Brexit: 94 Unanswered Questions on Climate and Energy Policy

By Simon Evans

What does the UK’s shock vote to leave the European Union mean for energy and climate change?

Speaking simultaneously on Wednesday morning at separate events in London, Amber Rudd, secretary of state for energy and climate change and Andrea Leadsom, energy minister, both sought to offer reassurances that UK energy and climate commitments would continue.

What does the UK’s shock vote to leave the European Union mean for energy and climate change? Abdullah Bin Sahl / Flickr

Rudd said, in unscripted comments added to her planned speech:

“We made a clear commitment to acting on climate change in our manifesto last year. That will continue.”

She confirmed commitments to the UK Climate Change Act, a phaseout of unabated coal, thecapacity market to secure electricity supplies and support for offshore wind and new nuclear. Leadsom also said the referendum would not affect climate and energy policy.

However, Rudd conceded that the referendum result had made the path to climate action harder, raising a host of questions. Adding to the air of uncertainty, there is now the prospect of a new Conservative prime minister being in place by September, as well as the possibility of a snap general election.

Carbon Brief has assembled a lengthy and probably incomplete, list of post-referendum questions for climate and energy policy.

Questions Remain

In the days following the referendum, a range of questions and possible answers have already been offered on the climate and energy implications of the vote.

Policy Exchange looks at impacts across environment policy. Business Green has 12 unanswered questions for the green economy, Climate Home has six questions for UK and EU climate ambition and another three questions on whether Brexit means a climate policy “bonfire.” Meanwhile, the Energy and Climate Intelligence Unit has five energy and climate predictions.

Elsewhere, consultancy Aurora Energy Research, the Economist Intelligence Unit and Nick Butler for the Financial Times look at what it means for energy and climate, with a focus on markets.

The expected approval this week of the UK’s fifth carbon budget for 2028-2032 would provide a key reference point for future policy. Still, uncertainty is sure to continue for months, if not years.

Here are some of the many unanswered questions.

The Paris Agreement on Climate Change:

• Will the UK ratify it while still an EU member state, allowing the EU to ratify it, too?

• If the UK and EU delay ratification, (when) will the agreement enter force?

• Will the UK be able to retain a strong voice in international climate talks, outside of Europe?

• Which negotiating bloc would it join?

• What would UK and EU nationally determined contributions to the agreement look like?

• Will the UK government set the Paris goal of net zero emissions into UK law, as promisedby Leave supporter and energy minister Andrea Leadsom?

• Will UK spending on international climate finance continue its current, rising trajectory?

• Or will the spending be pared back as part of a move to end the UK commitment to spend 0.7 percent of national income on international aid?

UK Policy:

• Is the cross-party commitment to UK climate ambition assured, as Rudd claimed this week?

• Will the next prime minister believe in continued climate action?

• Are doubts over the climate views of leading contender, Boris Johnson, unfounded?

• What are the views of other contenders, such as home secretary Theresa May or work and pensions secretary Stephen Crabb?

• How long will Rudd remain secretary of state for energy and climate change and Leadsom as energy minister, with both tipped for promotion if their side won the referendum?

• Who will replace them if they are moved on?

• Will the Department of Energy and Climate Change continue to exist under a new government?

UK Climate Change Act:

• The indications are that the government will put legislation on the fifth carbon budget before parliament on June 30, but Carbon Brief understands that parliamentary process means it may not pass into law before the end-of-June legal deadline. Will that legislation be in line with the advice of the Committee on Climate Change (CCC) to cut emissions by 57 percent by 2032, against 1990 levels?

• Will carbon accounting rules be amended, as per CCC advice, so that all UK emissions are counted towards carbon budget compliance?

• Will the government still publish a UK carbon plan by the end of 2016, on how the whole economy can decarbonize in line with the fourth and fifth carbon budgets for 2023-2032?

• If this plan is delayed or abandoned, how long can stasis continue without jeopardizing UK carbon targets?

• Would a delay or abandonment be subject to legal challenge, given the Act requires a planto be presented “as soon as is reasonably practicable” after the carbon budget is set?

• Does the act itself retain the overwhelming support of parliament, given all but six MPs approved it in 2008?

• Does it count for anything that Andrea Leadsom—Leave supporter, energy minister and potential Conservative leadership candidate—has said both before and after the referendum (see above) that the UK’s climate commitment would be secure after Brexit?

• Or does the rise of climate sceptic Eurosceptics put the act in danger?

Energy Bills:

• What price premium on loans will be demanded by investors in UK energy infrastructure to cover the costs of political uncertainty? Rudd was unable to offer a direct answer to this “depressing” question from Carbon Brief.

• How much will this add to the costs of building new electricity generating capacity?

• Will any impacts vary by technology type, potentially favoring lower- or higher-carbon sources of power?

• How much will the price of imported energy increase as a result of the falling pound?

• How quickly will exchange-rate driven increases filter through to pump prices and energy bills, via the fuel used to heat homes and generate electricity?

• Is it realistic to expect any new government to mitigate this impact through a promised end to the 5 percent rate of VAT on energy, given the £2bn a year it brings the exchequer?

• How will steel and other energy-intensive industries cope with the expectation of higher energy prices?

• For instance, will the hoped-for Tata Steel rescue still go ahead?

• Will the government’s Levy Control Framework, designed to limit the impact of low-carbon support on energy bills, remain in place?

• Could a new government seek to scrap the UK carbon price floor as a means to reduce energy bills for homes, businesses and industry, even though it brings in more than £1.5bn a year for the Treasury?

• How would this be squared with consequential increases in the level of required support for low-carbon sources of power?

• Will rising UK wholesale electricity prices attract investment in new generating capacity or will the rising cost of imported fuel outweigh any benefit?

• Could a post-Brexit cut in tariffs on Chinese solar module imports offset the impact of a falling pound?

• Will windfarms get more expensive in the UK, as sterling’s fall pushes up the price of imported steel or turbine parts?

UK Energy Markets:

• Will Brexit lead to weaker economic growth and reduced energy use, as expected?

• Will this ease pressure on electricity supplies and reduce UK emissions?

• How will the new administration approach fuel duty, which has been repeatedly frozen by current Chancellor George Osborne?

• Is there still a business case for new interconnectors if the UK leaves the EU internal energy market and how will that case be affected by currency swings and changes in carbon pricing in the UK, France or other countries?

• How will energy firms operating in the UK and elsewhere fare if the value of sterling remains depressed, affecting relative earnings denominated in pounds, euros and dollars?

• Will the City of London still remain a leading lender to oil and coal projects around the world, as well as a center for carbon trading?

• Rudd has this week reiterated plans to phase out unabated coal, but when will the consultation on how to achieve this be published and what policy levers will it propose?

• Could the fall in the pound revive the UK coal-mining industry, which is currently embroiled in contentious efforts to expand despite the UK’s coal phaseout plans?

• Will the new government heed climate-sceptic calls to back out of the EU Industrial Emissions Directive, blamed for the closure of aging coal-fired power stations?

• Will the government invoke provisions of the 2013 Energy Act, allowing it to set a 2030 decarbonization target for the power sector, once it has set the fifth carbon budget?

• How will support for shale gas exploration be affected by changes in government personnel?

• How will the nascent fracking industry fare with a weaker economy and pound?

• When will the government publish the CCC’s report on fracking and UK carbon budgets?

• Will North Sea industry benefit from currency movements as costs become relatively cheaper or will restrictions on freedom of labor movement pose greater challenges?

Low-Carbon Energy:

• Will the UK now abandon efforts to meet its EU 2020 renewable energy targets, which it has in any case been widely expected to miss?

• Could the UK still be fined by the European Court of Justice if Brexit is slow and the UK is still a member of the EU when the target bites in 2020?

• Is there cross-government backing for new renewable heat and transport subsidies?

• Will the UK continue to support electric vehicle uptake?

• When will the government set out the details and budget of the next auction for low-carbon electricity subsidies, supposedly due to take place later this year?

• Will this year’s Autumn Statement set out post-2020 arrangements for low-carbon support under the Levy Control Framework, as suggested this week by Leadsom?

• Will there be support for low-carbon technologies other than offshore wind, which has received the clearest government backing but is more costly than solar and onshore wind?

• If the government is opposed to support for onshore wind, even in the form of so-calledsubsidy-free contracts for difference, will it follow the Competition and Markets Authority‘s recent request to produce an assessment of the negative impact on consumer bills?

• Rudd has given post-referendum assurances to French firm EDF over the Hinkley C new nuclear plant, but can the scheme hope to retain the high-level political support it has enjoyed from David Cameron, George Osborne and the French government?

• Does Brexit render Austria’s legal challenge to the Hinkley C scheme irrelevant?

• Would a UK exit from the EU free the UK’s hand to subsidize further new nuclear reactors without the need to seek state aid approval from the European Commission?

• Will the new government be as keen on small modular nuclear reactors as the current one?

• After Siemens’ decision to freeze its UK wind power plans and with UK access to the EU’s single market in doubt, can the UK attract new renewable manufacturing investments?

• What will a weaker pound mean for the cost of burning imported biomass at power stations including Drax, formerly the UK’s largest coal plant?

• Does the prospect of Brexit mean the UK can award further biomass subsidies to Drax, before the ongoing EU state aid investigation into the planned support has concluded?

• When will the government publish follow-up research it commissioned on the climate impacts of burning wood, mostly imported from north America, to generate electricity?

• Could a new administration reverse the current government’s skepticism over financial support for carbon capture and storage or tidal energy?

EU Policy:

• How will Brexit affect the balance of power between EU member states on the European Council, given the UK has been part of a progressive alliance on climate and energy?

• Could Brexit strengthen Germany’s hand, with its backing for more interventionist and target-led approaches such as binding energy efficiency and renewable energy targets?

• Or will Brexit give eastern European countries more leverage as they attempt to limit EU climate ambition?

• Will the UK relinquish its EU presidency, scheduled for the second half of 2017?

• Will the EU continue to negotiate its effort-sharing decision on member state climate targets for 2030, despite the prospect of Brexit?

• If the EU’s 2030 target is recast with no UK participation, will it keep its headline goal of a 40 percent emissions reduction on 1990 levels or will it choose a new goal for 2030 emissions, either by simply removing the UK contribution or formally renegotiating country shares?

• Will the UK remain part of the EU Emissions Trading System (EU ETS)? (Non-EU members including Norway are part of the scheme).

• Are currently-proposed EU ETS reforms still considered sufficient to cope with market shocks, such as that experienced in the wake of the UK vote?

• Does the fall in EU ETS prices of more than 20 percent in a week suggest further reform, perhaps an EU-wide floor price, is necessary to maintain decarbonization momentum?

• Who will lead the reform process now that British MEP Iain Duncan has resigned from the role of European Parliament rapporteur?

• Will the UK remain part of the EU Energy Union, with its plans for closer coupling between European energy markets?

• Would current or future energy infrastructure investments, including electricityinterconnectors to the continent, automatically lose EU funding after Brexit? (The EU isinvesting more than €2bn in UK energy projects, more than any other member state).

• Will the UK remain subject to EU product standards, including on the energy efficiency of vehicles and household goods?

Scotland and Northern Ireland:

• If Brexit triggers a successful Scottish independence referendum, what would become of UK climate policy and how would UK climate targets be divided? (Scotland already has its own climate goals, but the rest of the UK does not).

• Would consumers in the rest of the UK be willing to continue paying for a planned expansion of renewable energy in Scotland?

• Could the rest of the UK meet its climate targets without Scottish renewables?

• Would Scotland be willing to shoulder the cost of North Sea oil and gas decommissioning, which being funded via tax breaks on the industry?

• Are moves to unite Northern Ireland with the Irish republic likely to gain any traction and what would that mean for UK, Irish and EU climate pledges?

Other Issues:

• What are the prospects for a third runway at Heathrow, given the committed opposition of Boris Johnson, a leading candidate to become prime minister?

• Does Brexit ease its path, given the UK’s long-running breach of EU air pollution rules has been seen as a barrier to approval or will its demise enable the UK to meet suggested targets for aviation emissions more easily?

• How will the UK respond to this week’s ruling that it breached EU air pollution rules in relation to the coal plant at Aberthaw in south Wales?

• Will the National Infrastructure Commission, seen as a personal project of current Chancellor George Osborne, still be able to carve out the significant policy role it had been poised to secure?

• Will a new government reverse the decision to scrap rules for zero carbon homes?

• How will it approach planning law, in particular the major pieces of UK environmental legislation that originate in EU law?

• If these EU planning rules are scrapped, will it become easier to build new energy infrastructure including wind farms, fracking sites or marine renewables?

• Will a new government continue to respect EU law during any transitional period, as called for by some lawyers?

Update 6/29/16—The question on the fifth carbon budget was amended. It previously said, in line with earlier press reports, that the fifth carbon budget would pass in to law on June 30, meeting the legal deadline. However, Carbon Brief now understands that the parliamentary process will not be completed on June 30.

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