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Climate & energy

June - September 2017

Summary

There have been encouraging signs on maintaining co-operation on energy and climate with the EU in comments from Greg Clarke, secretary of state for BEIS, and in the government’s position paper on Northern Ireland and Ireland. But significant concerns remain on the future of European Investment Bank (EIB) finance for low carbon infrastructure projects in the UK, participation in the Internal Energy Market and the future of EURATOM.  Worryingly, news stories have emerged recently that infrastructure applications to the EIB have been delayed owing to uncertainties surrounding Brexit, contradicting the chancellor’s assurances that EIB loans will not be affected while the UK remains within the EU.  Furthermore, the government’s partnership paper on foreign policy failed to mention climate change, despite calling for co-operation on defence and security, including energy security. And, despite encouraging progress on offshore wind, an overall lack of progress on domestic energy policy, partly owing to the complexity arising from Brexit, has hampered the investment visibility required to build the energy infrastructure needed to meet carbon budgets.

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Principles & strategies
The government intends that the EU Withdrawal Bill will “ensure that the whole body of existing EU environmental law continues to have effect”. However, as currently drafted, the bill fails to carry across the general principles in the EU treaties that underpin environment and climate policy, such as the goals of sustainable development and a high level of environmental protection, the precautionary principle and the polluter pays principle. The bill also fails to carry across the directives that set the policy frameworks, and the strategies that set out trajectories for achieving policy goals.

However, the Conservative manifesto stated that the government remains committed to the UK’s Climate Change Act, it also reiterated support for the Paris climate agreement and pledged to lead international action on climate change. 
Legislation
The government intends that the EU Withdrawal Bill will “ensure that the whole body of existing EU environmental law continues to have effect in domestic law”. This broad commitment is reassuring, yet it is stated elsewhere that the bill will only convert EU law into domestic law “wherever practical and sensible”, and it is not yet clear whether this could create gaps in climate and energy policy. The bill also contains extensive powers for ministers to alter that law during the two years following the UK’s exit. We remain concerned about the level of scrutiny given to statutory instruments used in the conversion process, particularly given the short timeframe.

The UK’s recent efforts to dilute energy efficiency legislation as part of the EU’s clean energy package discussions indicate a worryingly lax approach to energy efficiency. The UK’s Climate Change Act, however, is an achievement that all parties should be proud of. Moving forward the government’s Clean Growth Plan, expected soon, must set out how the UK will meet its legally binding carbon budgets under this Act.
Capacity & funding
There has been no news on the future of financing for low carbon energy infrastructure in the UK from the European Investment Bank (EIB) and other European investment bodies like the Connecting Europe Facility (CEF) and Horizon 2020. The EIB does invest in countries that are not EU member states, but the UK’s share of investment is expected to be significantly reduced after it leaves the EU. The chancellor in his recent Mansion House speech helpfully stated that “to endure that finance continues to be available after Brexit, alongside discussions with the EIB I can also announce I am expanding the support available to capital funding in the UK”.

But, in the wake of the Green Investment Bank’s sale to the Macquarie Group, it remains unclear whether domestic funding sources can match the levels that the EIB has historically provided. The EIB has not made any public statements on the future relationship with the UK, but it appears it would be difficult to retain the UK as a major stakeholder of the bank, as the terms of the European treaties would need to be amended. Worryingly, news stories have emerged recently that infrastructure applications to the EIB have been delayed owing to uncertainties surrounding Brexit, contradicting the chancellor’s assurances that EIB loans will not be affected while the UK remains within the EU.
Governance
The EU Withdrawal Bill envisages that existing EU case law will remain applicable by domestic courts. However, the role currently played by the European Court of Justice (ECJ) together with other EU institutions in providing the monitoring, oversight, accountability and enforcement functions required to ensure the effective implementation of EU-derived energy policies will no longer exist.  Although the government has proposed several options to replace the ECJ’s role in resolving cross-border disputes, its eventual position will depend to some extent on what sort of future relationship is negotiated with the EU. And the options paper does not set out an adequate plan for filling the domestic governance gap.

Environment Secretary Michael Gove has declared his ambition for the UK to “design potentially more effective, more rigorous and more responsive institutions, new means of holding individuals and organisations to account for environmental outcomes.” His department, working with BEIS as the department leading on climate policy, must set out soon how it plans to do so.
Co-operation
The UK government has, in the past, indicated its interest in retaining access to the EU’s internal energy market, but is clear that this is up for negotiation, so the outcome still remains uncertain. Plans for an ‘association agreement’ on EURATOM surfaced briefly but, as yet, remain unconfirmed by the government. 

The government’s recent position paper on Northern Ireland and Ireland explicitly highlights the importance of continuing the Integrated-Single Energy Market (I-SEM) and making sure energy trade within the island of Ireland and the wider UK continues without significant barriers. This is good news and potentially provides a template for wider co-operation between the UK and the EU on energy and climate issues. The prime minister's speech in Florence identified climate change as an area for co-operation with the EU, but, in contrast, the government’s partnership paper on foreign policy failed to mention climate change, despite calling for co-operation on defence and security, including energy security.

The UK continues to participate in and provide inputs to the ongoing EU negotiations on the Clean Energy Package, but recent inputs from the UK government to dilute proposed targets and legislation on energy efficiency and the governance of the Energy Union are cause for concern. The EU needs to be more ambitious in its 2030 targets, and any efforts by the UK to undermine them will tarnish its position as a climate leader.