Authors: Caroline Kuzemko1 and Antony Froggatt2 

1. University of Warwick, 2. Chatham House

The last five years in UK politics have been tumultuous: Brexit and the COVID-19 pandemic have had, and will continue to have, huge impacts on the country’s economy and society as a whole. The Government also introduced new targets and associated legislation on climate change in June 2019, which, if successfully implemented will lead to a net zero carbon economy by 2050.

This policy brief highlights the impact that Brexit could have on the ability for the UK to meet its net zero targets.  Focusing on key areas of climate change, UK Emissions Trading Scheme (UK ETS), trade, energy and interconnectors the paper highlights areas that require urgent attention.

Key recommendations

The Trade & Cooperation Agreement (TCA) provisions on the UK’s climate and energy policy are significantly less binding or specific than the rules that applied when in the EU. While the TCA creates a ‘policy floor’ for the UK, its enforcement internationally is questionable. The UK Government must ensure the rigor and scope of domestic agencies balance this.

Establishment of the UK emissions trading scheme (ETS) has highlighted problems associated with protracted TCA negotiations. The current system is temporary, so the eventual establishment of a link to the EU ETS remains a possibility. In its first auctions in May 2021, prices in the UK‘s Emissions Trading System reached £50 per tonne, but questions remain about the efficacy of this interim system. The Government needs to more clearly defined the scope of the system if it is to support the whole economy ‘net zero’ objective.

It is impossible to unplug the UK from the EU’s energy market. The UK government and the EU have until 30 June 2026 to decide the new terms and conditions of their energy relationship. In the meantime trading has reverted to ‘explicit’ rules with potential implications for electricity pricing, system balancing and interconnection.

Being outside of ENTSO-E and ENTSO-G, the Agency for the Co-operation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER), is to the detriment of UK energy actors. Relevant organisations and government departments will need to spend considerable time and effort trying to influence future EU choices that affect them now they are outside of the EU.

The UK civil service has had to dedicate much capacity to ‘doing’ Brexit. There may be opportunity costs of doing so at this important time for climate change.
Access the briefing paper in full here