To keep energy bills down the UK must continue to co-operate with the EU on energy and climate post-Brexit

Monday 24 July 2017
Chaitanya Kumar Chaitanya KumarHead of climate and energy020 7630

Failure to collaborate with the EU post-Brexit on energy and climate policy could raise energy costs for the UK, hitting consumers and unnecessarily complicating UK carbon emissions reductions.
UK-EU co-operation on energy is strongly in the national interest, particularly in relation to the growing low carbon economy. This sector already represents two to three per cent of the UK’s GDP, and over 55 per cent of trade in low carbon technology is with the EU. [1]

Negotiating Brexit, from think tank Green Alliance [2], highlights Brexit risks and proposes establishing a ‘Paris co-operation track’, using the Paris Agreement on climate change, an international mechanism ratified independently by both the EU and the UK, as the basis for future collaboration with the EU on climate and energy.

Five main areas at risk are:

• Electricity interconnection with the EU which meets seven per cent of UK’s electricity needs and keeps consumer energy bills down. National Grid’s ‘two degrees’ scenario for UK electricity sees interconnectors providing 17% of UK peak demand by 2023. [3] A doubling of existing interconnection could save up to £1 billion a year in reduced wholesale prices by 2020. [4] But leaving the EU’s internal energy market would put this at risk.

• Northern Ireland’s energy integration with the Republic of Ireland. If the UK leaves the internal energy market, it will disrupt the £6 billion Irish energy market.
• Favourable finance terms from the European Investment Bank. Current loans from the EIB are worth £8 billion, more than double the finance previously available from the Green Investment Bank for UK energy infrastructure over the past five years. This favourable finance has underpinned the success of the UK offshore wind and electric vehicle sectors.

• Maintaining product standards and, in particular, vehicle standards which UK car manufacturers must comply with, as they export 80 per cent of their vehicles, half to EU consumers. Divergence in vehicle and other product standards would undermine UK exporters and risks turning the UK into a dumping ground for inefficient and shoddy products that aren’t fit to be sold in the EU.

• Delivering the carbon budgets where 55 percent of required emissions reductions to 2030 are expected to be delivered through EU-derived legislation with risks to effective transposition and future compliance and governance.

To achieve positive outcomes, the study identifies, amongst others, the following actions for the UK:

1. Reconsider the hard line on the role of the European Court of Justice (ECJ). The ECJ plays a significant role in governing the shared energy and climate rules across the EU and countries in the wider Energy Community. The UK’s concerns about the ECJ should not lead us to forego the benefits of high levels of co-operation: greater energy security and faster and cheaper decarbonisation. Several options are available to address potential concerns over the role of the ECJ. Green Alliance suggests that an ‘association agreement’ [5] with the EU is a potential alternative, which would minimise the ECJ’s role and could achieve the necessary outcomes.

2. Retain access to the internal energy market for electricity and gas to maintain barrier-free trade. The internal energy market and its rules and principles have served British interests well. The UK should negotiate continued participation in the market and the technical bodies proposing the rules.

3. Stay aligned with EU product standards and environmental principles. Significant divergence from these could undermine UK competitiveness and the ability to trade in low carbon goods and services, as well as weakening health and environmental safeguards.

Green Alliance’s senior policy adviser on low carbon energy, and author of the analysis, Chaitanya Kumar said:
“Sustained co-operation will mean the UK can continue to stand with the EU at the forefront of international leadership on climate. It will also maximise the benefits of low carbon trade with Europe and support the shared vision of long term energy security. Not least, it will secure clean and cheap energy for UK consumers.”
K. Chaitanya Kumar, senior policy adviser, Green Alliance (available for interview) or 020 7630 4514 / 07763 040388
[1] London School of Economics, 8 February 2017, UK needs free trade with the European Union in low-carbon technologies

[2] Green Alliance is a charity and independent think tank focused on ambitious leadership for the environment. Since 1979, it has been working with a growing network of influential leaders in business, NGOs and politics to stimulate new thinking and dialogue on environmental policy, and increase political action and support for environmental solutions in the UK.

Negotiating Brexit: positive outcomes for the UK on energy and climate is available now.

[3] National Grid, 2017, Future Energy Scenarios, p 69

[4] Grantham Institute, 2017, Interconnectors, the EU internal electricity market and Brexit

[5] An association agreement is a treaty between the European Union and a non-EU country which creates a framework for co-operation across trade, regulation, governance and other areas without strong imposition of the ECJ’s jurisdiction.