Stay in EU energy market after Brexit, say UK MPs

UK: The UK should seek to remain a member of the EU's internal energy market to ensure secure, clean and affordable energy, the energy department watchdog committee has argued.

by Paul Hatchwell 4 May 2017

The BEIS committee has called for greater clarity in the UK's energy policy ahead of Brexit negotiations

The Business, Energy and Industrial Strategy (BEIS) committee released a report on key objectives for the energy sectorin Brexit negotiations.

It argued there should be no tariffs or barriers to trade and that the UK should continue to influence rules for the internal energy market, rather becoming a "rule-taker" on the sidelines.

Until now, the UK has been a major driver of change on the modernisation of the energy market and on climate policy, keeping down the costs of action.

The MPs said the UK "should explore continued full membership of the technical institutions for developing the detailed rules of the internal energy market" including trading arrangements ensuring efficient operation of UK interconnectors. These are also important for rolling-out the smart grid.

Another major issue is the future of the EU emissions trading system (EU ETS). The committee said in theory the EU ETS provides the most cost-effective way to comply with the UK's 80% greenhouse gas reduction target for 2050.

But in practice, it "is performing poorly, due to a low target and domestic policies causing oversupply of EU ETS permits". It added that more needs to be done to reduce threat of carbon leakage, notably due to the carbon price floor.

Even so, it is unconvinced of any alternatives, particularly given the short period to develop them before Brexit in 2019.

There are also concerns that sudden exit from the EU ETS could be damaging to the London-dominated carbon market, and to the energy sector and heavy industries that have already invested in forward purchase of EU allowances.

As a result, the report recommends that "the government seeks to retain membership of the EU ETS until at least the end of Phase III in 2020".

But it goes further, recommending it seeks "to negotiate longer term membership of the EU ETS on the condition of commitment to future reform".

If adequate reforms are not achievable, it still advised against exit "until it has established clear and well-tested alternative approaches" to meet UK climate commitments.

The report concluded with a call for greater policy certainty on energy and climate policies including publication of the government's Clean Growth Plan and funding to support investor confidence and a warning against being distracted by Brexit.

It argued the government should "seek ongoing access to EU financial institutions and funds and continued collaboration on science and technology", or if not possible develop credible alternatives so the UK does not lose out.