Leaving the EU: negotiation priorities for energy and climate change policy Contents

9Cross-cutting issues for energy and climate change policy


143.UK–EU collaboration on energy and climate change policy offers long-term mutual benefits in terms of security of supply, consumer costs and decarbonisation at least cost. Our departure from the EU has potential ramifications across all areas of energy and climate change policy. Responses to this inquiry and the former inquiries of the Energy and Climate Change Committee highlighted several critical issues for the sector’s future functioning and direction, notably:

144.The Government has yet to set out clear and comprehensive aims for energy and climate change in the departure negotiations. It has said that it is “considering all options”.286 The balance of stakeholder opinions we heard lies with maintaining the status quo in most aspects of energy and climate policy. The feasibility of this objective is limited, however, by the overarching negotiation principles which have been proposed by both the UK Government and European bodies, which are summarised in Chapter 2. This chapter draws together cross-cutting themes and makes recommendations for general negotiation priorities across the energy and climate change space.

Policy direction

145.Whilst the motivations behind the referendum result were many and various, we can be reasonably confident that the UK’s decision to leave the EU was not driven by a desire to reform energy and climate change policy. Witnesses to our inquiry repeatedly emphasised the short- and long-term importance of current and anticipated EU-derived policy initiatives for the Government’s objectives on security of supply, energy prices and decarbonisation. They highlighted the importance of retaining close links with major energy institutions (such as the Internal Energy Market, the EU ETS and Euratom), and of barrier-free access to goods, services and skills, as well as retaining financing and funding opportunities equivalent to those available through the EU. The Secretary of State also acknowledged that co-operation with EU partners was generally mutually beneficial,287 and appeared to imply that it was in the country’s best interests to continue participating in the Internal Energy Market.288 We agree with stakeholders, and the Secretary of State, that business as usual should generally be the way forward as far as possible for energy and climate change policy.

146.We recommend that the Government seeks to avoid disruption to the energy sector and the domestic climate change agenda. Arrangements mirroring the status quo should be implemented as far as possible. Furthermore, the Government should seek to provide clarity, stability and foresight on domestic policy to support investment, including a long-term vision, sectoral aims and dedicated funding.

147.The influence and significance of domestic energy and climate change policy extends far beyond our immediate agenda to depart the EU. Brexit must not be allowed to distract the Government from the delivery of essential and long-term domestic policy decisions such as the Clean Growth Plan. These are of paramount importance to the sector. Many witnesses asserted that the Government can and should boost investor confidence across the energy sector by providing clarity, stability and foresight on the direction of, and future changes, to its long-term domestic policy. Given that the Government will retain control over domestic policy throughout the negotiations, there is no justification for further delay to decisions which are necessary to facilitate much-needed investment in the UK energy market. The Government must continue to advance the delivery of domestic energy and climate change policy without delay, including publication of the Clean Growth Plan.

148.Witnesses also highlighted the role of domestic policy in maximising the industrial opportunities of the decarbonisation agenda. The Minister of State for Climate Change and Industry told the Committee that he was determined that “the Clean Growth Plan [ … ] is embedded now into our Industrial Strategy”.289

149.Whilst the details of our exit agreement will necessarily remain uncertain for the immediate future, we are disappointed that the Government has been unwilling to announce its overall objectives in respect of energy and climate change. Such an indication would better enable stakeholders to adjust their investment and operational plans. We recommend that the Government publishes its overall objectives in the field of energy and climate change policy without delay.

Balance of mutual benefits

150.There are many areas in which EU initiatives have benefitted the UK. However, UK participation has also benefitted the remaining 27 Member States. For example: market coupling increases the flexibility and responsiveness of the British electricity grid in European grid balancing; the UK contributes a proportionately high share of overall emissions reductions in the EU ETS; and the European JET facility hosted at Culham is presently the most advanced fusion reactor in the world.

151.It is widely recognised that the UK has led the development of many progressive EU energy and climate change policies, which have often been based on earlier UK initiatives.290 Examples include energy market liberalisation, the emissions trading system and the decarbonisation agenda. Strong UK ambitions and influence—in particular on climate change—are understood to have led to the adoption of more ambitious EU policies than might have otherwise been the case.

152.The leverage that UK benefits to the EU offer in the negotiations should not, however, be overplayed. The UK’s influence in EU energy policy has not been uniformly welcomed, and Member States with opposing views and differing economic circumstances may well view a reduced UK influence—and thus an opportunity to change the direction of EU policy—as advantageous. Furthermore, not all Member States regard our departure as a major ongoing concern. Antony Froggatt of Chatham House explained that:

If you go to Brussels and you discuss energy and climate issues, Brexit is not number one. It may be in the top five, but if you go to Poland it is not going to be in the top 10.291

153.It is right for the Government to note the benefits of UK participation in EU energy and climate change initiatives for the remaining 27 Member States. However, given the stated position of the European Council, the Government should be realistic and not rely on these benefits to provide undue leverage.

Dispute resolution and enforcement

154.We recognise that one of the overarching aims of our departure is to remove the UK from the jurisdiction of the European Court of Justice. Whatever the extent and scope of our future energy and climate change partnership with the EU, it will be necessary to establish a new independent body for arbitration and enforcement. This will be especially important if the UK is to retain participation in the Internal Energy Market and the EU ETS, as non-compliance with the regulations of these bodies is ultimately a matter for the ECJ. It will also be key to ensure that legislation retained through the Great Repeal Bill remains enforceable. Professor Andrew Jordan, from the University of East Anglia, said in July that:

were all the legislation to be grandfathered outside the EU framework—in other words, carried across but without the European Environment Agency, the European Commission and the European Court of Justice—there is a real risk it would become zombie legislation; it would not have that power behind it to keep it updated and properly enforced.292

We recommend that the Government prioritises the establishment of new joint dispute resolution and enforcement arrangements with the EU.

Influence over future changes to EU rules

155.There is a trade-off between protecting the status quo in energy and climate policy—with accompanying restrictions in terms of policymaking—and, on the other hand, greater policy flexibility—but with potentially lower efficiencies arising from reduced integration and resource sharing. In general, witnesses favoured ongoing alignment with EU policy, reflecting perhaps a natural affinity with the status quo. However, they expressed strong concerns about the UK becoming a rule-taker. Chatham House noted that:

Outside of the EU, the UK will see its influence over the drafting of EU legislation drastically reduced… The Department for Business, Energy and Industrial Strategy would lose its voice during the comitology process293. The UK government would also lose its voting rights in the Council and there would be no British MEPs in Parliament.294

156.The Prime Minister has recently acknowledged that the UK will lose influence over the development of EU rules, and therefore that we will become a rule-taker, at least in trade.295 We welcome the Government’s published intention to retain UK participation in European regulatory bodies. We recommend that the Government seeks to maximise the extent of our influence in these bodies, such as in respect of voting rights and participation in working groups.

157.We further recommend that the Government seeks to maximise other opportunities to retain influence in EU and European bodies, for example through membership of the European standards bodies, regulators’ associations and industry associations, and by increasing the resources of the UK energy and climate change delegation in Brussels.

158.A number of major new EU energy and climate change policies are currently being developed, and are expected to be adopted before our departure. These include the Clean Energy Package and Phase IV of the EU ETS. In all cases, it will be important to engage proactively with the development of new EU policies throughout the negotiation period, to ensure that the laws we adopt under the Great Repeal Bill support our national policy ambitions and represent a good deal for the UK energy industry. We recommend that the Government engages proactively with the development of new EU policies throughout the negotiation period.

Transitional issues

159.Witnesses welcomed the Government’s intention to convert all existing EU law into UK law under the Great Repeal Bill. It was also noted that additional transitional arrangements may be required, for two reasons:

(1)The extent and complexity of existing integration between the UK and EU energy sectors may mean that additional time will be needed to develop the detail of some arrangements.296

(2)Even where long-term solutions are clear, it may be necessary to allow time to unwind existing commitments in an orderly fashion, so that potentially serious adverse market impacts can be avoided.297

160.Several witnesses suggested that arrangements should be made to retain the existing framework, including full participation in the Internal Energy Market, until a mutually beneficial alternative can be developed. 298 This would avoid the risk of a legislative hiatus, which could result in a sudden cessation of collaborative research agreements, funding streams and nuclear trade.

161.We welcome the Government’s intention to retain existing EU law at the point of departure, through the Great Repeal Bill. We recommend that existing membership of energy-specific institutions, such as the Internal Energy Market and the EU ETS, be retained, at least as a transitional arrangement, until alternatives can be developed in detail.

286 Department for Exiting the European Union, The United Kingdom’s exit from, and new partnership with the European Union, Cm 9417, 2 February 2017

287 Q229; Q231; Q233; Q236; Q249; Q250; Q254; Q267; Q280

288 Q249

289 Q261

291 Q224

292 Oral evidence taken before the House of Lords Select Committee on the European Union on 20 July 2016, Q5 [Professor Andrew Jordan]

293 Comitology in the European Union refers to a process by which EU law is modified or adjusted and takes place within “comitology committees” chaired by the European Commission.

294 Chatham House UKERC (LEU0006)

296 E3G (LEU0017); Centrica (LEU0042); EDF Energy (LEU0024)

297 EDF Energy (LEU0024)

298 E3G (LEU0017); Centrica (LEU0042); EDF (LEU0024)

4 May 2017