health effects as well as its negative effects on investments in renewable energy.
In this context, amendments to the Executive Regulations stressed particularly on environmental safeguards related to the import, storage, transport and use of coal. The amendments differentiated between the use of coal for energy-intensive industries such as the cement industry, and its use for generating electricity. Lastly, the amendments also dealt with expanding the revenue sources of the Environmental Protection Fund and highlighted its regulatory mandate.
The Use of Coal
The main changes introduced through the latest amendment to the Executive Regulations of the Environment Law relate to the use of coal. The Executive Regulations had previously completely prohibited the use of coal in or around residential areas. The amended phrasing of the same Article suggests that such prohibition is continued, and is in fact expanded to all types of coal. A closer reading shows, however, that the amended version allows for the import and use of coal, on the condition of obtaining the prior approval of the Egyptian Environmental Affairs Agency (EEAA) and respecting the rules and standards included in the annexes to the Executive Regulations. While this means that coal may now be used as an energy source, it also means that importers and users will have to obey specific and detailed standards that were newly introduced as Annex 12 to the Executive Regulations. The Annex includes rules and standards relating to the import, transport and use of coal, as well as specifications on the permitted types of coal and the conditions of using it in cement factories and in power plants.
| A striking change introduced by the new Executive Regulations is the drastic increase in the weight given to environmental impact assessment studies. While previously, such studies were required, presenting an unsatisfactory assessment or failure to provide sufficient information did not result in revoking any licenses or seizing import. |
Notably, and in line with promises made by the Government before the recent amendments were enacted, the permission to import and use coal is not a general one, but is specific to certain sectors. These are: the cement clinker industry, electricity producers, as well as producers of coke, steel and basic aluminum. In addition to this set list, the Prime Minister may issue decisions to allow other entities to import and use coal.
Aside from evaluating the environmental impact of the decision, it is worth mentioning that the amendment stipulates that the legal responsibility of an entity that uses coal (whether a factory or a power plant) begins as soon as the coal leaves the port, and includes different stages such as transport and usage and disposal. In addition, the amendment confirms the responsibility of such entity for any damages resulting from failure to uphold the provisions of the Executive Regulations or relevant laws. This raises several questions which will likely be answered in the courts, such as the nature and range of such responsibility and the ambit of the wrong and whether it is defined only in terms of environmental damage, or whether it also includes long-term and indirect health damage.
In general, one of the most striking changes introduced by the new Executive Regulations is the drastic increase in the weight given to environmental impact assessment studies. While the previous phrasing of the Executive Regulations and the Environment Law itself did require the performance of an environmental impact assessment in some cases, this was a toothless requirement which had no real consequences. Presenting an unsatisfactory assessment or failure to provide sufficient information did not result in revoking any licenses or seizing import – in fact, Article 19 in the “penalties” section of the Environment Law only imposed fines and possibility of halting activities if the environmental assessment impact was not presented at all, rather than not being satisfactory. While the same situation persists for other minerals, Annex 12 introduced through the new amendments requires in unequivocal language that the Egyptian Environmental Affairs Agency approve the environmental impact assessment before the import and use of coal, and requires the entity using coal to present an annual report on environmental impact in order to renew the license to import or use it.
As far as the use of coal in power plants, the Executive Regulations now state that such plants must be established on coastal areas, away from the Nile valley, and must take into consideration areas that are sensitive for the environment or for tourism. Establishing plants on coastal areas is most likely meant to minimize the risks associated with transportation, and allowing for direct unloading between the plant and the ships carrying the coal. It is to be noted that these regulations only apply to plants that are established after the enactment of the amendments.
The amended Executive Regulations give existing entities a period of six months (starting 20 April) to present a study detailing how it will comply with the new changes. For entities working on transportation and unloading, such grace period extends to one year that can be stretched to two years, provided a study on the process of compliance is approved by the EEAA.
Lastly, the recent amendments have also introduced minor changes related to minerals other than coal. While previous phrasing completely prohibited the use of materials such as oils, crude petroleum and petro-products in residential areas, the amended provisions make an exception in cases where necessity or the public good are served, which is only applicable to entities that existed before the operation of the amendment. Such exception will be triggered by a decision of the prime minister, and considering the emission standards presented by the minister of environment.
Environmental Protection Fund
The new decision also amended Article 7 of the Executive Regulations, expanding the revenue sources of the Environmental Protection Fund (EPF). Before the amendments, the EPF received money from the state, from donations and from environmental fines. The amendments expanded revenue sources in two ways. First, the EPF will now be the main beneficiary of fees related to some licenses and permits, such as licenses to use protected sites as well as licenses issued by the EEAA such as those related to the use of coal. In that sense, the EPF will become the main recipient of fees related to the regulatory role of the ministry of environment.
Secondly, the EPF will now receive funds in his role as a service provider and an expert house rather than merely a regulator. For instance, the EPF will now receive revenues from leading and experimental environmental projects funded by it and executed through the ministry of environment or through foreign entities or civil society. Similarly, the EPF may now receive monetary compensation for tasks (such as research) done for other entities, and will deserve payment for fulfilling his role in reviewing environmental impact assessment studies. Finally, the amendments also give the EPF the right to invest its own proceeds in accordance with the decisions of its board of directors.
| The amendments expand and diversify the revenue sources of the EPF and give it an incentive to enter into collaborative projects and efforts with governmental and non-governmental players, which may possibly have a positive impact on experimental and vanguard projects. |
The amendments expand and diversify the revenue sources of the EPF and give it an incentive to enter into collaborative projects and efforts with governmental and non-governmental players, which may possibly have a positive impact on experimental and vanguard projects. On the other hand, the amendments also exemplify an inconsistency and confusion in understanding the role of the EPF. Many of the recent changes are mere restatement of provisions that were present in the original wording of the 1995 Executive Regulations. These provisions, such as that relating to experimental projects and that relating to performing paid services to other entities) were abolished as recently as 2011. The amendments also leave out the organizational and administrative structure of the EPF – which is supposed to fall under the EEAA – and begin by directly discussing revenue sources.
Despite the significant increase in the revenue sources of the EPF, its mandate and tasks remain largely unchanged. In its current format, the EPF already has a broad mandate that includes tasks such as responding to environmental disasters, entering into pioneer projects, establishing and managing environmental detection sites, administering protected sites and funding environmental studies, etc. The expansion of revenue sources without expanding the EPF’s mandate may indicate the government’s conviction that the fulfilment of the current mandate requires an increase in funds.
Conclusion
The recent amendments to the Executive Regulations of the Environment Law are of high importance for several reasons. From an environmental and economic perspective, stakeholders in the energy field or in energy-intensive industries must understand the impact of the amendments on their respective fields. While the amendments open the door for the use of coal, they impose numerous restrictions that must be respected.
Furthermore, the amendments gain importance because of the political context surrounding the decision to permit the import and use of coal as an energy source. While the ministry of environment was one of the main opponents of the decision, this has changed after the appointment of a new minister. Despite the ministry’s acceptance of the principle, the new Executive Regulations will give the ministry an important and expansive regulatory function with respect to the import and use of coal, in contrast with the role it used to play before and the one it will continue to play with respect to other energy sources. The importance of the amendments therefore partially stems from the fact that it is constitutive of the ministry’s strong regulatory role and of the principle of tying licenses to the ministry’s approval of environmental impact assessment studies.
Finally, the new amendments introduce same confusion in the role of the Environmental Protection Fund (”EPF”) whereby it will providing advisory services to the private sector, while at the same time protecting the environment, and earning an income from penalties imposed on those violating the Law.
[1] Prime Minister's Decree No.964/2015 amending Decree No. 338/1995, Official Gazette, Issue No. 16 (bis) A, 19 April 2015.
On 19 April 2015, the Prime Minister issued a decree amending the Executive Regulations of the Environment Law, the third amendment in the last four years.[1] The latest set of amendments is targeted primarily towards regulating the use of coal as a source of energy. The use of coal had sparked heated controversy between authorities and members of civil society groups concerned with potential environmental and health hazards, as well as between different ministries among each other. While supporters of the decision to use coal focused on the energy crisis Egypt is facing and the role that coal can play to alleviate such crisis, especially for energy-intensive industries, opponents of the decision highlighted its negative environmental and health effects as well as its negative effects on investments in renewable energy.
In this context, amendments to the Executive Regulations stressed particularly on environmental safeguards related to the import, storage, transport and use of coal. The amendments differentiated between the use of coal for energy-intensive industries such as the cement industry, and its use for generating electricity. Lastly, the amendments also dealt with expanding the revenue sources of the Environmental Protection Fund and highlighted its regulatory mandate.
The Use of Coal
The main changes introduced through the latest amendment to the Executive Regulations of the Environment Law relate to the use of coal. The Executive Regulations had previously completely prohibited the use of coal in or around residential areas. The amended phrasing of the same Article suggests that such prohibition is continued, and is in fact expanded to all types of coal. A closer reading shows, however, that the amended version allows for the import and use of coal, on the condition of obtaining the prior approval of the Egyptian Environmental Affairs Agency (EEAA) and respecting the rules and standards included in the annexes to the Executive Regulations. While this means that coal may now be used as an energy source, it also means that importers and users will have to obey specific and detailed standards that were newly introduced as Annex 12 to the Executive Regulations. The Annex includes rules and standards relating to the import, transport and use of coal, as well as specifications on the permitted types of coal and the conditions of using it in cement factories and in power plants.
| A striking change introduced by the new Executive Regulations is the drastic increase in the weight given to environmental impact assessment studies. While previously, such studies were required, presenting an unsatisfactory assessment or failure to provide sufficient information did not result in revoking any licenses or seizing import. |
Notably, and in line with promises made by the Government before the recent amendments were enacted, the permission to import and use coal is not a general one, but is specific to certain sectors. These are: the cement clinker industry, electricity producers, as well as producers of coke, steel and basic aluminum. In addition to this set list, the Prime Minister may issue decisions to allow other entities to import and use coal.
Aside from evaluating the environmental impact of the decision, it is worth mentioning that the amendment stipulates that the legal responsibility of an entity that uses coal (whether a factory or a power plant) begins as soon as the coal leaves the port, and includes different stages such as transport and usage and disposal. In addition, the amendment confirms the responsibility of such entity for any damages resulting from failure to uphold the provisions of the Executive Regulations or relevant laws. This raises several questions which will likely be answered in the courts, such as the nature and range of such responsibility and the ambit of the wrong and whether it is defined only in terms of environmental damage, or whether it also includes long-term and indirect health damage.
In general, one of the most striking changes introduced by the new Executive Regulations is the drastic increase in the weight given to environmental impact assessment studies. While the previous phrasing of the Executive Regulations and the Environment Law itself did require the performance of an environmental impact assessment in some cases, this was a toothless requirement which had no real consequences. Presenting an unsatisfactory assessment or failure to provide sufficient information did not result in revoking any licenses or seizing import – in fact, Article 19 in the “penalties” section of the Environment Law only imposed fines and possibility of halting activities if the environmental assessment impact was not presented at all, rather than not being satisfactory. While the same situation persists for other minerals, Annex 12 introduced through the new amendments requires in unequivocal language that the Egyptian Environmental Affairs Agency approve the environmental impact assessment before the import and use of coal, and requires the entity using coal to present an annual report on environmental impact in order to renew the license to import or use it.
As far as the use of coal in power plants, the Executive Regulations now state that such plants must be established on coastal areas, away from the Nile valley, and must take into consideration areas that are sensitive for the environment or for tourism. Establishing plants on coastal areas is most likely meant to minimize the risks associated with transportation, and allowing for direct unloading between the plant and the ships carrying the coal. It is to be noted that these regulations only apply to plants that are established after the enactment of the amendments.
The amended Executive Regulations give existing entities a period of six months (starting 20 April) to present a study detailing how it will comply with the new changes. For entities working on transportation and unloading, such grace period extends to one year that can be stretched to two years, provided a study on the process of compliance is approved by the EEAA.
Lastly, the recent amendments have also introduced minor changes related to minerals other than coal. While previous phrasing completely prohibited the use of materials such as oils, crude petroleum and petro-products in residential areas, the amended provisions make an exception in cases where necessity or the public good are served, which is only applicable to entities that existed before the operation of the amendment. Such exception will be triggered by a decision of the prime minister, and considering the emission standards presented by the minister of environment.
Environmental Protection Fund
The new decision also amended Article 7 of the Executive Regulations, expanding the revenue sources of the Environmental Protection Fund (EPF). Before the amendments, the EPF received money from the state, from donations and from environmental fines. The amendments expanded revenue sources in two ways. First, the EPF will now be the main beneficiary of fees related to some licenses and permits, such as licenses to use protected sites as well as licenses issued by the EEAA such as those related to the use of coal. In that sense, the EPF will become the main recipient of fees related to the regulatory role of the ministry of environment.
Secondly, the EPF will now receive funds in his role as a service provider and an expert house rather than merely a regulator. For instance, the EPF will now receive revenues from leading and experimental environmental projects funded by it and executed through the ministry of environment or through foreign entities or civil society. Similarly, the EPF may now receive monetary compensation for tasks (such as research) done for other entities, and will deserve payment for fulfilling his role in reviewing environmental impact assessment studies. Finally, the amendments also give the EPF the right to invest its own proceeds in accordance with the decisions of its board of directors.
| The amendments expand and diversify the revenue sources of the EPF and give it an incentive to enter into collaborative projects and efforts with governmental and non-governmental players, which may possibly have a positive impact on experimental and vanguard projects. |
The amendments expand and diversify the revenue sources of the EPF and give it an incentive to enter into collaborative projects and efforts with governmental and non-governmental players, which may possibly have a positive impact on experimental and vanguard projects. On the other hand, the amendments also exemplify an inconsistency and confusion in understanding the role of the EPF. Many of the recent changes are mere restatement of provisions that were present in the original wording of the 1995 Executive Regulations. These provisions, such as that relating to experimental projects and that relating to performing paid services to other entities) were abolished as recently as 2011. The amendments also leave out the organizational and administrative structure of the EPF – which is supposed to fall under the EEAA – and begin by directly discussing revenue sources.
Despite the significant increase in the revenue sources of the EPF, its mandate and tasks remain largely unchanged. In its current format, the EPF already has a broad mandate that includes tasks such as responding to environmental disasters, entering into pioneer projects, establishing and managing environmental detection sites, administering protected sites and funding environmental studies, etc. The expansion of revenue sources without expanding the EPF’s mandate may indicate the government’s conviction that the fulfilment of the current mandate requires an increase in funds.
Conclusion
The recent amendments to the Executive Regulations of the Environment Law are of high importance for several reasons. From an environmental and economic perspective, stakeholders in the energy field or in energy-intensive industries must understand the impact of the amendments on their respective fields. While the amendments open the door for the use of coal, they impose numerous restrictions that must be respected.
Furthermore, the amendments gain importance because of the political context surrounding the decision to permit the import and use of coal as an energy source. While the ministry of environment was one of the main opponents of the decision, this has changed after the appointment of a new minister. Despite the ministry’s acceptance of the principle, the new Executive Regulations will give the ministry an important and expansive regulatory function with respect to the import and use of coal, in contrast with the role it used to play before and the one it will continue to play with respect to other energy sources. The importance of the amendments therefore partially stems from the fact that it is constitutive of the ministry’s strong regulatory role and of the principle of tying licenses to the ministry’s approval of environmental impact assessment studies.
Finally, the new amendments introduce same confusion in the role of the Environmental Protection Fund (”EPF”) whereby it will providing advisory services to the private sector, while at the same time protecting the environment, and earning an income from penalties imposed on those violating the Law.
[1] Prime Minister's Decree No.964/2015 amending Decree No. 338/1995, Official Gazette, Issue No. 16 (bis) A, 19 April 2015.