The European Union (EU) has driven environmental policy across Europe since its inception in 1992. With the United Kingdom's (UK) referendum of withdrawal from the EU, though, how it responds in its energy and environmental legal and regulatory structure could affect not only the UK, but the European and even the global marketplace.
The UK's Energy Needs
The UK, under Article 50 of the Lisbon Treaty, has two years to negotiate the terms of its withdrawal. Initially, then, it will still operate under the treaties and laws in place with the EU. Imports accounted for 61% of the UK's overall energy consumption as of 2014, with 71% of its imported natural gas coming from the EU and Norway, in particular. The negotiations will thus need to take into account this current dependence and likely will include some adherence to the EU's standards currently in place. Options include a limited free trade agreement similar to the accord between Canada and the EU (known as the 'Canadian model'); individual-sectorial, bilateral agreements with the EU (known as the 'Swiss model'); or retaining membership as a non-member to the European Economic Area (known as the 'Norwegian model'). Because the UK is one of the largest suppliers of natural gas in the EU, it retains some negotiating power as it seeks the agreement most advantageous to its own energy and economic needs.
Impact on Climate and Environmental Concerns
The UK has to this point been one of the more ambitious proponents of energy regulation and climate change. Brexit means the role it can play in seeking to regulate carbon emissions on the continent and in the world will diminish. The British approach to emissions testing could include establishing its own independent system, in which it negotiates a tie to the EU system, or some hybrid approach. While the result will not come out immediately, the decisions and treaties put into place could greatly impact the EU energy policies that emerge and, as a result, global environmental policies.
The world's approach to environmental regulation currently faces a great deal of uncertainty. Political developments over the next two years will create ripples through the world's energy markets, in terms of costs of doing business and environmental impact the EU and UK create.
Originally published September 13, 2016
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