The UK’s Secretary of State for Energy and Climate Change, Amber Rudd, recently argued that energy bills in the UK would soar by £500 million a year if the UK left the EU. This figure was strongly disputed by leave campaigners, amongst whom is her Minister of State at the Department for Energy and Climate Change, Andrea Leadsom.
At the heart of this dispute about energy costs is the collective response over many years by the EU to improve the quality of the environment, with particular focus on the challenge posed by human-induced climate change, and to shape energy policy. This has involved extensive interventions by the EU with Member States with the aim of helping them develop a system of clean, efficient energy to provide power, to heat and cool homes and businesses, and for mobility.
These interventions mean that UK energy and climate change policies are closely entwined with EU-wide regulations. The recent dispute by the UK Ministers is whether these regulations are adding unnecessary costs to UK households and businesses: whether directly, through taxes; or indirectly, through the additional regulatory burden on businesses and the public sector.
This chapter explores these claims and counterclaims by the ‘Leave’ and ‘Remain’ campaigners. It seeks to answer the question of whether the EU is important for addressing the challenge of climate change, which is determined largely by national and international energy (and land use) policies; and the extent to which this imposes a burden on the UK that could be avoided by the UK leaving the EU.
What is the Issue?
EU Directives, transposed by the UK Government into UK legislation, affect all aspects of the way in which we produce and use energy, from the UK’s building regulations to air quality standards for power stations. This outcome stems from the key underpinning treaties of the EU to which the UK has signed up, such as the Maastricht (Treaty of European Union) and Rome (Treaty of the Functioning of the European Union) Treaties as amended by the Lisbon Treaty. Article 3 of the Treaty of the European Union states the objectives of the EU and defines the principle for sustainable development for Europe “…based on economic growth and price stability, a competitive social market economy aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment”.
The Treaty for the Function of the European Union goes further and states that the Union has an objective “to deal with regional or worldwide environmental problems, and in particular combating climate change”. It requires the EU to preserve and improve the environment. This Treaty also sets out the framework for EU energy policy, which is framed explicitly around the need to integrate these environmental considerations. The specific objectives for the EU energy policy are to: ensure the functioning of the energy market; ensure security of energy supply in the Union; promote energy network interconnection; and “promote energy efficiency and energy saving and the development of new and renewable forms of energy”. In other words, the EU co- develops policy on energy and climate change with Member States.
However, apart from certain specific circumstances, the EU cannot adopt any measure that affects a Member State’s right to determine the conditions for exploiting its energy resources; its choice between different energy sources; or the general structure of a Member State’s energy supply.
Why is this important?
These entwined treaties mean that UK energy policy is set within a wider framework that aims to support European objectives for delivering a clean, efficient energy system. At the heart of this framework is an obligation to improve the environment – whether involving considerations of local air quality or worldwide climate change.
This wider EU framework has driven extensive changes in the UK energy system. For example, the most polluting power stations have been forced to fit pollution abatement measures to reduce their local air pollution or face mandatory closure. This has driven the closure of many old coal-fired power stations in recent years, including Cockenzie Power Station in East Lothian.
Renewable energy targets for Member States have driven the expansion of renewable energy in the UK. The UK agreed with the EU to meet a target of 15% of total energy needs (including electricity, heat and transport energy) from renewable sources by 2020. Until this point, the UK had been a laggard in the EU in developing renewable sources of energy. This target has driven the extensive development of regulatory frameworks in the UK to increase the role of renewables, with some success – particularly in renewable electricity – but at the cost of substantial public subsidies paid through consumer bills.
Meanwhile, EU rules on vehicle efficiencies have driven global vehicle manufacturers to meet successively enhanced efficiency standards for petrol and diesel engine vehicles, whilst also encouraging the use of sustainable biofuels. And EU frameworks have driven improvement in efficiencies of “white goods” – domestic appliances such as washing machines and fridges - by forcing consistent energy labels to be used across the EU. This is calculated to save households over 400 Euros per year.
What special relevance does this issue have for Scotland?
Since devolution, Scotland has embraced change in the production and use of its energy by building on the UK regulatory frameworks that emerged to meet EU climate and energy obligations. Scotland has expanded renewable sources of electricity from around 10% to over 50% of its electricity consumption over the past 15 years, with the aim of meeting 100% of its net demand by 2020. At the same time, housing across Scotland has been made much more efficient through targeted application of energy efficiency measures such as insulation. This has only been possible because of the UK renewable electricity and energy efficiency targets, with associated public subsidies, which support Scottish ambitions.
Scotland aims to be a world-leader in meeting the challenge of climate change by developing a clean, efficient energy system. Its Climate Change Act (2009) sets a framework for radical changes in the production and use of energy (and land) over the next 35 years.
When this Scottish ambition aligned closely with that of the UK Government, Scotland could use the UK frameworks and financial support mechanisms to support its ambitions. However, over the past year, the current UK Government has undertaken an ‘energy policy reset’. This has put the focus on the short-term affordability of energy over environmental or efficiency considerations, coupled with a desire to use gas and nuclear for electricity production and gas for heating. This energy reset has hit business and investor confidence in the UK’s commitment to clean energy. It also makes it much more difficult for Scotland to deliver its own ambitions for a clean, efficient energy system. In this situation, the role of the EU in co- developing energy and climate policy with Member States provides a powerful counterweight to the UK Government’s current approach to energy policy.
What are the arguments put forward by the ‘Remain’ campaigners?
The key arguments put forward by the pro-EU campaigners revolve around:
- The importance of the emerging EU-wide energy market which, through trade liberalisation and competition, is expected to bring down energy prices for consumers.
- The power exerted by the EU bloc of countries on global consumer product manufacturers – whether of white goods or vehicles – and associated energy efficiency measures in Europe, such as energy labeling, which leads to substantial lifetime cost savings to vehicle owners and householders.
- The role of the EU in ensuring energy security for all Member States, through the collective response to energy suppliers, such as Russia, which seeks to use and price its supply of gas for maximum political impact.
- The key role of the EU in driving the UK to clean up its energy system, from forcing air polluting power stations to close, to developing an array of renewable energy sources for electricity, heating and transport.
What are the arguments put forward by the ‘Leave’ campaigners?
The key arguments put forward by the anti-EU campaigners regarding energy and climate change issues revolve around:
- The additional cost imposed by the various energy regulations co- developed by the EU, such as requiring the UK to increase the penetration of renewable sources of energy, which requires public subsidies; or imposing energy efficiency regulations such as energy labeling, which they argue should be left up to the market.
- The misplaced focus by the EU on climate change and the environment as a key factor in government policy on energy (or indeed in other policy areas): for example, various ‘Leave’ campaigners have suggested we should resort to the ‘cheapest form of energy, which is coal’.
- The loss of sovereignty associated with having energy and climate policy co-developed by the EU, thereby taking it out of sole UK jurisdiction to determine our own energy future.
What is the balance of arguments?
There is little doubt that the EU has played a key role over the last two decades in the development of energy and climate policy in the UK. Renewables targets, coupled with air quality standards for fossil fuel power stations, set at EU level have driven major changes in the UK’s power sector. Air pollution and greenhouse gas emissions targets, through for example the EU-wide Emissions Trading Scheme, have forced environmental considerations onto company boards of industrial facilities across the UK. Products from vehicles to white goods have become dramatically more efficient as a result of EU regulations. And energy systems, from electricity to gas networks, are becoming more interconnected between Member States.
Whether these changes in the UK’s energy system are seen as positive, which will generally be the case for ‘Remain’ campaigners, or negative, which will generally be the case of ‘Leave’ campaigners, typically depends on wider political views about the relative importance of climate change and the environment as a priority for government action; and the extent to which governments should intervene or allow the free market to operate. In other words, ‘Leave’ campaigners are more likely to view government intervention negatively, because they believe it imposes unnecessary costs on households and businesses to deliver outcomes that a functioning market system should deliver; and to see climate change and environmental improvement as of lesser importance compared with economic factors.
A key assumption of the ‘Leave’ campaigners appears to be that if the UK leaves the European Union then all the UK’s obligations to renewable energy and energy efficiency standards will be redundant. However, the UK has also signed up to United Nations commitments under the UN Framework Convention on Climate Change (UNFCCC), most recently by signing the Paris Agreement in December 2015. Meeting the obligations of this Agreement will require the UK to develop a clean, efficient energy system by around mid- century, regardless of whether the UK is part of the EU or not.
The Paris Agreement is more onerous than the energy and climate-related obligations by the EU on the UK. In other words, the UK will also need to revoke these global climate agreements to which it has signed up in order to avoid imposing radical changes in its energy system over the next 35 years. And, should the UK both leave the EU and renege on its UN commitments, but still wish for preferential access to the EU single market through an EFTA agreement, it will still need to abide by the EU acquis communautaire: the UK will still need to abide by rules and regulations governing the single EU market, including many environmental and energy rules, but with less influence over their content.
In conclusion, the EU has played a key role over the past two decades in helping the UK to address environmental issues and efficiency of energy use, ranging from local air pollution to climate change. However, leaving the EU will not allow the UK to unpick these changes without also reneging on global UN agreements. And the UK will still need to abide by many energy and environmental regulations to enable preferential access to the EU single market.
Andy Kerr is Executive Director of the Edinburgh Centre for Carbon Innovation at the University of Edinburgh.