Brexit – The Implications for UK Energy Industry

Brexit – The Implications for UK Energy Industry

  • 01 Apr 0

‘In or Out?’ is the question currently being asked across the country. One thing that is clear – Environmental policy issues will not be a high priority on the list of deciding factors in the build-up to the UK European Union (EU) referendum. That said, there will be a profound effect on green policy if the country was to vote for Brexit. Experts from the energy and sustainability industry have given their support for remaining in the European Union and see it as critical to Britain’s transition to a low-carbon future.

Whilst the EU is far from perfect when it comes to its oversight of green legislation, it appears that the advantages of EU membership do outweigh the disadvantages. The EU Renewable Energy Directive encouraged rapid growth in the renewable industry in the UK and the waste and resource industry has undergone radical change for the better to meet on-going European obligations. In addition, international agreement on nature conservation have proved essential for the UK’s biodiversity and EU membership clearly strengthened the UK’s negotiation power at the recent COP21 Paris climate summit

The environment is an area in which the UK and EU law are strongly entwined. The environmental principles enshrined in the Single European Act provide that environmental action by the EU aims to preserve, protect and improve the quality of the environment; to contribute towards protecting human health; and to ensure a prudent and rational utilisation of natural resources.

EU legislation sets limits for a range of air pollutants and requires member states to have plans setting out how they will be met. The EU emissions trading scheme sets a decreasing cap for emissions from energy intensive sectors, and allocates or auctions emissions allowances, which can be traded on the open market. This will represent a 21% reduction by 2020 in emissions for all sectors in Europe covered, compared with 2005 levels. The UK government has expressed firm support for the aims of the EU’s environmental directives and in some cases UK requirements are actually stricter than, or in addition to, those required by the EU. Therefore, it is unlikely that there would be a huge change in emphasis should Brexit be successful.

The Energy Secretary, Amber Rudd, has warned that, voting to leave the EU, risks energy bills rocketing by £500 million a year in the next decade and would threaten the nation’s energy security. Rudd is insistent that the UK is stronger, safer and better off staying in Europe. She supported her claims by citing a report, commissioned by the National Grid, which claimed that leaving the EU, and exiting the internal energy market, could see bills rise by around 2%.

Supporters of Brexit claim that Amber Rudd’s claims are merely supported by her own research and are absurd. The feeling in the ‘Leave’ camp is that the Government will go to extraordinary lengths to win the referendum and remain in the EU. Brexit campaigners claim that being an EU member state actually increases UK energy bills.

The Government has also claimed that membership of the EU has given Britain more bargaining power to diversify sources of gas and preventing Russian President Vladimir Putin using gas supplies as a tool of foreign policy. The Government’s message is clear – when it comes to Russian gas, united we stand, divided we fall. That said, the UK currently has very little reliance on Russia to supply gas. There is the potential for this to increase in the longer term but the such concern holds little weight at this present time. It should however be noted that, should Putin decide to exercise such power over Eastern European states and the EU opts to divert resources to these areas, an exit for the UK could see supplies that are currently relied on from the continent drastically reduce.

A stark reality of an exit from Europe is the resultant uncertainty for investors in the environmental sector. Economists claim that an EU exit would leave a huge void for the industry as it would be unclear to what degree the UK would retain elements of the European path towards greater environmental sustainability. Such uncertainty could all but wipe out billions of pounds of fresh investment in green jobs and the growth that the UK renewable industry has seen in recent years could all but dry up overnight.

The matter will be decided on Thursday 23rd June 2016. In the event of a win for Brexit, the UK Government needs to be clear in its message of support to stakeholders in the Environmental Industry if security of supply, cost and for investment is to be maintained going forward.


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