Select committee inquiry
Leaving the EU: negotiation priorities for energy and climate change policy inquiry
Closed
What the inquiry looked at
“The Business, Energy and Industrial Strategy Committee warns that the Government has left the UK nuclear industry at risk and must act urgently to ensure its continued operation post-Brexit. This inquiry examines the implications of the UK's departure from the EU on the energy sector and the UK's national climate change commitments and determine which policy areas should be prioritised for continued cooperation during the exit negotiation process. The UK energy sector has extensive links with the EU through trade, directives and interconnection. While Member States, including the UK, retain sovereignty over their energy mix, substantial parts of UK energy policy have been driven by EU-wide directives and proposals. The UK's climate change agenda has similarly been shaped by a mixture of national and international policies, including EU initiatives.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 5th Report - Leaving the EU: negotiation priorities for energy and climate change policy ↗
This Report is intended to inform the public and to influence the Government’s negotiations on leaving the European Union in respect of energy and climate change policy.
Neither the referendum campaign, nor the evidence we have received, revealed widespread concerns that EU membership is damaging UK energy competitiveness or adversely affecting consumers. Whilst there are undoubtedly weaknesses in the operation of some EU policies on energy and climate change, notably the EU Emissions Trading System (ETS), the Secretary of State, the Rt Hon Greg Clark MP, acknowledged that co-operation with EU partners was generally mutually beneficial. The UK has consistently been a driver of high standards and ambitious climate change targets.
In the short term, we recommend that the Government, as part of its negotiations, seeks to avoid disruption to the energy sector and the domestic climate change agenda.
Arrangements mirroring the status quo should be sought and implemented as far as possible. The Government should seek to provide as much clarity and stability as possible on domestic policy to support investment. In particular, we recommend that the Government should seek to maintain ongoing access to the Internal Energy Market, and resolve the particular difficulties faced by Northern Ireland, as it shares a single electricity market with the Republic of Ireland. We also recommend that the Government seeks to retain membership of the EU ETS until at least 2020. Longer term membership of the EU ETS should be conditional on progress of its future reform.
In the longer term, we are concerned that the UK will become a “rule taker” outside the EU, complying with, but unable to influence, rules and standards. If our formal standards diverge too far from those applying in European countries, there is a risk that the UK could become a dumping ground for energy inefficient products. We recommend that the Government retains or mirrors European energy product standards for the immediate future at least and should also, as far as possible, maintain routes to influence their development, for example through active UK participation in European standards bodies.
The Government has said that the UK will be leaving Euratom as a consequence of the referendum result. We share the concern of the nuclear industry that new arrangements for regulating nuclear trade and activity will take longer than two years to set up.
We therefore recommend that the Government seeks to delay exit from Euratom, if necessary, to be certain that new arrangements can be in place on our departure from the EU.
Many of the biggest decisions in relation to energy and climate change policy are long term and not dependent on the outcome of negotiations. 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, nor to undermine the Government’s commitment to meeting emissions reduction targets, which are enshrined in domestic legislation. We recommend that the Government provides a clear and long-term vision for the UK energy sector to support investor confidence and that this should underpin its negotiating objectives.
What the government said
The government responded on 6 November 2017.
Summary written by Accountability Index from the government's response.
The government welcomes the Committee's report and says the UK is seeking a "deep and special future partnership" with the EU on energy and climate change, while addressing the recommendations largely by setting out its existing plans and positions.
- On emissions trading, the government says it "is considering all the options" for UK participation in the EU ETS after exit, and that its future approach will deliver "at least as much decarbonisation" as current participation.
- On Euratom, it says it "wants to maintain continuity" of civil nuclear cooperation and introduced the Nuclear Safeguards Bill on 11 October 2017, which "if adopted" will enable a domestic safeguards regime to be run by the Office for Nuclear Regulation.
- On energy efficiency standards, it will look "on a case by case basis" at those derived from EU law and consider whether to retain, depart from or exceed them in future.
- On transition, it proposes an implementation period of "around two years", and for Northern Ireland and Ireland it seeks a framework that facilitates "the continuation of a SEM".
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 17 November 2016 to its close on 23 May 2018.
- Oral evidence 5 sessions
- Report 2 May 2017
- Government response 6 Nov 2017
What it recommended 24 recommendations · 11 conclusions
1We have heard evidence from across the energy and wider industries that access to the...
Concluded (the committee's words)
We have heard evidence from across the energy and wider industries that access to the Internal Energy Market is important for secure, clean, and affordable UK energy supply, and that it is in the interests of both UK and EU consumers to facilitate the most efficient sharing of energy resources established through the Internal Energy Market.
2There are some technical differences between the UK and EU energy systems, and therefore there...
Concluded (the committee's words)
There are some technical differences between the UK and EU energy systems, and therefore there is a potential long term risk of the UK losing influence on the design and detailed rules underpinning the Internal Energy Market in order to access and share energy resources. Some witnesses have also raised concerns that network charges and the UK Carbon Price Floor may be distorting competition in favour of interconnection and continental generation.
3We believe that membership of the Internal Energy Market has been beneficial to UK and...
Concluded (the committee's words)
We believe that membership of the Internal Energy Market has been beneficial to UK and EU consumers and has helped provide flexibility and certainty to the supply of energy. We therefore agree with the Government’s intention to retain as free as possible access to this market and the intention to remain an influential player on energy in the EU.
4We recommend that the Government seeks continued access to the Internal Energy Market, with no...
Recommended (the committee's words)
We recommend that the Government seeks continued access to the Internal Energy Market, with no accompanying tariffs or barriers to trade. This should include continued participation in the trading arrangements established by the European Network Codes to ensure the most efficient operation of UK interconnectors.
5We recommend that the Government should seek continued UK influence over the rules of the...
Recommended (the committee's words)
We recommend that the Government should seek continued UK influence over the rules of the Internal Energy Market. In particular it should explore continued full membership of the technical institutions for developing the detailed rules of the Internal Energy Market.
6The free trade of energy across the island of Ireland and efficient use of interconnection...
Concluded (the committee's words)
The free trade of energy across the island of Ireland and efficient use of interconnection with Great Britain are of critical importance to Northern Ireland, which is reliant on imports from the Republic of Ireland and Great Britain for gas and power supply. Any disruption to the development of and trading within the Single Energy Market of the island of Ireland (SEM), and the ongoing implementation of the Integrated Single Energy Market (I-SEM) project, may have serious implications for consumers across the island of Ireland.
7We recommend that the Government protect the continued operation of SEM and implementation of the...
Recommended (the committee's words)
We recommend that the Government protect the continued operation of SEM and implementation of the I-SEM project, through the UK’s wider access to the Internal Energy Market or alternatively through special arrangements for the island of Ireland.
8Emissions Trading Systems are in theory the most effective means of reducing emissions at lowest...
Concluded (the committee's words)
Emissions Trading Systems are in theory the most effective means of reducing emissions at lowest cost. The UK and EU benefit by being part of a wider system able to import and export carbon allowances to reduce emissions in a way that is most cost efficient. The EU ETS is also a good example of international collaboration and ambition to tackle climate change. In practice, the EU ETS is performing poorly, due to a low target and domestic policies causing oversupply of EU ETS permits. We share concerns that not enough is being done to protect UK industry from carbon leakage, in particular due to the unilateral UK Carbon Price Floor.
9The 5th Carbon Budget adopted in 2016 was calculated assuming ongoing UK participation in the...
Concluded (the committee's words)
The 5th Carbon Budget adopted in 2016 was calculated assuming ongoing UK participation in the EU ETS. If the UK leaves the EU ETS, the Carbon Budget will need to be revised upwards in order for the UK to remain on a cost-effective path to meeting our target of an 80% emissions reduction by 2050.
10We recommend that—if the UK leaves the EU ETS—the Government revises the 5th Carbon budget,...
Recommended (the committee's words)
We recommend that—if the UK leaves the EU ETS—the Government revises the 5th Carbon budget, on the advice of the Committee on Climate Change.
11It is not clear that there are as yet any alternative options to membership of...
Concluded (the committee's words)
It is not clear that there are as yet any alternative options to membership of the EU ETS that could deliver our emissions reduction target at least cost. The most realistic aim should be a more ambitious EU ETS, with permit prices and the UK carbon price floor aligning across the EU to ensure the most cost efficient and competitive reduction in overall carbon emissions.
12We recommend that the Government seeks to retain membership of the EU ETS until at...
Recommended (the committee's words)
We recommend that the Government seeks to retain membership of the EU ETS until at least end of Phase III in 2020, and that it seeks to negotiate longer term membership of the EU ETS on the condition of commitment to future reform.
13If sufficient reforms to the EU ETS do not appear achievable, we recommend that the...
Recommended (the committee's words)
If sufficient reforms to the EU ETS do not appear achievable, we recommend that the Government considers alternative options, such as establishing a separate UK system linked with wider international schemes. We further recommend that the Government should not seek to leave the EU ETS until it has established clear and well-tested alternative approaches which can deliver our emissions reduction targets at low cost and without destabilising investment or undermining the UK’s commitment and ambition to tackle climate change.
14The Government’s objective to leave the jurisdiction of the European Court of Justice means that...
Concluded (the committee's words)
The Government’s objective to leave the jurisdiction of the European Court of Justice means that it is politically unfeasible for the UK to remain a member of Euratom in the long term, but a temporary extension to our membership—if legal—would allow time for new arrangements to be put in place. We are not aware of any substantive arguments in favour of leaving Euratom made either during the referendum campaign or afterwards. This outcome seems to be an unfortunate, and perhaps unforeseen, consequence of the Prime Minister’s decision to leave the jurisdiction of the European Court of Justice. Safeguarding nuclear energy is a public policy area with a unique level of risk and therefore requires a robust legal regime. We note that the necessity of leaving Euratom is subject to legal uncertainty, but that Leaving the EU: negotiation priorities for energy and climate change policy 55 uncertainty puts the continuing operation of the nuclear industry in the UK at risk. The Government therefore has a responsibility to resolve this matter as urgently as possible.
15Exclusion from Euratom’s research programmes could disadvantage national nuclear research, limit the UK’s future access...
Recommended (the committee's words)
Exclusion from Euratom’s research programmes could disadvantage national nuclear research, limit the UK’s future access to global developments in fusion, and reduce the substantial business opportunities for UK firms supplying Euratom research projects. The Government should explore options to maintain the benefits of our existing research cooperation with Euratom, such as third party membership. Special consideration should be given to funding arrangements that would allow continued operation of, and access to, world-leading research projects including JET and ITER.
16The nuclear industry has expressed strong concerns that new arrangements will take longer than two...
Recommended (the committee's words)
The nuclear industry has expressed strong concerns that new arrangements will take longer than two years to set up. Ministers have not been able to allay these concerns. An interval between the cessation of our Euratom membership and the entry into force of new arrangements could severely inhibit nuclear trade and research cooperation. We recommend that the Government seeks to delay our departure from Euratom. This would give the nuclear industry a realistic window for setting up alternative arrangements—including safeguards and international nuclear cooperation agreements—so as to minimise any disruptions to trade and threats to power supplies.
17If the option of remaining a Euratom member proves untenable, we recommend that the Government...
Recommended (the committee's words)
If the option of remaining a Euratom member proves untenable, we recommend that the Government seeks a transitional agreement to retain our existing arrangements until new arrangements can be put in place. The duration of this agreement may need to be longer than the three year transitional period proposed by the European Parliament.
18We recommend that the Government provides a clear and long term vision for the UK...
Recommended (the committee's words)
We recommend that the Government provides a clear and long term vision for the UK energy sector to support investor confidence, and this should underpin its negotiating objectives on energy and climate change.
19The UK energy sector currently receives substantial funding from the EU, for infrastructure projects and...
Recommended (the committee's words)
The UK energy sector currently receives substantial funding from the EU, for infrastructure projects and for research and development. Maintaining collaboration with the EU in funding and research and development is important for investment in, and long term development of, our energy system. These are also opportunities for the UK to increase domestic funding and wider international collaboration in the energy sector to support the UK as a leader in low carbon technology. We recommend that the Government should seek ongoing access to EU financial institutions and funds and continued collaboration on science and technology. Where this is not possible, we recommend that the Government seeks to develop credible alternatives to ensure that the UK does not lose out in these areas. It should also seek to expand domestic opportunities for research and development, and wider international collaboration.
20Leaving the single market may increase overall energy costs through additional tariffs or other barriers...
Concluded (the committee's words)
Leaving the single market may increase overall energy costs through additional tariffs or other barriers to wider supply chains.
21We recommend that the Government, as part of its negotiations, seeks arrangements to ensure that...
Recommended (the committee's words)
We recommend that the Government, as part of its negotiations, seeks arrangements to ensure that the UK energy sector can access a skilled and mobile workforce, while recognising public concerns about migration levels.
22A reduction in VAT on energy efficiency products would support consumers in using less energy.
Recommended (the committee's words)
A reduction in VAT on energy efficiency products would support consumers in using less energy. This would help to address both fuel poverty and decarbonisation objectives. We recommend that the Government reduces VAT on energy efficiency products after the UK leaves the EU.
23EU-derived polices have contributed to significant improvements in the energy efficiency of buildings and products,...
Recommended (the committee's words)
EU-derived polices have contributed to significant improvements in the energy efficiency of buildings and products, with benefits in terms of emissions reductions, reduced household bills and consumer protections. A small number of organisations have called for changes to EU energy efficiency policies, but in general there is widespread support for maintaining the status quo. The Government should consider retaining the majority of our EU-derived energy efficiency regulations, due to their economic, social and commercial benefits.
24Industry would in particular prefer European energy product standards to be retained.
Concluded (the committee's words)
Industry would in particular prefer European energy product standards to be retained. These are likely to be applied in practice, due to the continuing need to trade with EU countries. If our formal standards diverge too far from those applying in European countries, there is a risk that the UK could become a dumping ground for energy inefficient products.
25We recommend that the Government retains or mirrors European energy product standards for the immediate...
Recommended (the committee's words)
We recommend that the Government retains or mirrors European energy product standards for the immediate future at least, and should also, as far as possible, maintain routes to influence their development, for example through active UK participation in the European standards bodies. Any potential divergence from European energy product standards should be carefully evaluated, to avoid undermining consumer protection and competitiveness.
26We agree with stakeholders, and the Secretary of State, that business as usual should generally...
Concluded (the committee's words)
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.
27We recommend that the Government seeks to avoid disruption to the energy sector and the...
Recommended (the committee's words)
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.
28Brexit must not be allowed to distract the Government from the delivery of essential and...
Recommended (the committee's words)
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 Leaving the EU: negotiation priorities for energy and climate change policy 57 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.
29Whilst the details of our exit agreement will necessarily remain uncertain for the immediate future,...
Recommended (the committee's words)
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.
30It is right for the Government to note the benefits of UK participation in EU...
Recommended (the committee's words)
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.
31We recommend that the Government prioritises the establishment of new joint dispute resolution and enforcement...
Recommended (the committee's words)
We recommend that the Government prioritises the establishment of new joint dispute resolution and enforcement arrangements with the EU.
32We welcome the Government’s published intention to retain UK participation in European regulatory bodies.
Recommended (the committee's words)
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.
33We further recommend that the Government seeks to maximise other opportunities to retain influence in...
Recommended (the committee's words)
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.
34In all cases, it will be important to engage proactively with the development of new...
Recommended (the committee's words)
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.
35We welcome the Government’s intention to retain existing EU law at the point of departure,...
Recommended (the committee's words)
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.
Evidence
Oral evidence sessions 5
- 19 Apr 2017No witnesses recordedparliament.uk ↗
- 21 Mar 2017No witnesses recordedparliament.uk ↗
- 28 Feb 2017No witnesses recordedparliament.uk ↗
- 7 Feb 2017No witnesses recordedparliament.uk ↗
- 25 Jan 2017No witnesses recordedparliament.uk ↗