CHILE: An introduction to Environment

Chile: Environment

Environmental protection is a key component of the economic model that has been implemented by the various industries operating in Chile. Climate change, water stress, and biodiversity loss are some of the main challenges that companies are currently facing in order to achieve this objective. In the face of these problems, Chilean environmental law is at a turning point and there is a continuous debate about the necessary changes that its institutions and regulatory framework need to implement.

A look into Chile’s Environmental Legal Framework.

In general terms, the founding milestone of Chilean environmental law is the enactment in 1994 of Act  No. 19.300, on General Environment Bases. This Act implemented an environmental institutional model based on coordination between public agencies. In order for Chile to join the Organisation for Economic Co-operation and Development (hereinafter, ‘OECD’), in 2005 this Organisation formulated a series of recommendations to the state regarding environmental issues. In 2010, Chile modified its environmental institutional framework through the enactment of Act No. 20.417. This Act created the Ministry of the Environment (MMA), the Superintendence of the Environment (SMA), and the Environmental Assessment Service (SEA). Subsequently, in 2012, the enactment of Act No. 20.600 created three environmental courts in the country. Finally, in 2023, Act No. 21.600 was enacted to complete the environmental framework through the creation of the Biodiversity and Protected Areas Service and the National System of Protected Areas.

In light of this regulatory framework, it is worth considering that the Chilean environmental regulatory model is characterised by a plurality of public agencies with specific competences. Some are responsible for the development of environmental public policies (hereinafter, ‘MMA’), others for the evaluation of a project (hereinafter, ‘SEA’), and others for the supervision and sanctioning of environmental rules (hereinafter, ‘SMA’).

An evaluation of the more than 30 years of this model reveals both lights and shadows. In this sense, environmental institutions today face a series of challenges that require regulatory modifications. The continuing challenges of adaptation and mitigation required by climate change, as well as delays in obtaining environmental and sectoral permits, are some of the regulatory issues that Chilean companies face in contributing to a sustainable development model.

Environmental assessment and the call for a change in Chile.

The Environmental Impact Assessment System (hereinafter, ‘SEIA’) is an environmental management instrument that aims to preventively assess the effects that the development of a project or an activity may have on the environment. The inclusion of a project in this system is subject to a list of typologies established in the law and can be by means of an Environmental Impact Study or an Environmental Impact Statement, depending on whether the activity or industry causes a significant impact. Although this figure has been in force since 1997 and has been an essential pillar of the Chilean environmental regulatory framework, it is currently experiencing some difficulties. The main of these challenges relates to the difficult task of reconciling environmental protection with the streamlining of environmental assessment deadlines and procedures.

In order to respond to these challenges, in January 2024 the President of the Republic presented Bill No. 16.552, which seeks to modernise the SEIA and shorten the timeframe of the environmental assessment procedure for obtaining a permit. It should also be noted that this Bill seeks to eliminate the Environmental Assessment Commissions, whose current function is to qualify projects and grant the permit, in order to transfer this function to the SEA. Finally, one may highlight that this Bill includes modifications to the environmental liability regime.

Also in January 2024, the President of the Republic presented another Bill, No. 16.566-03, which aims to facilitate and improve the efficiency of obtaining permits for companies to develop their projects. While environmental permitting is outside the scope of this Bill, there are a number of sectoral permits that are associated with the environmental regulation of many economic activities. The main objective of this Bill is to accelerate investment and improve economic competitiveness in strategic sectors, such as the mining and energy industry.

Compliance and sanction: The Superintendence of the Environment.

The task of discipline and punish, environmentally speaking, in Chile is in charge of the Superintendence of the Environment. Created as a result of the reforms suggested by the OECD, this regulatory agency is based on a carrot-and-stick management model of oversight and sanction. Ten years after its creation, the reviews are mixed, since although it has played an outstanding role, there are a series of shortcomings and gaps that stem from its legal design. Some of these challenges are due to the excessively rigid model that shapes its actions and does not allow the incentive model to achieve the promised objectives.

Once again, due to an initiative of the President of the Republic, the SMA's regulatory framework seeks to be modified. Bill No. 16.553-12 was presented in January 2024 and pursues to settle the pending debts of the incentive model, ie the carrots, of the Chilean environmental regulatory framework. For example, it seeks to strengthen the figures that allow companies to adjust their conduct to compliance and avoid the imposition of fines. In terms of sanctions, the Bill proposes to create a simplified sanctioning procedure for minor infractions and to strengthen the incentives model to ensure its efficiency. In particular, it seeks to improve the figures of self-reporting, compliance programmes and remediation plans, among others.

Challenges and recommendations.

A review of the last 30 years of environmental institutions in Chile reveals successes and mistakes. Environmental protection is a fundamental pillar of sustainable development and environmental legislation is sensitive to change. Thus, issues such as climate change, water scarcity, and biodiversity loss are concerns that must be reconciled with the promotion of investment and the economic competitiveness of industries.

The proposed and revised regulatory amendments are still in the process of legislative discussion and have a way to go to eventually be enacted and become law. The main recommendations are as follows:

First, keep an eye on regulatory developments. In this regard, it is essential for corporations to constantly monitor the legislative and regulatory discussions developed by the state. It is not uncommon for certain regulatory developments to require structural modifications for certain industries to comply.

Next, implement a preventive approach to identify which of these possible changes may affect the industry. In this sense, the suggestion is that new projects developed by companies should not only focus on today’s law but also consider a forward-looking approach that addresses the regulatory challenges they will face sooner rather than later.

And finally, observe the different instances of citizen participation that the legislative process offers. In this respect, it is key that industries seek advice on ways in which they can bring their concerns and proposals to the attention of the legislator. Sustainable regulation considers private interests and common concerns.