Page 21 - Gi flipbook February 2018

jurisdiction of the European Court of
Justice (ECJ), but common sense
dictates this is aligned with the end of
the current phase of the scheme. The
UK will also want to introduce
something in its place, as it needs to
secure ongoing reductions in carbon
emissions to meet its Paris Agreement
commitments as well as its binding
domestic Climate Change Act targets.
Given its preference for market-based
mechanisms, creating a new UK
trading scheme, possibly linked to the
ETS, could be an option.
Finally, UK negotiators will want to
ensure that the UK’s ability to
continue to develop its domestic
onshore shale gas reserves remains
intact post Brexit. This is perhaps
unlikely to be controversial, because
the EU has not been a proponent of
shale. Policy development has been
left to member states, and the UK
government has been an enthusiast.
UK shale prospects could certainly be
improved by further tax and other
incentives to accelerate the industry
and head off security of supply
concerns post-Brexit, but in reality the
big factor here is likely to be the oil
price and the UK geology.
However, returning to the big picture,
Domestic gas prices will inevitably we should remember that two deals
see upward pressures if the sterling are actually needed: one to document
the withdrawal terms, including the
exchange rate remains depressed, basis of the implementation period,
and one to detail the enduring trading
especially if LNG imports increase arrangements once the
(e.g., from the US), and if the UK implementation period ends.
As we head into the crucial next
markets detach from the EU markets phase of negotiations in 2018, UK
negotiators must maintain a clear
focus on the latter. The risk is that,
security of supply, facilitating the EU, allowing continued operation with so little time, we might head
functioning energy markets; both key of the cross-border interconnectors towards the end of 2018 with a
strategic aims of the UK and EU. and integration of markets. substantive withdrawal and
Furthermore, access to cheaper However, if the UK is to avoid implementation deal, but without
energy from the continent has become a rule taker, its negotiators much progress on the enduring
benefitted UK consumers, and should be seeking some meaningful trading arrangements. That simply
particularly in relation to electricity influence in the development of the delays the hard Brexit ‘cliff edge’,
has facilitated the construction of new IEM rules, and this means continued leaving the EU to dictate the terms of
interconnectors, which in turn have active involvement with the the trade deal knowing that the UK
bolstered security of supply. European Network of Transmission faces the unappealing choice of either
Whilst few would argue that System Operators for Gas (ENTSO-g), extending the implementation period
significant tariffs on cross border ENTSO-e for electricity, and the or falling off the cliff. A perpetual
interconnector flows are a likely Brexit Agency for the Co-operation of series of extensions to this is surely
scenario, one of the greatest threats is Energy Regulators. After all, ongoing the worst of all worlds. ■
surely regulatory divergence. UK participation has been viewed as
Remaining in the IEM means adhering generally positive and constructive. ■ Read Shakespeare Martineau’s
to the current IEM rules (specifically Looking beyond the IEM, the UK’s report, The Impact of Brexit on the
the Third Package and the Network approach to the ETS is going to be Energy Sector: Till Brexit Do Us Part
Codes) – even if as part of UK law. This critical. A UK exit from the ETS is by visiting www.shma.co.uk/web/
requires the UK regulatory and market certain if the UK holds its line that it FILES/Brexit/Brexit-energy-sector-
regime to remain aligned with that of does not want to be within the direct insights-August-2017.pdf

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