The outcome of the EU referendum on 23 June has given rise to much uncertainty for many businesses, including in the low carbon sector.
The outcome of the EU referendum on 23 June has given rise to much uncertainty for many businesses, including in the low carbon sector. This is understandable given that many laws on climate change, energy and the environment have been shaped by the UK’s membership of the EU.
Membership of the EU has also, on balance, provided benefits to UK businesses when it comes to environmental laws. Whilst not perfect, EU environmental rules have provided a more level playing field with competitor businesses in the EU who are all subject to the same rules. They have also helped drive environmental innovation by introducing standards such as on energy efficiency and sustainable wood sourcing applicable across the single market and its 500 million consumers.
So what does the Brexit vote mean for the environment and the low carbon economy? Some observers fear that the vote to leave the EU will result in a significant dilution of measures to protect the environment and support the growth of the low carbon economy. Yet, this doesn’t have to and mustn’t be the case.
An ambitious climate policy is now essential
It’s important to remember first of all that an argument repeatedly made by the Leave campaign was that the UK needed to look beyond the EU and instead aspire to be a relevant and competitive player on the global stage. If that’s indeed the case, an ambitious policy on tackling climate change both at home and abroad will be essential.
The Paris climate change agreement reached by 195 countries in December last year has shown unprecedented global political will for tackling climate change. This has been accompanied by a significant surge in low carbon investments globally, with over $285bn invested in clean energy in 2015 according to Bloomberg New Energy Finance. This surge in investment has been driven by major economies as diverse as China, India, South Africa and the United States. If the UK wants to be a competitive and relevant global player, it will have to follow suit. It has been encouraging in this regard to see the government recently agreeing to the fifth carbon budget, which requires the UK to cut its greenhouse gas emissions by at least 57% by 2030.
A ‘country that works for everyone’
Second, in the aftermath of the Brexit vote, much was said about the need to address the feeling of economic disenfranchisement in parts of the UK, especially the North of England. Whilst not a silver bullet, the UK’s growing low carbon and renewable energy economy, which already has a turnover in excess of £46bn and employs over 238,000 people directly according to the ONS, could be a source of important opportunity and help deliver Theresa May’s vision of “a country that works for everyone”. Much low carbon investment in the UK is taking place in the North of England, such as the investment by Siemens in offshore wind manufacturing in Hull which will skill up and employ 1,000 people directly. This could grow in the future with supportive national and local policy.
A priority for Theresa May’s government here should be to rapidly develop its Emissions Reduction Plan by the end of 2016. This should set out how the UK will attract the private sector investment in energy efficiency, low carbon heat, power and transport technologies that is urgently needed to meet the UK’s climate targets affordably and grow the supply chain.
As highlighted by the recent Climate Change Risk Assessment report from the Committee on Climate Change, it is also in the UK’s interest to put together a clear strategy for its natural environment. The UK’s economy and society heavily depend on the state of the natural environment from which we derive valuable services such as clean air, clean water, food and carbon storage. But improving the state of the environment is also critical to help the UK be better prepared to cope with the impacts of climate change, as shown for example by the role that coastal wetlands and good quality soil can play in reducing risks from flooding. Theresa May’s administration should therefore ensure that it honours the previous government’s pledge to develop a 25 year plan to improve the state of the UK’s environment.
Being pragmatic over Brexit
Finally, the government will have to be pragmatic as to how it deals with Brexit when it comes to the environment. There are areas of EU environmental, climate and energy policy where it will make environmental and economic sense for the UK to remain closely associated with EU initiatives. For instance, the EU is currently developing its Circular Economy Package, the aim of which is to make the economy more resource efficient and competitive. This is likely going to include design standards that will require products to be easier to repair and dismantle and which will apply across the single market. If UK businesses want to keep on selling goods and services to this market, they will need to comply with these standards. The more the UK can work closely with the EU on these, the better.
Likewise, if the UK and EU are to move to a low carbon energy system in a way that is cost-effective, this will require greater interconnection between national power grids, collaboration on innovation and joint initiatives such as on carbon emissions trading. Again, maintaining a relationship that allows the UK to work closely with the EU on such issues would make good business and environmental sense.
The Brexit vote came as a surprise to many in the low carbon sector but the business case for an ambitious domestic environmental policy and pragmatic collaboration with the EU is stronger than ever. Theresa May’s government should take note.
Nick Molho is executive director of the Aldersgate Group