Brexit white paper signals continuation in EU ETS

The government has signalled that it wants to remain in the EU Emissions Trading System (EU ETS) to maintain the efficient flow of energy along its interconnector links with the rest of Europe post-Brexit.

The move for continued participation in the ETS is outlined in the Brexit white paper, which was published yesterday (12 July).

The white paper’s chapter on electricity and gas states that continued participation in the internal energy market (IEM) would maintain the existing “efficient” trading relationships along the interconnectors, which are projected to supply an increasing share of UK energy needs as reliance grows on more intermittent sources of renewable supply.

To remain in the IEM, the UK would need to maintain a consistent approach to carbon pricing with the UK, which the white paper says could be delivered by remaining in the EU ETS. Another condition would be continued adherence to the common rule book on technical rules for electricity trading, such as the market coupling mechanism.

The white paper says the UK is also keen to explore cooperation on technical and regulatory energy arrangements, such as continued membership of the European Networks of Transmission System Operators for Electricity (ENTSO-E) and Gas (ENTSO-G).

But according to the white paper, the government does not believe that continued membership of the IEM would require binding the UK within the common rule book on wider environmental and climate change rules.

If the UK exits the IEM, the white paper says the government would have to explore how trade could continue over interconnectors without the automatic capacity allocation offered under existing arrangements.

The white paper also says that negotiators have made “good progress” on a legal provision in the UK’s EU withdrawal agreement to underpin the continuation of the Single Electricity Market (SEM) between Northern Ireland and Ireland. The government will work with the EU to ensure the future maintenance of the pan-Ireland SEM, according to the document.

Commenting on the Brexit white paper’s publication, Energy UK chief executive Lawrence Slade, said: “Access to an EU-wide market has helped keep bills down by enabling the most efficient use of energy resources – something that will become even more important in a world of variable generation. The EU Emission Trading System has been crucial in the drive to decarbonise across the whole economy, something in which the UK energy sector has led the way.

“As an essential product for consumers, businesses and the UK economy, energy must be a priority in the ongoing negotiations with the EU.

“So, whilst we welcome the broad commitments, there is a lot of detailed work and discussions required in a short space of time to achieve these goals and provide the clarity urgently needed on issues such as participation in the internal energy market and the EU ETS – and the continuation of the Single Energy Market between Northern Ireland and Ireland. The opacity around policy has already been having a direct impact on the energy sector.”