Interesting times

Love Energy Savings sums up some thoughts on Brexit and the energy sector

Before the votes were cast, many in the energy sector raised concerns that a Brexit would have a negative effect on the industry. Now we have chosen to leave, uncertainty about the long-term implications is understandably rife.

The UK had previously been a rather loud voice in Brussels when it came to both the liberalisation of the energy market and climate change. Both of these need to be looked at separately.

Firstly, the energy market. In the immediate aftermath of the Brexit, a decline in exchange rates caused gas prices to rise, causing many to immediately jump to the conclusion that leaving the EU was a ‘bad move’. However, as the dust settles, things have started to calm down.

One of the biggest questions that will face Brexit negotiators is whether the UK will remain in the internal energy market and what an energy trading relationship will look like.

If the UK wants to continue to have full access to the European single energy market, we will also have to comply with the rules and regulations other members adhere to as part of the access agreement, similar to Norway, however we will lack negotiating powers.

If we chose to work outside this market, it would begin a hugely complex process and result in uncertainty harming investment in the long-term. Having said that, in terms of prices, ‘energy’ is not currently subject to a tariff and the World Trade Organisation (WTO) have a zero-cap on energy trade tariffs, suggesting that the EU would not be able to impose an explicit tax on energy exports – which would be good news. However, that is not to say that the EU would not impose ‘transmission’ charges, for example.

Moving onto the effect a Brexit will have on our climate change commitments. The fact that we have a UK Climate Change Act and have just recently passed the fifth carbon budget demonstrates that our motivation to de-carbonise is not one imposed by the EU, but one which the UK seeks to pursue regardless of whether we are an EU member or not. In the EU, we were a louder voice than many for pushing climate change policy. Without us, support for green legislation may suffer.

A potential problem for the EU is that the UK currently contributes more than the member state average when it comes to the EU’s collective target. This means that when the UK leaves, other members will have to make more of an effort to reduce their emissions.

One the other hand, the main issue the UK could potentially experience is a reduction in investment. Uncertainty always hinders confidence but, by leaving the EU, we will also have reduced access to the European Investment Bank. A lack of funding may delay, or even put an end to, any potential renewable energy plant plans or fracking opportunities which would then reduce our ability to generate green power domestically.

Therefore, it seems that our best bet is to remain part of the single market, negotiating favourable supply terms while continuing to lobby for progressive climate change policies. However, with known climate-change sceptic, David Davis, leading UK Brexit negotiations, it will be interesting to see how the next five, ten and 20 years pan out.

Love Energy Savings
Love Energy Savings is one of the UK’s leading home and business energy comparison websites, specialising in helping people find cheaper energy tariffs. It is their mission to help businesses cut back on their spending and save the environment at the same time.

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