Negotiating practical arrangements for the UK and EU energy markets to work together in the long term is taking up civil service capacity that we can ill-afford to lose, at a time when the need to develop energy and climate policies to meet Net Zero targets is urgent. But the commitment is unavoidable if the UK is to replace short-term Trade & Cooperation Agreement (TCA) provisions on the EU and UK energy relationship with longer term agreements that meet our needs, says a policy brief for the UK Energy Research Council. The UK also faces a challenge in make the most of its new, weaker position with regards to EU regulatory and other bodies, say authors Antony Froggatt and Caroline Kuzemko in eth new publication, ‘Brexit Implications for UK Decarbonisation Objectives’. They say being outside those bodies, “is to the detriment of UK energy actors”, adding, “Relevant organisations and government departments will need to spend considerable time and effort trying to influence future EU choices that affect them now they are outside of the EU.”
For example, on interconnectors, the authors hope that an inconsistency in prices on different exchanges and additional costs to trade will eventually disappear. That has arisen because moving out of the internal electricity market meant a move back to ‘explicit’ trading, which is less timely and more expensive because interconnector capacity has to be booked separately from the associated power sale, and done further in advance. The authors think negotiations over long term co-operation may remove that ‘friction’ in trading. However, they say Brexit has had a “materially negative” impact on new interconnectors. Two new links to France (Fab and Aquind) have been suspended, “at least in part due to the uncertainty over future demand and
The report also raises the question of a potential carbon border adjustment mechanism designed to stop companies that do not have to pay for carbon emissions from undercutting those that do, effectively ‘exporting’ or ‘leaking’ carbon emissions. That too could cause ‘friction’ for exports from UK to EU, the authors said, because although the UK is likely to have a comparable carbon price and have similar climate policies, some goods or materials are imported to the UK and then sold on the EU market. “This would create additional barriers around rules of origin requirements, making the exporting process even more complicated and potentially expensive,” and that may see manufacturers relocate, they said.
Read the full report UKERC_Brexit Implications for UK Decarbonisation Objectives