Published 11 December 2019

Miljölagstiftningens betydelse för stora kunskapsintensiva investeringar

This report is one of the studies in Growth Analysis’ framework project: What role does the public sector have for large knowledge-intensive investments? (LKI). The overall aim of the framework project is to create learning regarding how the public sector can promote efficient establishment- and absorption processes for large knowledge-intensive investments. The purpose of this study to analyse how the environmental permit process can be designed to achieve continuously improved environmental performance without jeopardising the long-run competitiveness of the industry. The issue is central because the environmental permit process can be an important framework condition for LKI.

This report is one of the studies in Growth Analysis’ framework project: What role does the public sector have for large knowledge-intensive investments? (LKI). The overall aim of the framework project is to create learning regarding how the public sector can promote efficient establishment- and absorption processes for large knowledge-intensive investments. The purpose of this study to analyse how the environmental permit process can be designed to achieve continuously improved environmental performance without jeopardising the long-run competitiveness of the industry. The issue is central because the environmental permit process can be an important framework condition for LKI.

Based on previous research and case studies of three knowledge-intensive businesses – Facebook’s data center in Luleå, Northvolt’s battery factory in Skellefteå, and Preem’s refinery in Lysekil – a number of important prerequisites for such a permit process are analysed. The selected case studies serve as examples of LKI as defined by Growth Analysis (see PM 2019:13).

Prerequisites for an efficient environmental permit assessment

We identify three important prerequisites for an efficient environmental permit assessment, here defined as a process that continuously drives the environmental work towards reduced environmental impact without compromising the long-term competitiveness of LKI-related operations:

  • The first prerequisite concerns flexibility. On the one hand flexibility in terms of the industry’s scope to choose which measures, including the localisation of the facility, should be implemented to reduce any negative environmental impact, so-called flexibility in measures. On the other hand, flexibility in terms of how quickly the industry must meet the stipulated conditions of the permit, so-called time-flexibility. Clearly stated emission limitation values, an efficient planning process and extended compliance periods are three important instruments for achieving flexibility.
  • The second prerequisite is the predictability and transparency of the environmental permit process considering time consumption, implementation and final conditions. This can be achieved g. through shorter lead times, as well as clear instructions and guidelines for the interpretation of the rules and the design of the permit application in the individual case.
  • The third and final prerequisite concerns the level of knowledge amongst the involved authorities regarding the technical possibilities and their economic consequences. A high level of knowledge allows for coequal, consensus-oriented, while at the same time tough negotiations between the industry and the regulatory authorities.

Flexibility in measures is important but not always decisive

When it comes to flexibility in measures and localisation, our analysis shows that limitation values, for example for emissions, have been given more room in the permit assessment than pure technology requirements. However, certain technology requirements were set in the permit process for Facebook’s data center and Northvolt’s battery factory, for example regarding the management of chemicals, noise and vibrations. However, these conditions are standard procedures and nothing indicates that the companies perceived them as burdensome limitations. The fact that specific technical requirements can be viewed as limiting was however confirmed in the permit process for Preem’s oil refinery where the company asserted that the proposed technical solution for the sulfur recovery plant risked limiting the possibility of finding other, more appropriate solutions over time. The court admitted the “need for flexibility”, and changed the formulation of the condition.

The localisation – and thus the planning – affects the environmental impact of the activity

The case studies also show that flexibility in terms of the possibility of selecting the location for the activity is very important, not least in terms of the environmental impacts of the activity and thus the extent of the permit process. A case in point here is the location of the battery factory where the company’s own environmental- and localisation criteria helped minimizing the environmental impact, and the presence of conflicting interests. The localisation of Facebook’s data center also meant that adverse impacts on a nearby Natura 2000 area could be avoided and thus the specific permit required for intrusions in such areas. For existing activities, where the question of the localisation at least in practice has already been decided, as in for example Preem’s refinery in Lysekil, the environmental adaptation can be considerably more difficult.

Time flexibility in the form of long trial periods gives room for technical development

While our case studies show that the Swedish environmental permit assessment often provides significant flexibility in terms of measures and localisation of new activities, a more complex picture emerges regarding time-flexibility. In the Facebook-case the final permit does not contain any trial periods although these could have been imposed, e.g. in order to investigate the possibilities for making use of the excess heat. In the environmental permit assessment for Northvolt’s battery factory, the Court postponed the decision on final conditions for emissions to air and water as well as the management of various energy issues for a period of three years. Also in the Preem case, a trial period in combination with provisional conditions and guidelines is determined in the permit. Extensive trial periods allow for the industry to avoid delays in production, while at the same time test different solutions to further reduce the environmental impact. Long trial periods also give the authorities the opportunity to pursue environmental work without requirements entailing unreasonable costs in the short term.

The predictability and transparency of the environmental permit process is important for LKI

Although the permit processes for both the battery factory and the data center were quickly completed, there were some issues regarding the predictability and transparency of the process in the Facebook-case. The uncertainty regarding a possible need for a Natura 2000 permit meant that the company initially applied for such a permit. The decision not to require a Natura 2000 permit was appealed by a private individual. It turned out that the person did not have locus standi in the matter, but the delay meant that the company initiated a process for establishment in another Swedish municipality. In the case of Preem’s refinery, questions have been raised about how the rules of the Environmental Code (regarding regulation of greenhouse gas emissions) relate to the overall Swedish climate policy. The permit issued by the Land- and Environmental Court has been appealed, and the next stop is the Land and Environmental Court of Appeal. After the court has given its statement, the case will end up on the government’s table. Before this issue has been clarified, the uncertainty will be high also for other LKIs whose operations entail greenhouse gas emissions.

The importance of a high level of knowledge in the permitting authorities

An appropriate environmental permit assessment also requires that the examining authorities have sufficient knowledge to impose proper requirements and establish reasonable conditions. In the Facebook-case most of the respondents noted that the knowledge about data centers needs to be strengthened further, both to avoid over-regulation and to be able to sharpen the requirements when necessary. In the permit process for the battery factory, environmental impacts that could not be entirely predicted at the time of the assessment where handled by trial periods, as well as provisional conditions for certain types of emissions. A number of issues were postponed also in the Preem-case since limitations and precautionary measures for the majority of the environmental aspects of the planned activity could not be assessed at the time of the permit assessment.

The municipality’s role as an intermediary is described as very important for the establishment of Facebook’s data center. The company’s knowledge of both the legal and the physical conditions for the establishment was limited, and the development companies of the municipality played a vital role in speeding up the process and assisting the company in issues that were raised there. Also for the battery factory, the involvement of local decision-makers and the local business community was crucial to Northvolt’s decision to locate the production in Skellefteå.

Conclusions and lessons learned

We have identified a number of generic lessons for future environmental permit assessments of LKI. Focus in these is amongst other things on issues that should be given room in permit assessments where economic growth, e.g. in the form of start-ups, must be coordinated with the environmental perspective.

A first lesson is the importance of careful planning of the localisation of different types of activities. By considering the localisation of the activity, costly demands for measures as well as drawn-out conflicts and appeals can be avoided. Localisation close to safeguarded areas, such as Natura 2000 areas and/or areas harbouring protected species, can mean additional permit processes with other and increased requirements for precautionary measures. The municipalities’ physical planning plays a very important role here, both to guide subsequent environmental permit assessments and to avoid undesired cumulative impacts. Municipalities that are interested in attracting new investments/LKI need to consider the specific prerequisites for the particular activity and plan accordingly. The most important planning instruments are in place, so the challenge for the municipality is primarily to act fast and assign resources, e.g. to ensure that appropriate detail- (‘zoning’-) plans can be adopted in an efficient and legitimate manner.

A second lesson is about the need for guidelines for the environmental permit assessment of new activities. The Swedish environmental legislation is generally formulated. The requirements in the Environmental Code, e.g. regarding energy conservation, provide only vague guidelines for the balancing of different interests in the individual case. On the one hand, the law is flexible and offers good opportunities to identify appropriate environmental requirements. On the other hand, the vague formulations give rise to uncertainties regarding the content of the environmental permit assessment. Partly with regard to the type of requirements that may be imposed on the activity given its characteristics, including different types of permits, and partly with regard to the actual handling of the case. This is particularly important in relation to new activities where past experiences are limited. Even if such guidelines will not be legally binding, they tend to develop into a practice that makes it easier to predict future outcomes. The question of the use of excess heat is an example of an issue where the content and requirements of the law could be clarified.

A third lesson concerns the question of whether better prerequisites for continuous environmental adaptation can be created. For Swedish municipalities, the establishment of new LKI is a matter of economic growth. There are often strong incentives to speed up the processes, assist with information and knowledge, and work actively with comprehensive- and detail plans. At the same time, the environmental permit assessment of economic activities means finding a balance between offering actors security in the form of a permit to conduct the activity and continuously pushing environmental adaptation in the facility in question. There are at least two ways of handling this challenge. One way is to use trial periods (see above). Another is to strengthen the competences of the various courts, authorities and referral bodies in relation to the industries and technologies where LKI are likely to be common in the future.

Finally, an important lesson is to take into account the complexity of the time-consumption of the environmental permit process. The criticism towards the current environmental permit process often emphasize the existence of extended trial procedures and lengthy administrative processes. In some cases, it may be justified to reduce the lead-times, for example by providing additional resources to the permitting authorities. However, shorter permit processes are not only beneficial; for the planned activities to be accepted, it is crucial that participation- and feedback processes, e.g. concerning the environmental impact assessment, are given sufficient room in the process. Moreover, there are no simple means by which the permit processes can be shortened. Solutions such as precedence to green projects, modification permits or the like, rather risk to create new uncertainties about which activities are eligible for exemptions (which in turn can lead to more appeals). In other words, it is not just about granting permission to the activity as quickly as possible, but rather about gradually pushing for adaptation towards reduced environmental impact without putting a stalemate on the production, for example by allowing the activity to start, but with trial periods for the fulfillment and determination of important environmental requirements.

The role of the public sector in improving the environmental permit process

Based on the lessons learned above it is possible to identify a number of recommendations for how future permit assessments of LKI can be improved. These recommendations are primarily aimed at actors in the public sector.

Firstly, a crucial condition is that suitable locations can be identified, and this places great demands on both the comprehensive planning and on the adoption of detail plans with appropriate boundaries. The experiences from the proactive municipal planning that took place in both Skellefteå and Luleå should be disseminated to other municipalities. Since the most central planning tools are available, the challenges are mainly about acting quickly and supplying sufficient resources.

Secondly, the permit authorities (including important referral bodies such as the Swedish Environmental Protection Agency), together with representatives of different industries, should jointly develop generic guidelines for environmental permitting of LKI for each industry. The permitting authorities’ knowledge of various LKI, including their environmental impact, available technical solutions and costs, should be strengthened.

Thirdly, the environmental permit assessment should, to a greater extent, be designed as a continuous process rather than as a ‘one-shot game’. This can be achieved by a more systematic use of longer trial periods as these make it possible to move on with the investment while giving the industry time to test and optimize various technical solutions. As indicated above, it is also central to investigate seemingly simple solutions, such as precedence for green projects, before they are introduced, as they risk to further increase uncertainty about future assessments, and thus also the risk of appeals.

Title
Miljölagstiftningens betydelse för stora kunskapsintensiva investeringar

Serial number
PM 2019:15

Reference number
2018/141

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