While the overwhelming majority of the UK’s environmental legislation is derived from EU legislation and UK climate change and energy policy is largely influenced by the EU, surprisingly, environment and energy has been the subject of only limited discussion in the context of Brexit. Observers anticipate that most environmental laws will remain in place, initially at least, as the government seeks to avoid a legislative vacuum caused by the repeal of EU laws before new UK laws are in place. However, longer term trends remain unclear as the UK is likely to face challenges associated with its energy supply and the changing energy market. In terms of the likely post-exit relationship, a number of experts have suggested three possible models. First is a limited free trade relationship with the EU, based on the Comprehensive Economic and Trade Agreement (CETA) about to be signed between Canada and the EU (known as the “Canadian model”). A second option may be to agree bilateral accords with the EU governing UK access to the single market in specific sectors and remain part of the European Free Trade Association (EFTA) (known as the “Swiss model”). A third option would be for the UK to stay part of the single market by continuing its membership of the European Economic Area (EEA) (known as the “Norwegian model”). There have also been suggestions that the UK may seek its own bespoke arrangement.
In the context of these models, key environment and energy considerations include:
- The single energy market and security of supply. Imported gas is set to remain a key part of UK energy supply in the coming decades. Following Brexit, the relationship between the UK and the EU will be substantially altered with respect to trade agreements and engagement with European exporters no matter which model is adopted. The UK as part of its negotiations will have to address its continued inclusion in the single energy market, which is significant given the importance of imports for the UK’s energy supply.
- Renewable energy targets. Directive 2009/28/EC seeks to promote the use of energy from renewable sources. Whilst Member State targets are characterised as “binding”, states will not attract sanctions or infringement proceedings if they are not met. Whether the UK will be bound to fulfil its quasi-contractual obligations post-Brexit, and if so, how “binding” the target is remains unclear.
- Climate change policy. The EU and its Member States have secured the right to meet their climate targets collectively, rather than at the level of each Member State. Going forward, the UK may be unable to negotiate effectively and to influence the EU’s approach to international climate change regulation. The UK may also be less inclined in the future to adopt stringent and taxing targets for itself without European pressure to do so. However, the UK has been committed to combatting climate change and has set out ambitious targets.
- EU ETS. If the UK becomes associated with the EU through the EFTA and the EEA, many of the EU laws will continue to apply including the EU Emissions Trading Scheme (ETS). However, neither EFTA nor the EEA would allow the UK to directly seek to influence future regulation and this would therefore mean that the UK would not be able to directly influence future caps. If the UK exits EU ETS, this will prove to be complex and it will be of interest as to whether the UK establishes its own ETS and develops a link between its domestic ETS and EU ETS in order to provide greater resilience against weather-related fluctuations in emissions, and to benefit from cost reductions across a wider EU market.
- Product energy issues. A vast array of environmental and safety standards apply to products sold in the EU. If the UK remains part of the single market, the UK will continue to be required to implement EU rules. In any case, such standards will apply to UK producers importing into the EU.
- Integrated permitting. The UK has an integrated Environmental Permitting regime which regulates the environmental impact of industrial installations. This regime partly derives from the EU Integrated Pollution Prevention and Control (IPPC) regime, found in the EU Industrial Emissions Directive (IED). While many people anticipate that the structure of the environmental permitting regime will not change significantly following Brexit, Best Available Techniques (BAT) Reference Documents under the IPPC and the IED Directives may no longer apply. Consequently, the UK may have to design a new set of technical guidance in order to implement such an approach.
In summary, the Brexit vote will trigger a considerable period of uncertainty. There will be a number of complexities to work through for energy and environmental policy and regulation. Brexit is taking us into unchartered waters, but with it brings not just challenges, but disruption often brings about new opportunities. Companies will therefore need to carefully follow regulatory developments in this area in order to be in a position to move swiftly and take advantage of such opportunities.
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