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Brexit, EU and The Energy Sector: Dark skies loom for post-Brexit Britain

by / 0 Comments / 05/01/2017

Brexit poses several challenges to the British policymakers. One of the biggest, is that of finding a way to exit from the Common Energy Market and supply systems that the EU currently has in place. A Brexit from this would mean loss of climate financing in addition to the loss of related regulations. Additionally, the UK is connected through physical supply channels. Their functioning will now have to be renegotiated with individual countries in the EU.

 

In order to meet its obligations under the new Paris Agreement, both the UK and the EU face significant challenges once Brexit is launched. Together, the UK and the EU have been responsible for designing a model worth emulating in terms of regional cooperation on climate change. Both countries have contributed significantly to its evolution, and share equal credit for its ambitious goals and functioning. Standards for industrial practices, waste management, packaging, energy storage, energy generation from renewable sources and boosting the renewables industry have been jointly created. This has resulted in a harmonisation of policies that is so inextricable, that it could be decades before the UK truly separates itself from the EU’s Climate Change mitigation laws and energy goals.

There are two key inefficiencies with Brexit from the Energy Market. Firstly, the issue of costs. If the UK is to establish trade deals with the EU, or with individual member states, it will inevitably have to comply with EU regulations, like the regulations on energy. The likely consequence of this is that British companies will incur additional costs to adhere to those regulations. If British laws and EU laws are in conflict on the subject of energy, the cost of adhering to both will most likely be an issue. In addition to these operational costs, there is the issue of having tariffs imposed as a backlash reaction to Brexit. This may leave companies with a raw deal.

Ultimately, whatever the source of the increased costs, the British people will bear the greatest burden. Electricity costs could potentially rise, which may push power generation companies to switch to cheaper sources of energy. Efficient power generation, storage and supply is also at risk because of the issue of costs. Secondly, there is the issue of renegotiating deals for continued access to the Energy Trading System and the sources of supply of energy. As stated before, the energy system within the EU is so interwoven that extricating from it is an issue alone — in addition to renegotiating deals and enacting new laws.

The UK is also at risk of losing access to climate financing and investments to boost its renewables sector. The European Investment Bank for example, is one such institution that has decided to delve into climate finance. To help members, meet the EC 20/20 Goals and the latest 2030 goals, the EU also has various support schemes to assist countries. This could be a setback for the UK’s goals of bolstering its renewable resource plans.

Another aspect is that of oversight and regulation. What system will exist to ensure that the UK meets its obligations in good faith? An isolated approach to climate change mitigation is unlikely to work. In a world where globalisation impacts many minute and often insignificant details of our lives, standard goals and regulations are as necessary as a common vision. From the EU-UK perspective, the EU was established mainly as an organisation for coming together on trade, industrial and economic policies. It is therefore, only logical that environmental protection is also included in the coordination. Energy policy must therefore be a coordinated one, especially if the UK hopes to continue trading or having economic linkages with the EU.

Anti-globalisation movements around the world cannot be allowed to derail concerted efforts towards mitigating climate change. Energy economics and policy are key components of this. The UK’s desperation for freedom from rules and for being able to enact its own laws will come at a price. The Leave campaign has claimed repeatedly that without the EU Britain could enact better, stronger policies for energy efficiency, and that the EU has often held it back. This is a half-truth. The UK must keep its renewable energy sector capacity as well as its energy requirements in mind, before declaring the veracity of such claims.

The resounding question is, considering the inefficacies listed and the issues of compliance with international obligations, is a Brexit worth all this?

The move towards Brexit represents the rising undercurrent of disillusionment and unhappiness present in EU citizens, and necessitates internal reform of the EU structure. Its existence has, however, in many ways inspired and shaped regional cooperation around the world. The EU, like all models of transnational cooperation, must constantly evolve in its practices. The level of integration amongst EU nations is unprecedented.

Leaving the energy market seems inevitable now. The result is uncertainty with respect to the UK successfully meeting its energy goals and obligations.

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