Brexit repercussions raise questions over UK's energy future

Which way does the UK go now? Melanie Kendall-Reid, compliance director, CARBON2018, takes a close look at the implications on UK energy policy of the decision to leave the European Union.

The referendum has been decided and the result is in. While the British public has spoken and the decision to leave the EU has been made, the path is far from straightforward. The referendum is merely the start of a two-year process of negotiations and decisions. The UK has now to decide if it will join the European Economic Area (EEA), thereby remaining as associate members of the European Union or cut all ties with Europe – as far as it is possible to do so in a globalised world economy.

If the UK decides to remain part of the European Economic Area (EEA), the huge progress that has been made to date in improving the UK environment could be lost in the absence of external pressure and auditing that membership of the union has brought. A total withdrawal is likely to bring a much wider erosion of environmental policy. It is possible however, for members of the EEA to follow EU environmental policies.

Both Norway and Iceland, as non- EU members of the EEA, follow EU climate policy closely and participate in large parts without exerting significant influence on its development and direction. Norway participates in the EU ETS via its parallel trading system. European environmental policies provide business opportunities to UK firms to become market leaders in the development of new technologies. The Confederation of British Industry (CBI) suggested that green business accounted for 8 per cent of GDP, a third of UK growth in 2011-2012 and could add a further £20bn to the UK economy. The EU is our largest trading partner offering access to a larger marketplace and the opportunity to trade with other member states under favourable terms and conditions. Non- EU Members of the EEA enjoy preferential access to the Single European Market but do not participate in Justice and Home Affairs, Common Foreign and Security Policy, the Common Agricultural Policy, and the Common Fisheries Policy. In order to gain preferential access to the EU market they do have to abide by the acquis communautaire – the rules and regulations governing the operation of the single market, including many environmental rules.

A total withdrawal with no EEA membership would lead to significant risk of both rising energy costs and security of supply as the UK has a heavy dependence on European interconnectors. Predictions are that by 2030 the UK will be importing circa 75 per cent of its gas.

Before we joined the EU, Britain was seen as the dirty man of Europe In the period that the UK has been in the EU, the economy and environment has improved, albeit not entirely due to EU membership. For many years, Europe led the world in renewable energy investment but China has overtaken this. EU nations promoted clean energy at vastly inflated costs through imposed renewable energy targets, tariffs and subsidies. When budgets reached breaking point in 2011, European renewable energy investment slumped by more than half and has yet to recover.

Some environmental policies are as a result of UK initiatives, Driven by concerns on carbon price, the UK unilaterally enacted the carbon floor price which is contributing to the closure of coal-fired power stations. The UK has also singly decided to phase out coal-fired power entirely by 2025.

What is most worrying now the decision to exit the EU has been made is that, in recent years, the UK government has shown a clear lack of commitment to driving down energy use, preferring to focus its attention on security of supply at any cost as demonstrated by the capacity market auctions. The government is now effectively free to amend or repeal the acts adopted to give effect to the EU laws that has driven the implementation of energy efficiency measures. Without the levels of environmental protection afforded by EU membership, the weakening of UK environmental policy appears inevitable under the current Government. The longer term commitment is more positive, in that, on 22nd April 2016 the UK signed the COP21 agreement, committing to 1.55 per cent reduction in carbon emissions. The UK is expected to deliver on this whether it is an EU member state or not.

Another particular concern that will be in the forefront on campaigners’ minds today is that fracking will become widespread despite the number of environmental and safety concerns. The majority of the rules that regulate the use of fracking are derived from European directives and are intended to make sure that fracking and other activities do not contaminate water, pollute the air or use unsafe chemicals. The government has suggested in the past that fracking legislation is an unnecessary burden.

While EU membership has its drawbacks, from an environmental perspective, it offered the UK protection from the Government’s varying its commitment to the environment and climate change based on other needs including that of the Treasury.

Despite the environmental concerns arising from the referendum result, there is widespread acknowledgement from a large number of global organisations that the implementation of energy-saving measures and a reduction in energy use is essential to future success.

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