Sunday, 19 June 2016

So seriously, how will leaving the EU affect green energy.....

I'm of course for 'in', but I thought I'd try and put the green energy implications of a 'leave' decision in perspective in as balanced a way as I can manage......Technically speaking of course there's nothing to stop the UK pursuing a sustainable energy strategy outside of the EU, but I suppose the summary is that it would help considerably if we stayed in if (especially) we take broader political factors into account. I shall discuss this later on in this post.

Note, where I talk about the 'single market' I also mean the EU's internal market'. I use the terms interchangeably.

Let's break this down into sections

Energy Prices

I can't actually see much direct effect on energy prices if we leave or remain. Energy markets tend to set their own prices levels independent of governance arrangements and such markets tend to be global or regional.
Leave have talked about removing the 5 per cent VAT on energy. This would increase carbon emissions. In practical terms the prospect of removing this tax seems unlikely since you'd either have to increase taxation somewhere else (equally unpopular no doubt) or cut back state spending (more 'austerity').

There would be nothing to stop the UK remaining a member of the EU-ETS - after all, Iceland is a member.

Regulation of energy markets

Now this is an area where the EU has a major impact, and regulation needs to be talked about in different boxes. First there is the overriding regime of the internal market, which, the UK has been driving in the direction of more liberalisation.
But this liberalisation is bounded by complex sets of rules administered by bodies such as the European Network of Transmission System Operators (one for Electricity, ENTSO-E) and one for gas (ENTSO-G). As in the case of some small non-internal market states (like Serbia) The UK would still be members of these bodies, but its role in governance would be reduced. These are obscure, but important bodies since they define a lot of important technical rules and identities. They implement EU rules, and so it follows that if we leave the EU the UK will have much less influence on the rules. On the other hand the general direction of policy favours greater and more transparent energy trading within Europe and this trajectory is unlikely to change. But it would not be so easy for the UK to ensure that the technical changes are to its liking compared to the  present.

Energy efficiency standards

Much controversy about alleged Brussels meddling with our kettles etc is in fact about efforts to improve the energy efficiency of appliances we use. In general, then, to achieve energy efficiency, it serves us to have a European identity rather than just a British one. Outside of the EU and its internal market British manufactured products may become divided into two types: one for the EU market with higher energy efficiency, and one for the British market where the appliances are cheaper to buy but which cost more to run, and which produce more carbon emissions.

Renewable Energy

The EU has certainly had a very big impact on the UK through the 2009 Renewable Energy Directive. There is no mandatory post 2020 EU Renewable Directive, so the impact will be less in the future. However, it is the UK Government,essentially, that controls the regulatory and incentive regime for renewable energy at present, so little would, in a technical sense, change from the present arrangements in this area.

Nuclear Power

Despite the much publicised battle over 'state aid' for Hinkley C, whereby the UK has to get special permission from the European Commission to give 'state aid', the impact would be relatively small. Delays in giving state aid clearance are hardly an important factor in in the non-delivery of nuclear power in the UK (see other posts!). Moreover, it is the UK Treasury that is proving (understandably) reluctant to dole out the multi-billion £s worth of loan guarantees for Hinkley which have been authorised by the EU.

The political context

I would argue that the political context post Brexit will be the crucial determining factor in shaping the UK's energy trajectory, and I believe quite firmly that this would be very damaging for sustainable energy strategies. As I argued in a previous blog UKIP are likely to be big gainers post Brexit. See
In sum, whilst the majority of the House of Commons would negotiate for continuing membership of the EU's internal market, UKIP would denounce this as a sell-out since this settlement would involve the UK having to continue with current immigration arrangements. Tory right wingers would get sucked along with them no doubt, and a strengthening rightist bloc would emerge within the UK. Indeed, one could argue that even if we left the internal market and then even this failed to have that much impact on immigration, the right would gain further given the central focus of immigration in UK politics.
As the right gains more influence then the pressure for green energy policies is much reduced. This can be seen in other countries - eg Denmark where the renewable energy programme is being cut back after gains by the right wing Danish People's Party.
In short, the technical implications for green energy post-Brexit may be relatively moderate, but it is the contextual political ramifications that are likely to feed back to have substantial deleterious consequences for green energy strategies.

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