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First-tier Tribunal (General Regulatory Chamber)


You are here: BAILII >> Databases >> First-tier Tribunal (General Regulatory Chamber) >> Komatsu UK Ltd v The Environment Agency [2025] UKFTT 639 (GRC) (27 April 2025)
URL: http://www.bailii.org/uk/cases/UKFTT/GRC/2025/639.html
Cite as: [2025] UKFTT 639 (GRC)

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Neutral Citation Number: [2025] UKFTT 639 (GRC)
Appeal reference: EV/2024/0001/CCA

First-tier Tribunal
General Regulatory Chamber

Paper Decision
27th April 2025

B e f o r e :

FIRST-TIER TRIBUNAL JUDGE MATHEWS
____________________

Between:
KOMATSU UK LTD
Appellant
- and -

THE ENVIRONMENT AGENCY
Respondent

____________________

Representation:
The parties agreed that the appeal could be considered on the papers.

____________________

HTML VERSION OF DECISION
____________________

Crown Copyright ©

    Decision – The appeal is dismissed.

    The decision dated 22nd December 2023 is affirmed.

    Background

  1. The appellant company manufacturers ground excavators for supply to the European construction industry.
  2. This appeal seeks to challenge the respondent's decision of the 22nd of December 2023 to vary a climate change agreement that was in existence between the appellant and the respondent.
  3. The parties do not challenge the existence of that agreement, or the power of the Environment Agency to vary that agreement.
  4. The Underlying Climate Change Agreement
  5. I have been provided with a copy of the agreement, The agreement serves to establish targets to control carbon dioxide emissions during periods of trading. The agreement provides for the regular review and setting of emission targets during specified periods of time. The agreement seeks to control and reduce emissions by the setting of targets for carbon dioxide.
  6. The Department for Energy Security and Net Zero (DESNZ) oversees the climate change agreements. It is agreed that on the 15th of March 2023 DESNZ proposed a timeline for an extension scheme for existing climate change agreements. The structure and timeline required that targets for emission reduction was sent to sector associations in March 2023. There then followed a consultation and negotiation period before, between DESNZ and sector associations, for the setting of reduction targets for energy use.
  7. The appellant company falls under the sector referred to as surface engineering (SEA).
  8. The consultation and negotiation period resulted in DESNZ issuing target reductions to sectors in October 2023. Sector associations then distribute the reduction targets amongst their respective participants. It follows that the negotiation of targets was conducted between DESNZ and sector associations. The sector associations are then responsible for implementing the sector target by distributing the target reductions amongst their respective participants. It was in this way that the appellant company became subject to the target that is the subject of challenge in the present appeal.
  9. The role of the Environment Agency was that upon instruction from DESNZ, the agency was to vary the existing climate change agreements so as to implement the newly agreed targets. Accordingly it was the Environment Agency (EA) who wrote to the appellant with notice of the amended targets. The issuing of those amended target figures has generated the present appeal.
  10. I have been provided with copies of the underlying agreements in this case, together with the notice of the disputed target amendment. The appeal bundle in this matter includes a copy of the climate change agreement for the surface engineering sector, together with schedules.
  11. The Law

  12. The appeal is made under the Climate Change Agreements (Administration) Regulations 2021 and is also impacted by Rule 13.1.2 of the underlying climate change agreement for the Surface Engineering Sector, made between the parties.
  13. The Regulations and Agreement work together to provide for a right of appeal
  14. as follows:

    The Regulations Climate Change
    Agreements (Administration) Regulations 2021

    Right of appeal

    Reg 20 (1) Where a financial penalty is imposed under regulation 15, the operator may appeal to the First-tier Tribunal ("the Tribunal") against the decision to impose the penalty.

    (2) Subject to paragraph (4), where the administrator terminates an agreement under regulation 17(3), 17(4), or 18, a sector association or operator which has received a notice of termination may appeal to the Tribunal against the decision to terminate the agreement.

    (3) Where an agreement provides for a right of appeal in respect of any other decision of the administrator, that appeal is an appeal to the Tribunal.

    (4) There is no right of appeal for a sector association or an operator where the

    administrator terminates an agreement after receiving a notification under regulation 17(2).

    Grounds of appeal

    Reg 21. The grounds on which a person may appeal a decision under regulation 20 are -

    (a)that the decision was based on an error of fact;

    (b)that the decision was wrong in law;

    (c)that the decision was unreasonable;

    (d)any other reason.

    Effect of an appeal

    Reg 22. The bringing of an appeal suspends the effect of the decision pending the final

    determination by the Tribunal of the appeal or its withdrawal.

    Determination of an appeal

    Reg 23.(1) On determining an appeal under regulation 20(1) against the imposition of a

    financial penalty the Tribunal must either—

    (a) confirm the penalty;

    (b) reduce the penalty; or

    (c) quash the penalty.

    (2) On determining such an appeal, the Tribunal may allow an extension of time for

    payment of the penalty.

    (3) On determining an appeal under regulation 20(2) against the termination of the

    agreement the Tribunal must either—

    (a) confirm the termination;

    (b) permit an extension of time to remedy the failure that led to the termination; or

    (c) quash the termination.

    (4) On determining an appeal under regulation 20(3) against a decision of the

    administrator the Tribunal must either—

    (a) affirm the decision;

    (b) quash the decision; or

    (c) vary the decision.

    The Agreement
  15. The agreement provides that :-
  16. 13. RIGHT OF APPEAL

    13.1 If the Administrator:

    13.1.1 decides not to certify a facility or to vary a certificate which has been issued;

    13.1.2 serves a notice imposing a buy-out fee under Rule 7 upon determining that a target unit has failed to meet its target; or

    13.1.3 decides to vary or not to vary the target for a target unit, the Operator may appeal to the Tribunal against the decision.

    13.2 In respect of an Operator which enters into an agreement after 1 April 2013, the Operator may appeal to the Tribunal against the target that has been set for the target unit by the Administrator.

    13.3 For the purposes of Rule 13.2, the date on which notice of the decision is deemed to have been sent to the Operator is the later of the date the agreement is entered into or the date the Administrator sends notice to the Operator of the target for the target unit.

    13.4 The grounds on which an Operator may appeal under Rule 13.1 and 13.2 are:

    13.4.1 that the decision was based on an error of fact;

    13.4.2 that the decision was wrong in law;

    13.4.3 that the decision was unreasonable;

    13.4.4 any other reason.

    13.5 The bringing of an appeal suspends the effect of the decision pending final determination by the Tribunal of the appeal or its withdrawal.

    13.6 On determining an appeal under these Rules the Tribunal must either:

    13.6.1 affirm the decision;

    13.6.2 quash the decision; or

    13.6.3 vary the decision.

    Issue

  17. The issue in this appeal is narrow. The appellant has not disputed the legal power of the Environment Agency (EA) to give notice of the amended targets. The appellant asserts that the EA has a power to issue notices varying targets for participants such as the appellant, doing so by varying umbrella agreements that apply across a sector such as SEA. The appellant's point is that :-
  18. 1) The present target imposed upon the appellant is unfair because it is based on an unusually busy period Between January 2021 and December 2022. That time. contained very high production volumes stimulated by post COVID recovery. Energy use is not a matter that has a linear relationship with production numbers, because approximately 45% of energy use is based on the lighting and heating of a factory and remains a constant value regardless of rates of unit production. Accordingly during the present period of very much lower production levels, there is less scope or reduction in energy consumption by more efficient production processes, essentially because there is less production occurring.

    2) The appellant proposes a reduced target, indicating that the modest reduction sought for them, as one participant company within their sector, would still keep reduction targets within the range agreed between DESNZ and the surface sector organisation.

  19. The respondent indicates that the negotiation of targets was a matter for DESNZ and sector associations, the EA simply implements the resulting agreements. It does not feel able to vary the agreed targets that, it states, were agreed by the sector associations. It is also wary of being perceived to act unfairly towards other sector participants by agreeing to the proposed variation for this appellant, when it could not do so for all sector participants without undermining the originally agreed target.
  20. Evidence

  21. As indicated above all parties agreed that this matter could be resolved up on the papers. It is in fact a very narrow and discreet issue.
  22. The respondent had served a statement and response to the grounds of appeal and a further response to the appellants submissions.
  23. I have considered all documents provided by the parties and all matters addressed in the appeal bundle.
  24. Findings

  25. The appellant has not suggested that the EA has acted beyond its powers, in effect the EA is being invited to operate it's discretionary power to reduce a target for the reasons set out above.
  26. I have read the exhibited emails and correspondence provided by the parties. It is clear that in November 2023 the Environment Agency wrote to the surface engineering association, the sector that includes this appellant as a participant. That correspondence on the 27th of November 2023, invited the SEA to provide proposed distributions of the new sector commitment targets. They had been agreed with the DESNZ. I have then been provided with correspondence from 12th and 14th December 2023 in which the SEA attached for the EA, the final proposed distribution of the new targets for the sector's participants.
  27. I have noted with care the appellant's submission as to why the targets imposed upon them are inappropriate. But it is clear from the evidence before me that the climate change agreement scheme that generates the present appeal relies upon such negotiation occurring between individual participants, their sector associations and the DESNZ. The appeal in effect reveals that the appellant is perhaps understandably disappointed that its sector association has agreed to a target being imposed upon it that is unreasonable on the particular facts for this appellant.
  28. It is beyond the scope of this appeal and the evidence before me for me to make findings as to the extent to which the sector association sought to represent the interests of the present appellant during the negotiation and consultation period. The appellant may wish to pursue such an enquiry with the SEA, since other e-mail correspondence before me from the sector association to the appellant appears to suggest that there was no effective negotiation. That was not a point made by the sector association in the emails I have seen providing final distribution targets to the EA.
  29. The appellant sought to remind me of the fact that pursuant to section 13.6 of the underlying agreement in this case, set out above, on appeal the tribunal has three apparent options, to affirm the decision, quash the decision or vary a decision. The appellant invited me to vary and reduce the target in this case for the reasons already set out.
  30. In the present appeal the appeal relates to paragraph 13 of the original agreement, and the tribunal, in determining the appeal has the powers set out in Regulation 20 (3) and paragraph 13.6 of the agreement.
  31. I must keep in mind the following decisions of the Upper Tribunal, Environment Agency v Amphenol Invotec Ltd [2022] UKUT 318 (AAC) and Environment Agency v Taylor Engineering and Plastics Ltd [2022] UKUT 317 (AAC). The decisions concern appeals against penalty notices which, although imposed under a different provision, concern the same statutory powers for the tribunal as are relied upon in the present appeal.
  32. In those cases the EA was required to simply follows an agreed method of calculation when setting penalty notice. In the present appeal the EA is, similarly in my judgement, following and agreed timeline and process to notify the appellant of an amended target. The Environment Agency has had no part in the negotiation of an amended target nor is it required to do so. Indeed if such targets were to be individually negotiated by the Environment Agency with every individual participant, the system would be unwieldly and unworkable.
  33. In my judgment, the decisions above are helpful in confirming the principle that a tribunal in circumstances such as the present appeal, does not have powers wider than those of the respondent.
  34. The targets notified to the appellant by the EA, with the product of a separate negotiation process that did not include the EA. The agreement in this case does not give the respondent a discretion as to whether or it negotiates a separate reduction target with individual participants after wider sector negotiations have occurred.
  35. It follows in my judgment, as was established in the decisions referred to, that I do not have the discretion that the appellant urged me to exercise in reducing the targets in this case, as to do so would require me to act beyond the powers that was properly available to the EA when the present notice was issued.
  36. In my judgement I am required to follow the decisions set out in the Upper Tribunal decisions above, the present case concerns a similar issue as to the scope of an appeal despite the fact that the subject matter is slightly different. As a consequence of that finding, I have no power to unilaterally reduce the appellant's target as requested, because, I find, the respondent could not reduce so it when it was implementing the results of an agreed negotiation between the DESNZ and sector associations, and I do not have powers beyond those of the respondent in such circumstances.
  37. Summary

  38. The powers of the tribunal in this case do not include a discretion of the type urged upon me by the appellant. The tribunal does not have that power because despite the wording of the relevant regulations and agreement, the environment agency did not have any such discretion when issuing the disputed notice.
  39. For the reasons set out above the appeal is dismissed and the respondent's notice is affirmed.
  40. Signed:-

    HHJ Deni Mathews

    Judge of the First-Tier Tribunal

    27th April 2025

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