As the UK leaves the EU and the formal negotiations on the future relationship begins, this workshop will discuss any immediate changes and review the short and medium term impacts of Brexit on the energy sector. 

The workshop will look to cover:

• The implications for UK business and system operations of the UK leaving the Internal Energy Market.
• Current and future investment trends in the UK energy system.
• The trade of electricity and gas over inter-connectors.
• The need for the development of a new EU-UK operational framework mechanism.
• The UK's EU withdrawal agreement and the operation of the Single Electricity Market (SEM) across Ireland. 
• Options for the UK outside of the EU Emissions Trading System (ETS) and the impact on carbon prices.

This workshop is part of a programme funded by the UK Energy Research Centre on Brexit and the UK’s Net Zero Energy Policy being run by the University of Warwick and Chatham House.

Attendance at this event is by invitation only.

This meeting formed part of a programme of work which investigates the role of negative emissions technologies (NETs) in achieving the Paris Agreement climate targets. Previous meetings held in London and Brussels have looked at integrating negative emissions into EU policy-making, the implications and degree to which NETs, and in particular bioenergy with carbon capture storage (BECCS), can be an effective climate mitigation tool. This meeting focused on the possible deployment pathways of NETs and alternatives to BECCS for the US in particular, in the context of geographical constraints and socioenvironmental implications, the role of the private sector, and appropriate governance and finance mechanisms. 

COVID-19 is a sharp reminder of why trade and climate policy matters. How can governments maintain access to critical goods and services, and ensure global supply chains function in times of crisis?

The timing of many trade negotiations is now increasingly uncertain, as are the UK’s plans to host COP26 in November. Policy work continues, however, and the EU has released its draft negotiating text for the new UK-EU trade deal, which includes a sub-chapter specifically devoted to climate. 

This is a timely reminder both of the pressing need for the UK to integrate its trade and climate policymaking and to use the current crisis-induced breathing space in international negotiations - however limited - to catch up on both strategy and priorities on this critical policy intersection.

The UK government has moved fast to reset its external trade relations post-Brexit. In the past month it formally launched bilateral negotiations with the EU and took up a seat at the World Trade Organization (WTO) as an independent member. Until the COVID-19 crisis hit, negotiations were also poised to start with the US.

The UK is also in the climate spotlight as host of COP26, the most important international climate negotiation since Paris in 2015, which presents a vital opportunity for the government to show leadership by aligning its trade agenda with its climate and sustainability commitments in bold new ways.

Not just an empty aspiration

This would send a signal that ‘Global Britain’ is not just an empty aspiration, but a concrete commitment to lead.

Not only is concerted action on the climate crisis a central priority for UK citizens, a growing and increasingly vocal group of UK businesses committed to decarbonization are calling on the government to secure a more transparent and predictable international market place that supports climate action by business.

With COP26, the UK has a unique responsibility to push governments to ratchet up ambition in the national contributions to climate action – and to promote coherence between climate ambition and wider economic policymaking, including on trade. If Britain really wants to lead, here are some concrete actions it should take.

At the national level, the UK can pioneer new ways to put environmental sustainability – and climate action in particular - at the heart of its trade agenda. Achieving the government’s ambitious Clean Growth Strategy - which seeks to make the UK the global leader in a range of industries including electric cars and offshore wind – should be a central objective of UK trade policy.

The UK should re-orient trade policy frameworks to incentivize the shift toward a more circular and net zero global economy. And all elements of UK trade policy could be assessed against environmental objectives - for example, their contribution to phasing out fossil fuels, helping to reverse overexploitation of natural resources, and support for sustainable agriculture and biodiversity.

In its bilateral and regional trade negotiations, the UK can and should advance its environment, climate and trade goals in tandem, and implementation of the Paris Agreement must be a core objective of the UK trade strategy.

A core issue for the UK is how to ensure that efforts to decarbonise the economy are not undercut by imports from high-carbon producers. Here, a ‘border carbon adjustment (BCA)’ - effectively a tax on the climate pollution of imports - would support UK climate goals. The EU draft negotiating text released yesterday put the issue of BCAs front and centre, making crystal clear that the intersection of climate, environment and trade policy goals will be a central issue for UK-EU trade negotiations.

Even with the United States, a trade deal can and should still be seized as a way to incentivize the shift toward a net zero and more circular economy. At the multilateral level, as a new independent WTO member, the UK has an opportunity to help build a forward-looking climate and trade agenda.

The UK could help foster dialogue, research and action on a cluster of ‘climate and trade’ issues that warrant more focused attention at the WTO. These include the design of carbon pricing policies at the border that are transparent, fair and support a just transition; proposals for a climate waiver for WTO rules; and identification of ways multilateral trade cooperation could promote a zero carbon and more circular global economy.  

To help nudge multilateral discussion along, the UK could also ask to join a critical ‘path finder’ effort by six governments, led by New Zealand, to pursue an agreement on climate change, trade and sustainability (ACCTS). This group aims to find ways forward on three central trade and climate issues: removing fossil fuel subsidies, climate-related labelling, and promoting trade in climate-friendly goods and services.

At present, the complex challenges at the intersection of climate, trade and development policy are too often used to defer or side-step issues deemed ‘too hard’ or ‘too sensitive’ to tackle. The UK could help here by working to ensure multilateral climate and trade initiatives share adjustment burdens, recognise the historical responsibility of developed countries, and do not unfairly disadvantage developing countries - especially the least developed.

Many developing countries are keen to promote climate-friendly exports as part of wider export diversification strategies  and want to reap greater returns from greener global value chains. Further, small island states and least-developed countries – many of which are Commonwealth members – that are especially vulnerable to the impacts of climate change and natural disasters, need support to adapt in the face of trade shocks and to build climate-resilient, trade-related infrastructure and export sectors.

As an immediate next step, the UK should actively support the growing number of WTO members in favour of a WTO Ministerial Statement on environmental sustainability and trade. It should work with its key trading partners in the Commonwealth and beyond to ensure the agenda is inclusive, supports achievement of the UN Sustainable Development Goals (SDGs) and helps developing countries benefit from a more environmentally sustainable global economy.

As the UK prepares to host COP26, negotiates deals with the EU and US, and prepares for its first WTO Ministerial meeting as an independent member, it must show it can lead the way nationally, bilaterally, and multilaterally. And to ensure the government acts, greater engagement from the UK’s business, civil society and research sectors is critical – we need all hands on deck to forge and promote concrete proposals for aligning UK trade policy with the climate ambition our world needs.

The President of the European Commission, Ursula von der Leyen, has declared that she wants Europe to become ‘the first climate-neutral continent by 2050’, and in December 2019, the Commission presented the European Green Deal in order to achieve this objective. However, even though greenhouse gas emissions from the EU have fallen by more than 20 per cent since 1990, the Union remains the third largest emitter in the world, after the United States and China.

What are the opportunities and challenges for raising climate ambition in Europe?  Will the EU increase its Nationally Determined Contribution and what impact might this have globally? How might Brexit affect climate action in the EU and the UK?  The second event in the Chatham House COP26 Diplomatic Briefing Series will address these critical questions.

The 2019–20 fire season in Australia has been unprecedented. To date, an estimated 18 million hectares of fire has cut swathes through the bush – an area greater than that of the average European country and over five times the size of blazes in the Amazon.

This reflects previous predictions of Australian science. Since 2008 and as recently as 2018, scientific bodies have warned that climate change will exacerbate existing conditions for fires and other climatic disasters in Australia. What used to be once-in-a-generation fires now re-appear within 10–15 years with increased ferocity, over longer seasons.

In a country known for climate denial and division, debate has erupted around bushfire management and climate change. One of these is whether controlled burns are the answer to Australia’s climate-affected fire conditions.

There is no single risk reduction strategy. Controlled burning remains key, if adapted to the environment and climate. 

But when three out of four seasons in a year can support destructive bushfires, there are clear limits to what controlled burning and other fire management techniques can achieve. Other ‘adaptation’ measures are also likely to provoke intense debate – including bush clearance. As one Australian expert offered to highlight where Australia has got to, families should probably not go on holiday to bush and beach during the height of summer when temperatures and fire risk peaks. 

So, unless Australia is prepared to debate radical changes to where people live and how land is used, the limits to adaptation imply the need for mitigation. This means supporting ambitious global greenhouse emissions reductions targets. As research from Victoria, one fire-prone state in Australia, highlights, ‘the emissions pathway we follow is the largest determinant of change to many variables [such as temperature] beyond the next few decades.’

Can Australia become a more active global partner on emissions?

Australia accounts for just over one per cent of global emissions, so reducing domestic emissions – even though on a per capita basis they are the highest in the world – will not reduce Australia’s climate risk. Showing international leadership and supporting a powerful coalition of the willing to tackle climate change is the only way ahead. By showing a willingness to adopt climate ambition, Australia can help more constructive worldwide action, and thereby reduce its own risk exposure. 

Leading by example is a politically difficult issue for Australia. Prime Minister Scott Morrison was re-elected in May 2019 on an economic stability platform, and a promise not to imperil employment growth through climate action. Australia has contested UN estimates that it will not meet its existing modest goals for domestic emissions, by seeking to rely on carryover credits from action under the Kyoto Protocol as proof of progress.

It has also distanced itself from concerns over global supply and demand in fossil fuels. Australia remains a global supplier for fossil fuels, including coal – the nation’s coal exports accounted for $67 billion in revenues in 2019 in an expanding but changing Asian market, supplying ‘some of the cheapest electricity in the world’.

Possible influencers of change

With Australians experiencing first-hand the risks of climate change, there is already pressure to do more. Many are sceptical this will translate into domestic targets or export policies that give Australia the moral authority to ask for more action on the global stage.

Here, diverse groups who share a common interest in seeing Australia recover from the bushfires and address future climate risks could be key.

Importantly this includes rural and urban-fringe communities affected by the bushfires. They were part of Morrison’s traditional supporter-base but are angry at the government’s handling of the crisis and increasingly see how tiptoeing around emissions (including exports) has also ‘buried’ open discussion at home on climate-readiness.

Australian states could also find themselves taking a lead role. Virtually all jurisdictions have now committed to their own goals, most based on zero-carbon goals by 2050 (as has New Zealand). These can support modelling for Australia’s energy transition from coal, through gas, to market competitive renewables, while also help to ensure this reflects community expectations on jobs, electricity prices and other costs. 

Other emerging voices include the insurance and banking sectors (the Reserve Bank of Australia warned of the long-term financial stability risks of climate change before the fires) and indigenous Australians (one group of Torres Strait Islanders have filed a complaint to the UN Human Rights Committee which, if heard, will place Australia’s emissions record under the spotlight again). Their challenge now is finding a common language on what a cohesive approach to addressing climate change risk looks like. 

The international picture is mixed. The United States’ poor federal climate policy is a buffer for Australia. French President Emmanuel Macron has tried to raise the cost of inaction for Australia in current EU–Australia trade negotiations, but many large emitters in the Indo-Pacific region remain key Australian trading partners, investors and buyers of Australian coal. 

In the meantime, the United Kingdom is preparing for the meeting of parties to the Paris Agreement in Glasgow in November. A key global event following Brexit, the UK will no doubt be hoping to encourage a leadership circle with national commitments that meet global need to make the Glasgow meeting a success.

The UK public has expressed enormous sympathy for Australia in the bushfires and outrage over ‘climate denialism.’ Australia’s experience will be a cautionary tale of the effects of climate change at the meeting. Could the UK also support Australia to become a less reluctant partner in global climate action?