Brexit Energy: To Be or Not to Be

We all hear about Brexit and the political and economic consequence of the British withdrawal from the EU but only few discuss the consequences on energy in Great Britain.

If there is no deal, the EU rules governing the EU ETS would no longer apply to the UK. The EU ETS limits emissions from more than 11,000 heavy energy-using installations (power stations & industrial plants) as well as airlines operating. Business emissions from 1 January 2019 onwards will no longer be covered by the EU ETS, so UK businesses would no longer need to surrender allowances for these emissions and they will be free to produce CO2 emissions as much as they want to without legal obligations.

In terms of electricity, a no-deal means the end of trade relationship in the same way as nowadays since the UK will not be part of the internal energy market. So the UK will need to register under the Regulation on Energy Market Integrity and Transparency (REMIT) with an EU regulatory authority for the purposes of market monitoring to avoid disruption. The UK will negotiate new alternative trading arrangements in order to provide support to interconnectors engaging with EU Member State authorities. Nevertheless, Orgefm succeeded to make new access rules which would be applied only in the case of no-deal. Yet a temporary tariff regime will be implemented and will apply up until 12 months while undertaking a full consultation on the permanent character. Under this regime, imports into the UK would be eligible for tariff-free access. But in my opinion, it is less likely to happen since the UK will be not a member of the internal energy market anymore. Although there will be difficult trade agreement on electrical import, it does not bother the British government because imports from continental Europe represent 6.6% of the total supply, a tiny part.

And what about oil and natural gas? According to the UK Petroleum industry association, a no-deal will not endanger national refineries a lot. Great Britain imports 12% of its gas from the EU so for this association it does not seem irreplaceable even if trading could be less efficient. But exports are not secure. All UK-based natural gas shippers will lose the right to supply the French market, creating possible shortages and higher prices if no alternative arrangements.

The British oil industry could encounter some trouble, especially in exports to Asia. Korea is a major buyer of UK oil because of its free-trade agreement with the EU. The UK is less likely to replace this deal in case of no-deal. Furthermore, purchasing tickets from the EU will be needed to trade. Short-run consequences are not a big deal but they could worsen in the long-run.

The UK should advocate for a soft Brexit in terms of energy, especially in electricity and gas. Despite its desire for broad cooperation, the details remain fuzzy as well as the whole Brexit affair, especially in the energy single-market. Furthermore, the UK is increasingly turning towards nuclear development with Canada, Australia, and the US: is it the rise of a new nuclear-based energy policy caused by Brexit? Is it the Nuclear Energy Brexit?

Léa Gaudillière

Bibliography

https://www.gov.uk/guidance/energy-and-climate-after-brexit

https://www.bloomberg.com/news/articles/2019-02-21/keeping-the-lights-on-after-brexit-no-deal-s-impact-on-energy

https://energypost.eu/brexit-uk-eu-energy-trade/

 

Photo by John Cameron on Unsplash

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