The implications of the United Kingdom's vote to leave the EU
The legal challenges
It has been suggested that some 40,000 individual items of legislation are affected by the decision to leave. So the legal consequences of the UK exit are complex, especially in the area of environmental legislation and energy management law. Many principles and legal obligations in UK, Scotland or England and Wales or devolved law stem from EU legislation.
European Regulations have direct effect in UK law under the European Communities Act. Directives, such as the Energy Performance of Buildings Directive (EPBD), are implemented individually by each member state – and in the UK there may be devolved implementation in Scotland and Northern Ireland, as with the EPBD. To add to the complexity, the EPBD is implemented in England and Wales in two separate sets of regulations – the Building Regulations and the Energy Performance of Buildings (EPB) Regulations.
However, some pieces of legislation have both a European and a national dimension. The Energy Act 2011 defines a dwelling, in s42, by reference to the EPB Regulations (2012). So this domestic Act uses a term defined in an EU inspired Statutory Instrument. In turn, the EPB Regulations are made in exercise of the powers conferred by section 2(2) of the European Communities Act 1972 and by section 74 of the Energy Act 2011. And, just for good measure, the EPB Regulations only apply to England and Wales – Scotland and Northern Ireland have their own implementing regulations. This is not easy to untangle.
To leave the EU the UK must give notice under Article 50 of the Treaty of Lisbon, which starts a period of two years for the UK to negotiate the terms of exit. Early indications are that Mrs May does not wish to give notice until the end of 2016, so it is most likely that the actual UK exit will be late in 2018.
The Climate Change Act and Brexit
The Climate Change Act (2008) requires an 80% reduction in UK emissions relative to 1990 levels by 2050. This is done through a series of statutory five yearly carbon budgets, which are designed to represent the lowest-cost path for the UK to contribute to global efforts to tackle climate change. The Act requires the Government to set out its policies to meet the targets, and these will also now need to reflect the UK’s changing relationship with the EU.
On 30th June the government committed to the emissions reductions recommended by the Committee on Climate Change (CCC) for the fifth carbon budget 2028 – 2032, which will reduce UK greenhouse gas emissions in 2030 by 57% relative to 1990 levels. On that day the CCC also published its 2016 Annual Progress Report to Parliament detailing UK progress in reducing greenhouse gas emissions and meeting carbon budgets.
The report shows that UK emissions have fallen by an average of 4.5% per year in the last three years and are 38% below 1990 levels. This reduction in emissions has come almost exclusively from one sector: electricity generation, where UK Government policies have driven an increase in renewable generation and a reduction in coal use.
While this is welcome, the report shows little progress elsewhere: installation rates for home insulation have fallen by 60-90%, take-up of low-carbon heating is below 2.5% of demand and emissions in the transport and agriculture sectors have been rising in the past year.
There are no policies in place to broaden the scope of emissions reduction. The Progress Report identifies a gap of approximately 100 MtCO2e between the likely reductions from current plans and the reductions required by the fifth carbon budget for emissions in 2028-2032. That gap amounts to half the required reduction from 2015-2032, and will be greater if existing does not deliver the anticipated reductions.
The Government has recognised this policy shortfall and it has committed to provide an ‘emissions reduction plan’ later this year. The CCC Progress Report sets out several areas which it expects this plan to address:
New policy approaches to decarbonise heating and improve energy efficiency, focusing on lower cost areas (e.g. new buildings) and overcoming behavioural barriers.
Policies to improve the efficiency of new vehicles and increase the uptake of low-emission vehicles.
A new approach to the development of carbon capture and storage (CCS), to provide separate support for carbon capture plants and for transport and storage infrastructure. This is seen as an urgent need.
Mature low-carbon generation giving the cheapest forms of low-carbon electricity generation (e.g. onshore wind and solar in locally-acceptable locations a route to market (e.g. new auctions for low-carbon contracts).
The Progress Report identifies a number of areas where the Committee consider new policies are needed, including several for the built environment:
A strategic approach to carbon capture and storage deployment in the UK
An approach to bring forward the cheapest low-carbon generation (e.g. auctions for generation from onshore wind, solar and sustainable biomass)
Clear, consistent and credible policies to drive deployment of heat pumps and district heating, including: immediate action to address barriers (e.g. upfront cost, low awareness) alongside the Renewable Heat Incentive and development of a more comprehensive policy package to drive the higher uptake needed in the long run
Standards to ensure new-build properties are highly energy efficient and use low carbon heating systems by default
A stronger policy framework to drive improved residential energy efficiency by addressing gaps and strengthening existing policies, including: addressing behavioural factors for the able-to-pay, increased funding for fuel poor households, an effective approach to the private-rented sector
More progress on improving the energy efficiency of non-residential buildings, including: a consolidated reporting mechanism for commercial and public buildings, new emissions reduction targets for the public estate, new policies to support SMEs in England
An effective approach to drive sustained uptake of low-carbon heat in industrial processes and building
A stronger policy framework for industrial energy efficiency, including reviewed Climate Change Agreements and an effective reporting mechanism
F-gas emissions (which accounted for 3% of 2014 emissions) to fall by at least 70% by 2030, through monitoring, implementation and enforcement of existing F-gases regulation, and by seeking cost-effective opportunities to reduce F-gas emissions further than existing legislation requires, including assessing and addressing barriers to action. Furthermore, international negotiations to further reduce the emissions of F-gases are at an advanced stage and due to be concluded later this year.
It is worth noting that the UK is a signatory to the 1986 Montreal Protocol for Ozone Depleting Gases (which was signed under the UK’s previous female Prime Minister). Quite simply, any serious ambition to deliver the emissions reduction targets set under the Climate Change Act excludes any widespread repeal of energy and environmental legislation which has its origins in EU Regulations and Directives.
Current government policy
Angus MacNeil, SNP MP for Na h-Eileanan an lar (formerly the Western Isles), who chairs the Energy & Climate Change Committee of the House of Commons, led an important debate in the House on 4th July. Formally a debate on the proposed DECC budget, or “Estimates” for 2017-18, it was entitled “Energy Spending Priorities: Investors and Consumers”, and it concluded with a short response by Amber Rudd, who was at that time the Secretary of State for Energy and Climate Change.
The debate covered three of the Reports from the Committee published during the 2015-16 Session, which covered:
Future of carbon capture and storage in the UK
Investor confidence in the UK energy sector
Home energy efficiency and demand reduction
The debate started by reviewing the reasons investors in energy projects gave for their lack of confidence in the UK energy market at present. These are:
“Sudden and numerous policy announcements”.;
“A lack of transparency in the decision-making process”;
“insufficient consideration of investor impacts”;
“claiming to want to decarbonise at lowest cost while simultaneously halting onshore wind” and choosing more expensive forms of renewable generation;
“The lack of a long-term vision”;
“The policy ‘cliff-edge’ in 2020” (the date when the current funding arrangements under the levy control framework (LCF) are due to end, with no indication of what is to follow)
All the conclusions set out in detail in the committee report on investor confidence. The Committee recommended that Ministers clarify the assumptions and methodologies behind their levy control framework calculations, and that Ministers should set out the post-2020 LCF budget in the context of the fourth and fifth carbon budgets to ensure that the available funding was consistent with meeting our longer-term carbon commitments.
They also recommended that Ministers develop their plans to achieve the fifth carbon budget in full consultation with investors, using transparent methodology and clearly showing how funding will be managed as new technologies become established, advocating a clear “glide path” out of subsidies, rather than a sudden, and often short notice push over a cliff edge.
The Committee cited Carbon capture and storage (CCS) as another example of the need to rebuild confidence. Angus MacNeil argued that on current analysis, “it is difficult to see how we can have fossil fuels but no CCS and still meet our long-term decarbonisation projections at the same time.” He noted that Lord Deben, chair of the CCC, had stated that “not having CCS would cause the UK an issue”, calling it a “statement of high alarm about the targets that the Government might have difficulty in meeting”.
On home energy efficiency, MacNeil noted that “improving energy efficiency is a win-win for households and the UK as a whole. It enhances energy security, cuts carbon emissions from housing and reduces costs”. This was very much CIBSE’s line in response to the Committee enquiry. MacNeil continued, “for consumers, the benefits include lower energy bills, and, critically, warmer, more comfortable homes—more arguments should be made on that point—and improved health and wellbeing. When we work on the technical energy side, we sometimes forget that these things are for human beings, who have very nuanced and different reasons for wanting to insulate their homes and have warmer homes.” This shows a greater understanding of the importance, significance, and behavioural complexity of dealing with home energy efficiency on the Committee than in some parts of government. Readers will surely hope that this understanding might spread rapidly in the coming months.
Also echoing the CIBSE response, Callum McCaig, SNP MP for Aberdeen, argued: “this comes to the nub of the issue with investment in this area [energy efficiency]. Government are completely unwilling to accept that it is investment. Investment in making homes energy efficient is an investment in our society. There are savings to be made. We need to look at things in the round, rather than looking at one part in isolation.” We might all say ‘hear hear’.
Amber Rudd, responding as Secretary of State for Energy and Climate Change, stated that the Government will be setting out more on the future of the LCF in the autumn statement. She argued that recent capacity market changes “have sent a clear signal to investors that will encourage the secure energy sources we need to come forward”, and she reiterated a commitment to boost “innovation funding to over £500 million, including £250 million for nuclear innovation and small modular reactors”.
On home energy, Rudd said that “energy efficiency is rightly seen by many, and certainly by the Government, as an excellent means to not one but several ends. It contributes not only to reducing energy bills, but to reducing carbon emissions and improving the security of our energy supplies”. She then went on to add that the Conservative manifesto in 2015 “clearly set out how we will help a further 1 million homes this Parliament, as part of our commitment to address fuel poverty”. She hoped that “my comments will reassure [Steve McCabe] about our commitment to deliver on those 1 million homes”. McCabe had earlier condemned the fall in the rate of home insulation by 90% under this government.
Rudd thanked the SNP MP for Glasgow North, Patrick Grady, for his comments, although he had earlier launched a scathing attack on the proposed cuts to the DECC budget, loss of EU funding for energy projects, and the absence of the then Energy Minister, Andrea Leadsom, from the debate (he did acknowledge that, on July 4th, Ms Leadsom might have been pre-occupied by other matters, namely the Conservative Party leadership election).
But he also declared that he had had a Smart Meter fitted the previous Friday, and looked forward to its impact on his energy and time efficiency, prompting Rudd to express the “hope that his energy usage will indeed be reduced by his new smart meter”. She continued by saying that “we are delighted that the Government programme is on target, so that everybody will be offered the advantages he has by 2020.” This was the only tangible measure offered to reassure us of the commitment to deliver on those 1m homes.
On Brexit itself, Rudd said “several Members asked about the impact of leaving the EU on our energy policy. We must face up to the fact that it will make some of our targets more difficult. I do not have the answers about what our future relationship will be with the EU on vital elements, such as the emissions trading scheme and the energy union. It will make some of the challenges we already face more difficult,”
Talking specifically about Hinkley Point C, Rudd said: “I have indeed spoken to EDF, and we have had conversations with the French Government, and we have been told that there is no change; they remain committed to arriving at a final investment decision.” Her concluding remarks “[reassured] hon. Members that we remain committed to delivering clean, secure and affordable energy. It might be that this task has become a little harder, but what remains unchanged is our determination to do that while always thinking of the consumer first.”
So government policy on 4th July was to maintain investor confidence, not spend on CCS until someone else finds an affordable approach, build Hinckley Point C at any price, and install smart meters to improve 1m homes. It appears that the new Prime Minister may have other thoughts about pressing ahead with Hinckley Point C. Along with uncertain investors we will have to see what other changes to policy might emerge in the coming weeks.
Energy and Building Related Legislation
A number of existing pieces of legislation relate to energy in the Built Environment:
Review of Energy requirements of Building Regulations
Under the EPBD this is meant to happen in 2017. So there may be some debate about whether or not it goes ahead. However, some readers may recall that Before Brexit there was an extended argument between the Commons and the Lords in Westminster over the Lords attempt to reinstate a zero carbon homes requirement into law. It ended with an agreement to drop it, in return for an undertaking to review the energy efficiency elements of the Building Regulations. It is not clear whether all parties to the deal realised that under the EPBD that review was required anyway in 2017, so it was a free hit for government to offer. However, Post Brexit, with the status of the review under the EPBD in question, the deal now means that the review should go ahead regardless of Brexit. But we shall see. And, once again, it is different in Scotland, where it is more likely that there will be a review of Section 6 of the Scottish Building Standards.
This is largely a domestic policy. Planning rules implement requirements for heat networks and onsite generation, especially in urban areas, driving a transition to more efficient heating and cooling systems and networks. UK planning policy is unlikely to change as a direct result of Brexit, although EU framework support and policy direction will be removed. Renewable generation subsidies are being cut, although the Committee for Climate Change has identified low carbon heating as an area requiring new policy measures.
The EU has undoubtedly played a key role in energy management in the built environment, setting targets and legislating to improve energy efficiency in buildings and products. For the reasons outlined above, it seems unlikely that a Brexit will lead to wholesale changes to existing UK legislation in these areas.
The exact mechanism for giving notice has already stimulated a serious debate amongst lawyers, ranging from those who believe notice can be given by the Prime Minister under the prerogative powers of the office, to those who believe that nothing short of an Act of Parliament is required. The House of Lords has produced a Library Note on the topic, which contains a number of detailed references. Readers wishing to explore this in more detail should refer to the Note at : http://researchbriefings.files.parliament.uk/documents/LLN-2016-0034/LLN-2016-0034.pdf