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Editorial

The Coming of Age of Environmental Regulation in Israel – Recent Aligning with Stringent EU Standa

Environmental policy and regulation in Israel have developed significantly over the course of the past several years. After decades of what may be considered as regulatory standstill, Israeli environmental regulation has taken a tremendous leap forward. Numerous environmental matters, some of which were not previously regulated and others which were subject to outdated standards, have been revised and updated through new comprehensive statutes, innovative regulations and professional guidelines.

This new generation of environmental regulation, mostly introduced and promoted by the Israeli Ministry of Environmental Protection (MOEP), is based upon one common principle - the adoption of modern and internationally-accepted environmental norms and principles, focusing primarily on those reflected in EU environmental directives. The polluter-pays principle, the precautionary principle, life cycle analysis, transparency and public participation - all of which are well-rooted environmental concepts in developed countries - were swiftly introduced into the Israeli environmental legal sphere, along with the application of best available techniques (BAT) standards.

The most vivid example of this transformation is the Clean Air Law, 5768-2008. Replacing the archaic chapter on air quality in the Abatement of Nuisances Law 5721-1961, the Clean Air Law adopted the underlying elements of the European Integrated Pollution Prevention and Control (IPPC) Directive (replaced later by the Industrial Emissions Directive). These included requirements to hold an emissions permit, mandatory adoption of BAT and the introduction of polluter-pays concepts, such as imposition of civil fines and levies reflecting the cost of damage to the environment and unlawful profit earned by the offender.

Another distinctive example is the waste regulation framework, which has been the subject of significant overhaul. The Israeli legislator has recently adopted equivalents of a number of EU waste treatment directives: the Drinking Bottles Refund Law 5759-1999 and the Packaging Management Law 5771-2011 (inspired by the EU Waste Directive), as well as the Environmental Treatment of Electrical and Electronic Equipment and Batteries Law, 5772-2012 (designed to mirror the EU Waste Electrical and Electronic Equipment Directive). These statutes introduced novel concepts to Israeli environmental regulation, including extended manufacturer and importer liability and the setting of annual national collection and recycling targets. In addition, the MOEP is currently promoting a reform of hazardous waste regulation, implementing a comprehensive approach similar to that which exists under EU regulation.

An additional important framework currently being promoted by the MOEP is the Green Licensing Law, essentially employing an Israeli version of the Industrial Emissions Directive. This new environmental licensing regime will set out the main principles for the permitting of large industrial installations based on an integrated approach, in an attempt to reduce regulatory barriers for industry while increasing the efficiency of oversight and enforcement.

The latest developments in this dynamic area of regulation are initiatives relating to oil and gas exploration and drilling activities. Oil and gas companies acting in Israel are being required to apply for a series of environmental permits which will set forth conditions for drilling activities both on-shore and off-shore. Additionally, several bills and draft sets of regulations have been introduced in connection with planning procedures and preparedness for emergency incidents. In laying out this new regime, the MOEP has looked to both US and EU-wide technical standards and financial mechanisms.

While the need for this vigorous reform in Israel's environmental regulation framework and its aligning with EU standards are warranted, they have come at a cost. Israeli businesses across the economy have been compelled to adapt to the new standards quickly. They have had to bear substantial costs for required adjustments in manufacturing and business activities in strict timelines and short phase-in periods, and will have to continue to do so over the course of the next several years.

Navigating these new regulatory waters is even more challenging due to the vast array of new regulations and guidelines, some of which are being implemented while still in draft form and while creating unintended clashes between numerous supervising ministries and agencies. The regulatory framework has become cumbersome and at times detrimental to business development, and regulators are working together with the business sector to streamline the various new tools and lift barriers created by the rapid reform.

Another outcome of the modernisation of Israeli environmental regulation, and undoubtedly a positive one, has been its effect on international transactions. Israel became a full member of the OECD in September 2010. Its adherence to globally-accepted environmental principles and standards has resulted in the classification of Israel as a developed country for purposes of international commercial contracts and financings, as reflected, for example, under the Equator Principles and the OECD's Common Approaches for Export Credits.

The transformation of Israel's environmental regulation regime has been swift and comprehensive. It has also come hand in hand with enhanced criminal enforcement action and harsher penalties. While this new situation creates numerous challenges for the business sector, both legally and financially, it can also generate opportunities for international business development in Israel as well as reduce barriers which previously existed for Israeli companies abroad.

For more information on environmental regulation in Israel, please contact the head of HFN's Environment and Climate Change practice, Dr. Ruth Dagan, at: daganr@hfn.co.il or on +972-3-692-7433.

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