Better the dEUvil you know in Europe? An energy perspective

Kerry Mashford, National Energy Foundation, EU Referendum

Dr Kerry Mashford, chief executive of the National Energy Foundation, shares some personal views on energy issues and the UK remaining in the European Union or leaving it.

So, David Cameron has negotiated a package of changes for a ‘reformed’ EU (based on immigration, British sovereignty and the Eurozone), the in/out referendum has been set for 23 June, and the campaigns are underway. But what are the things to consider from an energy perspective?

First, the post-referendum options.

• The UK remains in the EU. If the vote is to stay in, the EU has agreed to put in place the reforms negotiated by the Prime Minister.

• The UK leaves the EU (Brexit) but joins the European Economic Area (the EU plus Iceland, Liechtenstein and Norway) and/or the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland).

• The UK leaves the EU and goes it alone, relying on access to the EU market via either the World Trade Organisation or through a special deal which would give it the benefit of free trade with the EU but (hopefully) without all its ‘disadvantages’.

If the decision is to leave, there would have to be a managed exit, in what would be a period of uncertainty. Some believe that this could last up to 12 years, starting with two years of exit negotiations followed by a further period to agree the UK’s new relationship with the EU in the long term.

If, by then, the UK is a member of the EEA, it would still have to pay into the EU budget and agree to its single market and to the free movement of goods, services, people and capital, together with certain EU laws, including those relating to the environment.

So, not much of a saving on either the cost of UK membership or a reduction of the dreaded EU bureaucracy so vilified by Brexiteers. How much the UK would actually save on bureaucracy is uncertain, especially as a 2015 OECD study (based on 2013 data) of its members and a number of non-members found that the UK is one of the least regulated/restrictive countries.

In the 1970s and ’80s, the UK was at the bottom of the environment league table. We were labelled the ‘dirty man of Europe’ — and with good reason. However, in recent decades the UK has made significant improvements, having been pulled along by collectively-agreed EU legislation.

The EU Renewable Energy Directive requires the UK to generate 15% of all its energy (electricity, heat and transport) from renewable sources by 2020. This will produce the UK’s share of the total EU target of 20%. In effect, this means targets of 30% for electricity and 12% for heating underpinned by significant improvements in energy efficiency and a transformational move to low-carbon energy.

The UK’s targets are ambitious and are made even more so by its own Climate Change Act 2008, which includes the tougher target of cutting carbon emissions by 80% on 1990 levels by 2050. There are doubts whether the UK can achieve its goals and, quite frankly, I don’t see much progress in that direction, but the Government reckons it’s on track.

Some people believe that leaving the EU would enable the UK to abandon its EU Renewable Energy Directive obligations and allow the Government to lower its targets and even repeal the Climate Change Act.

For example, the UK could drop some EU initiatives such as the Emissions Trading Scheme or the Industrial Emissions Directive, with a view to running old power plants for longer. This, in turn, could ease the financial burden of ‘green levies’ and reduce energy bills for both households and businesses, but would it also make UK companies less attractive to suppliers and business partners than countries that are explicitly more environmentally responsible?

Indeed, some fear that any watering down of our energy commitments would set the scene for the UK sliding back to being the ‘dirty man of Europe’, particularly in view of the following.

EU Referendum, Kerry Mashford, National Energy Foundation

• The UK’s previous patchy record on energy issues in Europe.

• The current Government’s ‘slash and burn’ approach to ‘green’ and energy-efficiency policies, and its leanings towards fracking and a new ‘dash for gas’.

• The continued support for the fossil fuel oil and gas industries, as demonstrated through the tax reductions announced in the Chancellor’s most recent Budget.

A UK outside the EU (whether it’s completely out or part of either the EEA or the EFTA) might have its hands tied. Countries in the EEA are bound by many EU ‘rules’; if the UK needed to negotiate trade and other deals, the EU would be unlikely to let the UK get away with hanging on to ‘dirty policies’ (especially if they might give the new outsider some trading advantage) without insisting on some (possibly quite hefty) carbon penalties or commitments to reducing carbon emissions, improving energy efficiency and promoting clean energy. In effect, this would negate any notional advantage that Brexit might promise.

As the world becomes increasingly global, a non-EU UK would still have to innovate, design and manufacture with exporting to the EU in mind; the EU is our largest trading partner, and it provides the UK with trading conditions it might not be granted if it were outside the block. What’s more, we’d be bound by future EU rules, regulations and product standards but have no say on how they’re agreed.

Renewable energy, carbon emissions, energy supply and energy efficiency are global issues. As with all global issues, they can’t be solved by one country alone. The best way to solve them is through collaboration and international partnerships. Energy security is a good example. Even if the UK were outside the EU, it would still need to work with the likes of France, Belgium and the Netherlands on energy interconnectors and the security of its energy supplies, and these negotiations and any resulting agreements would most probably be under EU frameworks.

The UK needs to be a full part of Europe’s collective and partnership approaches — both leading and driving a competitive and sustainable market, not looking in like a child with its face pressed up against a sweet shop window. Leaving the EU would relegate the UK’s position in Europe from being one of the most important policymakers to a country with limited influence and ‘Hobson’s choice’ on EU decisions.

Both Europe and the UK face an enormous decarbonisation and energy-saving task. This will need investment on a huge scale — in infrastructure, innovation and new technology. Brexit would almost certainly create uncertainty — something the investor community gets very nervous about. In turn, this would almost certainly result in the UK having difficulty attracting the necessary investment, with investors favouring the more stable EU market instead.

The UK has certainly developed its strength in invention and innovation as a result of being in the EU, and has received support and exploitation opportunities from EU funding.

One area particularly relevant to the energy-efficiency sector is the Horizon 2020 programme. It’s the EU’s biggest ever research and innovation project, worth nearly €80 billion. A significant proportion of that money comes to the UK. Access to this funding could disappear if the UK votes to leave the EU.

Certainly in the short term, a Brexit decision would have a significant negative impact on both ‘green’ and sustainable investments in the UK and our ability to work collaboratively in supported research and development with EU partners. What’s more, it might restrict the movement of experts, skills and knowledge across borders, something we at the National Energy Foundation have experience of and benefit from through our multi-national staff, interns and volunteers.

The EU is far from perfect but it has delivered significant benefits to the UK in the energy sector, and has helped the UK face the big challenges of climate change, carbon reductions and energy efficiency in a collaborative, responsible and robust way. Leaving aside the mega-issues of the economy and the UK’s global influence, are we prepared to take what would be a leap in the dark and risk jeopardising all the good work that has been achieved through the EU to make the world a better place?

Kerry Mashford is the Chief Executive of the National Energy Foundation (NEF). The views expressed in this article are personal, and do not necessarily represent those of the NEF.

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