Financial Provisions



Project description and aims

When sites go into liquidation provisions are generally not made for environmental clean-up and leave substantial environmental legacies which need subsequently to be addressed. Different solutions have been sought across Europe and include the use of insurance policies, financial provisions, and bonds. The issue of insolvency remains and even if provisions are made these are often ignored by the liquidator with the result that nothing is left for the environment as it is seen as subservient to company law. Ultimately lengthy legal battles may still result in the tax payer covering the expense – in direct contradiction of the polluter pays principle.

This is most critical where environmental licencing has permitted short term degradation of the environment on the explicit condition that the degradation will be at least reversed at the end of the life of the activity and that suitable financial provision will be maintained by the operator tocover the risk of business failure before this restoration has occurred.

Phase I & II

It is intended that this project will focus on compiling guidelines on the principles of recommended financial provisions addressing the three key issues:

  1. Is it sufficient?
  2. Is it secure?
  3. Is it available when required?

There is desire to do something of this nature now as it was recognised by the EPA Network that regulations, should they come, would take considerable time. These seemed to be most relevant to legacies of landfill and mining, and harmonisation of existing approaches (preferred to reinvention).

Regulators will have a better understanding of what financial provision will work in different scenarios, appropriate financial provision tools can be selected and the issue of creating future legacy liabilities will be better addressed.

Phase III

This final part of the project follows on from and builds on the outputs of the IMPEL project Financial Provision – Protecting the Environment and the Public Purse (2016/2017). The final phase of the project aims to investigate the application of the Irish and Spanish tools in other jurisdictions. This is likely to require production of a version of the Spanish MORA tool with an English language user interface.  Regulators and operators will have a better understanding of the availability and suitability of financial tools resulting in improved:

  • Protection of the environment
  • Protection of the public purse
  • Implementation of polluter pays principle
  • Investment in pollution prevention

Output and outcomes:

  • An evaluation of the potential wider application (to other jurisdictions) or the Irish and Spanish models (and the Netherlands approach if available).
  • Confidence in decision making, potential benefits in terms of streamlining the process and reducing regulatory burden (this has been found in Spain where operators are aligning their datasets to be compatible with MORA).

The 2021 project builds on the outputs of the Financial Provision – Protecting the Environment and the Public Purse project (2016 to 2018 & 2020).  This project will take the previous output (report) and make it available as a web-based tool.

Related files/information

  • Landfill and Mining Waste Directives.
  • Environmental Liability Directive and SEVESO.
  • Industrial Emissions Directive and related domestic legislation.

Number: 2021/14, 2020/23, 2018/20, 2017/22, 2016/20 – Status: Ongoing – Period: 2016 – Topic: Cross-cutting tools and approaches - Tags:

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