Brexit and Climate Change: 4 Questions Answered

The unexpected result of Britain’s referendum in favor of leaving the European Union has sent shockwaves through European politics and the global economy. The scramble has begun in every sector and policy area to understand the implications of Brexit, and energy and climate change is no exception. Here are four questions climate policymakers and market participants are asking themselves about what Brexit means for the United Kingdom, Europe, and the world.

1. Will Brexit change Britain’s domestic climate and energy policies?

Not likely. A period of great domestic political turmoil has begun, but the underlying cross-party consensus in favor of low-carbon transition appears strong. Of the three major parties, the ruling Conservatives have been least gung-ho about renewable energy on cost grounds. Yet the Conservative-run Department of Energy and Climate Change is reportedly set to codify a 57 percent target for British emissions reductions by 2030.

Although referendum fallout may trigger a general election, any alternative permutation of governing parties should not result in a negative directional change for climate policy. Indeed, if domestic economic stimulus is needed in a Brexit transition period, renewables could stand to benefit. If Hinkley Point, the nuclear plant that formed the core of the government’s plan to comply with its Paris obligations, has difficulty securing financing, then that could also open up more support for renewables.

That said, Brexit will consume the British political and policy world for some time. Thus, forward progress on affirmative priorities like climate change may stall as politicians and bureaucrats wrestle with the incredibly complex task of changing the UK’s domestic regulatory and legislative frameworks. For instance, it is hard to imagine that the ratification of the Paris Agreement would be the first order of parliamentary business.

2. Will Brexit negatively affect European climate and energy targets and markets?

Quite possibly. The UK is the second largest economy in the EU and has led the way for ambitious and market-based European climate policies. Because the UK’s contribution to collective EU goals on emissions cuts and renewables has been more ambitious than average, the EU faces the prospect of adjusting collective internal targets downwards—or persuading other member states to step up to make up the difference. Not only are countries like Poland unlikely to pick up the slack, the UK’s departure may strengthen their resistance to what Eastern European states perceive as an overly aggressive green agenda. The UK is unlikely to leave the EU Emissions Trading System (EU ETS), but the terms of its participation as a non-EU country will need to be negotiated and nontrivial technical and accounting changes made to enable UK entities to continue trading.

3. Will Brexit hinder global efforts to tackle climate change through the Paris Agreement?

Maybe. The EU has long been regarded as a global leader in setting international climate targets, and it was first out of the gate before Paris with an ambitious 2030 emissions target (intended nationally determined contribution or INDC) of 40 percent below 2005 levels. The UK’s prospective withdrawal throws the EU’s Paris target into doubt, and will also slow the EU’s process of formally joining the Agreement. As the UK was set to deliver a 57 percent reduction by 2030, a 40 percent collective target without the UK will be much harder for everyone else to achieve. Again, member states that fought against the 40 percent target in the first place, like Poland, will not be in any mood to strengthen their own commitments. Formally, the EU may be forced to revise its INDC downwards with the UK setting a separate target, but with no net atmospheric impact if the weighted average of the two targets remains the same.

Those who hope an independent UK could formally approve the Paris Agreement early and thus hasten its entry into force may be disappointed—with formal Brexit no less than two years away, the UK will not be in a position to push up the ratification numbers anytime soon. More broadly, some have expressed hope that a UK unshackled from the EU collective could be a more assertive force for good in climate policy. That may well be the case, though it is also possible the UK turns inward to process the fallout from Brexit—and that a crisis in the European project leaves the EU as a whole less able to maintain its global leadership role.

4. Could Brexit be avoided after all?

Conceivably. With the pound plummeting and FTSE100 companies making plans to decamp to the continent, it is possible that the British political class will stare into the economic abyss and elect to try a do-over referendum or otherwise wriggle out of Brexit. But even then, we are in for a long period of uncertainty.

Image courtesy of iStock.