Environment | UK Regulatory Outlook February 2026

English and Welsh governments propose changes to water governance 

The Welsh government following its initial response to the Independent Water Commission's recommendations has published a green paper on water reform in Wales that sets out a high-level statement of intent with a consultation on the proposals that closes on 7 April.  

The proposals include a refreshed water strategy for Wales to provide a long-term vision for water governance. The paper also proposes a new economic regulator and system planner for water in Wales.  

The UK government has also recently published its white paper on a new vision for water for England. In line with the Welsh proposals, the plans include establishing a single water regulator with oversight of both economic and environmental performance. 

Earlier in the year, both the Environment Agency and Natural Resources Wales published guidance to water companies on how to prepare and publish pollution incident reduction plans and related implementation reports annually, highlighting a desire in both England and Wales to strengthen regulation and tackle pollution.  

Welsh government consults on combatting on-the-go packaging waste in Wales 

The Welsh government has published a consultation on amending the extended producer responsibility for packaging (pEPR) scheme in Wales to account for on-the-go packaging waste.  

The consultation is inviting opinions on possible methods for calculating producer fees for on-the-go packaging, how payments should be distributed to local authorities and whether other bodies involved in litter management, such as parish councils, should also receive payments. 

The consultation closes on 24 April, with any changes to the pEPR scheme unlikely to be introduced before 2027-28.  

The Welsh government on 27 January also laid draft amending regulations on waste separation requirements for recycling, which will come into force on 6 April and will require occupiers of non-domestic premises in Wales to separate certain recyclables for collection.  

Ofwat consults on payouts to failing water companies 

Ofwat is consulting on updating its rule prohibiting performance-related pay when water companies have failed environmental and other standards. 

The current performance-related pay (PRP) prohibition rule was introduced in June 2025 and prevents water and sewerage companies in England from paying PRP for any year in which they fail to meet specified environmental, consumer, financial resilience or criminal compliance requirements. 

The proposals aim to update the PRP prohibition rule to reflect new changes in environmental reporting for "water only" companies. These companies will need to prohibit PRP if they have had any category 1 (serious) water pollution incidents in the calendar year preceding the end of the PRP payment year.  

Ofwat will undertake a separate review of the full PRP rule in 2027.  

FCA launches consultation on UK Sustainability Reporting Standards 

The FCA is seeking views on replacing current sustainability disclosure rules with UK Sustainability Reporting Standards (UK SRS). The aim is for the rules under UK SRS to come into force from 1 January 2027, with some transitional reliefs.  

The FCA proposals include placing the reporting obligations against UK SRS 1 on a "comply or explain" basis, while making reporting against UK SRS 2 mandatory. "Scope 3" emissions data would continue to be reported on the comply-or-explain basis.  

In-scope companies would also be required under the proposals to disclose whether they have a published transition plan and if not, why this is. The new rules would aim to catch listed companies currently subject to the requirements introduced by the Task Force on Climate-related Financial Disclosures.  

The planned FCA consultation follows a letter from the Department for Business and Trade, which provided an update on the government process to finalise UK SRS.  

Biodiversity loss could threaten national security and food supply, says UK report 

The government has issued its strategic assessment exploring how global biodiversity loss and the collapse of critical ecosystems could threaten the UK's resilience. 

The report published on 20 January examines how global biodiversity loss could impact the UK's resilience, national security and long-term prosperity. The assessment notes the UK's heavy reliance on food and fertiliser imports, with imports accounting for around 40% of its food, making the nation particularly vulnerable to global ecosystem disruptions.  

The conclusions stipulate that the UK must strengthen its domestic production, reducing reliance on imports.  

Defra consults on reform of regulation of sewage sludge on agricultural land in England 

The Department for Environment, Food and Rural Affairs (Defra) is seeking views on the regulation of spreading sewage sludge in England. The current regime is governed by the Sludge (Use in Agriculture) Regulations 1989 (SI 1989/1263) (Sludge in Agriculture Regulations).  

Defra is consulting on three options. First, it is considering the revocation of all or part of the Sludge in Agriculture Regulations and regulating the spreading of sludge under the Environmental Permitting regime. It also looking at mending the Sludge in Agriculture Regulations to ensure they fit the current context and provide sufficient regulatory oversight.  

Last, it is seeking views on changing the standards without amending the legislation; for example by amending the supporting code of practice.  

The consultation closes on 24 March.  

Government responds to consultation on energy efficiency in private-rented property 

The government response to its consultation on raising the energy efficiency benchmark in the residential private-rented sector has confirmed that a higher minimum energy efficiency standard will be implemented using new metrics under the Energy Performance Certificate (EPC) rating of a property.  

The government in its response on 21 January proposed that landlords will be required to meet a standard that would involve broadly the same improvement measures as are currently needed to achieve an EPC rating of C. Landlords will need to invest up to £10,000 per property to meet the new standard, with spend on energy efficiency improvements counting towards the £10,000 cap from 1 October 2025. It is intended that all tenancies impacted by the amended regulations will need to comply with the new standards by 1 October 2030.  

The new metrics introduced under EPCs will be influenced by the government's recent consultation on the regime, which they partially responded to on 21 January 2026.  

Defra consults on new labelling and emission limits for domestic burning of solid fuels 

Defra has published a UK-wide consultation with a focus on reducing smoke and fine particulate matter emissions from burning solid fuel, such as wood. The proposals include a suggestion to reduce the emissions limit for solid fuel appliances from five grams of smoke per hour to one gram per hour.  

The consultation also proposes introducing mandatory labelling for solid fuel appliances and manufactured solid fuels, as well as increasing penalties under the Air Quality (Domestic Solid Fuels Standards) (England) Regulations from £300 to £2,000.  

CMA publishes additional guidance on greenwashing 

The Competition and Markets Authority (CMA) has published guidance supplementing its Green Claims Code to help businesses understand and comply with their obligations under consumer protection law when making environmental claims.  

This follows requests from stakeholders seeking greater clarity on their responsibilities in complex supply chains in which multiple parties may hold the information needed to substantiate green claims.  

The CMA guidance explains how consumer law applies for all businesses in the supply chain, providing companies with a visual map of a product's journey and how an environmental claim might be added to or remain on the product at the different stages. It also includes examples of how businesses should present an environmental claim. 

Wales makes third commencement on environmental order for air quality targets 

Section 7 of the Environment (Air Quality and Soundscapes) (Wales) Act 2024 came into force on 23 January 2026, requiring Welsh ministers to make arrangements in order to obtain data allowing the monitoring of progress in meeting Welsh air quality targets.  

Other provisions in the legislation provide a framework allowing for national air quality targets to be set and introduce fixed penalties for vehicle idling amongst other things.  

UK ETS draft regulations extended to include maritime sector 

The draft Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 was laid before Parliament on 13 January: if implemented, it will extend the scope of the UK Emissions Trading Scheme (UK ETS) to include the domestic maritime sector.  

Maritime operators obligated under UK ETS will be required to undertake monitoring, independent verification and reporting in respect of their carbon dioxide, methane and nitrogen dioxide emissions arising from certain activities.  

Ships with a gross tonnage of 5,000 and above will have to comply with the scheme. However, there are various exemptions, such as for government ships.  

Draft regulations laid to increase relief offered to energy intensive industries 

The draft Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026 laid in Parliament on 12 January aim to increase network charging compensation schemes to support energy intensive industries. Once in force, the regulations will increase relief offered under the scheme from 60% to 90% from 1 April 2026.  

The proposed reforms will allow applicants longer to make their applications under the regime, extending the application window from one month to two months. The extended window will apply from the application window that opens on 30 June 2026. 

The National Audit Office reports on environmental regulation in England 

The National Audit Office (NAO) published a report on 9 January reviewing the Environment Agency and Natural England – Defra's two largest environmental regulators – that consider how both can maximise benefits to the environment while maintaining proportionate costs to business.  

The report found that Defra lacks a clear strategic approach and is largely reactive and overly risk averse. It also concluded that there is a significant risk of either regulator failing to deliver the necessary volume of change, despite both having set up reform programmes in the past two years.  

The NAO has suggested that Defra works with the regulators to plan how to link existing change programmes and new reforms as well as determining how it will make the most of available Parliamentary time for legislative change.  

An update of funding and performance mechanisms by Defra would also place a greater emphasis on how both regulators address environmental harm as opposed to what activities they are doing.  

It also suggested that Defra investigates new approaches to data sharing and defines the support that it will offer to the regulators if risks materialise, in order to support a culture of change and innovation.  

Government consultation on new UK regulatory framework for HGV carbon dioxide emissions 

The Department of Transport has published a consultation on ending the sale of new non-zero emissions heavy goods vehicles (HGVs). This comes alongside an announcement that the Government will provide increased grants to support switching to electric HGVs.  

The consultation is considering options to cut emissions from new HGVs, support the phase-out of sales of new non-zero emission HGVs weighing up to and including 26 tonnes by 2035, and end the sale of all new non-zero emission HGVs by 2040.  

The consultation closes on 17 March.  

Natural England announces first sets of environmental delivery plans 

Natural England is preparing its first set of environmental delivery plans (EDPs) under the Planning and Infrastructure Act 2025. EDPs will identify the strategic measures required to address the impacts of development on protected sites or species in England and will be financed through a nature restoration levy on developers, paid into a dedicated Nature Restoration Fund. 

Sixteen nutrient-pollution EDPs and 7 EDPs for great crested newts are being prepared by Natural England. The government has pledged not to approve any EDPs beyond nutrient pollution EDPs until it has set out to Parliament what it has learnt from their development and implementation. This will facilitate a "test and learn" approach to the implementation of EDPs.  

Extended producer responsibility for packaging amending regulations made 

The packaging extended producer responsibility (pEPR) scheme has been amended in order to improve its operational efficiency and clarify the obligations it places on producers. The changes to the scheme include enabling the appointment of a producer responsibility organisation. This will also allow producers to offset the tonnage of recycled food-grade plastic packaging waste against their pEPR obligations if they have collected it directly from consumers and sent it for reprocessing in a closed-loop recycling system that converts it back into food-grade recyclate. 

The purpose of the pEPR scheme is to ensure producers of household packaging waste bear the full cost of managing their products at end of life. The goal is to incentivise producers to design sustainable products. The amendments aim to close loopholes in the scheme and remove any ambiguity. See our previous edition for more details. 

IPBES reports highlights the risks nature's decline poses to businesses 

The Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) has found that the biodiversity loss caused by global economic growth could have significant and often unforeseen impacts on businesses, who all rely on the services nature provides for free. A IPBES report published on 9 February has set out that businesses are central to both preventing biodiversity loss and reversing it and has provided some options that businesses can take to help them address their impacts. 

Examples of actions available to businesses include setting ambitious targets and integrating biodiversity into corporate strategy, conducting environmental impact assessments and management plans, mapping value chain actors and ensuring traceability, and educating and incentivising downstream customers. These a just a few of the wide range of options set out by the IPBES report which can aid businesses in shifting from harmful approaches to an approach that helps restore nature.  

First UK PFAS plan published 

See products section.