How to get the best possible outcome from Brexit on energy and climate
This post first appeared on BusinessGreen.
At 11am, on 14 July 2017, eight per cent of UK’s total electricity demand was generated by offshore wind, more than any other country in the world. Proactive policy and industrial innovation have crafted the UK’s success story on offshore wind but another significant part of the story has been the lending from the European Investment Bank (EIB) that has accelerated the sector’s growth. Roughly £2.6 billion has been invested in wind farms and transmission networks since 2012, part of an overall £8 billion investment in energy infrastructure in the UK. As we leave the EU, cheap EIB loans will not flow as easily, raising concerns about the future growth of our renewable energy industry. It is, therefore, critical that we negotiate to be a major shareholder and benefactor of the EIB and the other European investment bodies that support innovation and growth in low carbon technology.
Paris co-operation track
New insight from Green Alliance identifies the risks and recommends the negotiation strategies the UK should adopt to ensure a positive outcome for its energy industry and achieve its climate targets. The core of the recommendation is that we should establish a ‘Paris co-operation track’ with the EU, with negotiations aimed at collectively meeting the goals of the EU’s energy union and the much higher ambition set and ratified under the Paris climate agreement. This would provide a framework for robust collaboration in future on energy and climate.
Six main Brexit challenges for energy and climate policy
Electricity interconnection with Europe provides seven per cent of the UK’s electricity needs and brings down energy costs. By 2021, interconnection is expected to bring additional annual savings of £1 billion on consumer bills. Leaving the EU and the internal energy market raises risks for further interconnection beyond 2021.
Once outside the EU and the EEA, UK foreign dependency on gas will rise to 42 per cent. The UK’s long term energy security is uncertain, because of the potential for additional tariffs on gas interconnectors, volatile geopolitics and operating outside the EU’s gas solidarity mechanism.
Northern Ireland’s seamless energy integration with the Republic of Ireland could be threatened. If the UK leaves the internal energy market, it disrupts an Irish energy market worth £6 billion.
UK car manufacturers export 80 per cent of their vehicles and over 50 per cent go to EU consumers. Forty per cent of vehicle components purchased by UK are from the EU. Any potential divergence in vehicle and other product standards will place a burden on the UK export market and potentially open us up to inefficient, poor quality goods.
The UK expects to have a new nuclear fleet of roughly 12GW operating by 2030, but the UK’s departure from Euratom raises questions about the feasibility of these projects, with greater implications if the UK also leaves the internal energy market.
Finally, more than half of UK’s carbon budgets are expected to be delivered through EU-derived legislation, so there are questions around effective transposition and future compliance and governance.
Positive negotiating positions
To avoid setbacks and ensure a positive outcome for the UK on climate and energy, we have made a number of recommendations for the negotiations, the main one being that the UK should continue to participate in the EU’s internal energy markets for electricity and gas.
We should also negotiate to retain influence of regulatory bodies, like the Agency for the Co-operation of Energy Regulators and the Energy Transmission System Operators for gas and electricity. This would mean we could still have a role in setting the rules for barrier free electricity and gas trading across borders and potentially bring more than a £1billion of energy system savings to UK consumers after 2021. Other recommendations made, on the EU’s Emissions Trading Scheme, effort sharing regulation, renewable energy targets and energy efficiency, are aligned with the necessary ambition driven by the Paris agreement.
The future role of the European Court of Justice (ECJ) is also a vital consideration. Achieving a positive outcome would be hindered by a hard negotiating position on the ECJ. The UK’s strong stance on the ECJ is a major stumbling block for any agreement, because it is so heavily involved in governing the shared energy and climate rules. An EU-UK Association Agreement, similar to the EU’s one with the Ukraine, would be one way to reconcile existing political stances with the desired outcomes.
UK investment and the opportunity for growth in the low carbon energy sector is at stake from Brexit, not to mention the increasing challenge of how to meet our carbon budgets. The UK has been a champion for action on climate change. If we want to maintain that reputation and ensure a thriving energy industry post-Brexit, we will have to find new channels of co-operation with our progressive counterparts in the EU and the rest of the world.
[Image: Power Lines courtesy of Nick Miller from Flickr Creative Commons]