Participants at the longstanding Joint European Stakeholder Group (JESG) this week expressed their concern that co-operation on energy under the EU-UK treaty agreed at the end of 2020 ceases in 2026. In response, they heard that the UK is in a ‘new world of treaty governance’ in its relations with the EU, as opposed to being a member of the bloc. As such it is was normal for agreements to have a ‘sunset clause’.
The energy ‘sunset clause’ issue has already been aired in the daily press, where it was seen as closely allied to a similar situation on fishing rights – the only other sectors where such sunset clauses apply. But while fishing agreements after 2026 will be revisited on a four-yearly basis, energy co-operation will be renewed annually.
How long can the UK electricity market rely on close co-operation with the EU and access to its Internal Electricity Market (IEM)? There is no suggestion that either party currently want to limit co-operation, and there have been positive indications for collaboration, such as non-discrimination clauses that give the UK equal rights on interconnector capacity. Both parties are working within a tight timetable to agree the detail of arrangements for trading.
However, the sunset clause and annual renewal raised alarms bells – and not just in connection with continued access to IEM. Uncertainty over policy, and over exactly how links with the IEM work, have real-world implications. In just one example, changes in trading arrangements may require changes to IT systems – a cost and a barrier.
More broadly, of overriding interest for the industry, which is always asking for consistency of policy in a fast-evolving environment, is assurance that current arrangements with the EU will continue and that our energy and climate policy will remain in step. But we no longer have the long view implicit in membership of the group, or the insider knowledge of the priorities of Member States and their internal negotations – or the ability to mould its decisions to our wishes; instead we have a limited treaty and sunset clauses. We need to consider how to manage that change.
Meanwhile, what of our agenda in the UK?
The EU can be slow at evolving and implementing policy – not surprising, as it has to corral over two dozen countries with very different strengths and concerns. The danger within the EU was that the interests of other countries could delay or water down necessary policies. But once a policy is agreed by the bloc, that consensus-building process and the same slow process makes it very hard to dislodge.
The danger now is that changes in UK policy or implementation are much easier than shifting the entire EU. There is a long term danger here for the energy industry and our Net Zero ambitions.
Without the inertia involved in moving the EU, an incoming UK government can implement policy reverses very quickly. Net Zero has consensus now, but that could change as hard choices have to be made. And campaigners against neonicotinoids thought they had agreement from the UK government that a two-year EU ban would be maintained after Brexit. Instead Defra last week agreed their use “with strict conditions” and for specific applications.
While we were part of the EU we have got used to the idea that policy change is a long business and one that requires watertight arguments and persuasive negotiation. Now we are a ‘sovereign nation’ again, vigilance is required to ensure our green agenda is not undermined – in comparison, national government is short termist, with a view on the next election, and able to U-turn. Constant vigilance will be required.