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The Government has not been clear what a ‘no deal’ Brexit would mean for the energy sector

The Government has not been clear what a ‘no deal’ Brexit would mean for the energy sector
4 min read

Significant questions remain about what a ‘no deal’ Brexit would mean for energy supplies in the UK, writes Lord Teverson

Back in January, the European Commission started publishing notices on how EU businesses and citizens could be affected by a ‘no deal’ Brexit and what steps they could take to prepare. In August, and rather late, the Government finally followed suit and started providing guidance for UK citizens.

The Government’s guidance covers topics as diverse as aviation safety and state aid, and several of the notes address the ‘no deal’ implications for the UK’s energy system and its efforts to combat climate change. My Committee thought they left some questions unanswered, so we asked Energy Minister Claire Perry to come to a meeting to give us some more detail.

I regret to say that we didn’t finish that meeting much more enlightened. Frankly, the Minister either didn’t have an answer, or was trying to brush some of the more complicated issues under the carpet. This was a disappointment not least because this is a minister that can show real passion for her policy domains.

One of the biggest energy-and-climate changes in a ‘no deal’ Brexit is the Government’s plan to replace the Emissions Trading Scheme (ETS), which is the EU’s main mechanism for reducing greenhouse gas emissions, with a UK carbon tax. It’s good news that the Government is planning to maintain a carbon price, but the Minister couldn’t answer our questions about what impact the UK’s withdrawal from the ETS would have on the EU’s carbon price. It’s likely that it would at least temporarily cause a dip, and since the ETS price is only just starting to creep up towards effective levels, and everyone on the planet – not just EU residents – is harmed if the EU is less effective at reducing its emissions, that’s not a small problem.

On top of that, the Government’s decision to set the tax at £16 per tonne of carbon hasn’t yet been publicly explained: it needs to be, because that number affects both the UK’s ability to reduce its emissions and the competitiveness of UK businesses. And when we pointed out that both the Scottish and Welsh Governments had objected strongly to the carbon tax, all we were told was that discussions had taken place – which was probably of scant comfort to the devolved administrations whose views had apparently been discounted. As yet, it’s unclear how – or whether – that conflict will be resolved.

The Minister was keen to tell us that she wanted to maintain a Single Electricity Market (SEM) on the island of Ireland even in a ‘no deal’ Brexit, which would help maintain secure energy supplies and significantly reduce consumer costs, but again, wasn’t able to describe any progress on securing that. In fact, she referred to legal and technical questions that make it challenging; and had no response to our concern that the Government’s plan to implement the ‘no deal’ carbon tax in Northern Ireland makes it harder to maintain the SEM.

But finally, and perhaps most fundamentally, the Government has not been able to tell us what a ‘no deal’ Brexit would mean for consumers’ energy costs. It’s likely that they would increase because energy trading would become less efficient once the UK is outside the EU’s system, but although my Committee has asked the Government three times for its assessment of what that means for energy prices – once in our report on Brexit: energy security, once in the debate on that report, and again in this evidence session – it has consistently failed to do so. As a result, we’re concerned that the Government may be making decisions about the future of the UK’s energy system without fully understanding their impact.

We have written to the Minister with these and other questions and will continue to examine the Government’s preparations for a ‘no deal’ Brexit for as long as necessary. In the meantime, all we’re getting from the Government on these key issues is a lot of heat and very little light.   

Lord Teverson is a Lib Dem peer and chair of the EU Energy and Environment Sub-Committee

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