Theresa May urged to clarify Brexit environment policy that could kick 1,400 British industrial sites out of emissions trading scheme

  • NEW: Members of both Westminster and European Parliaments join the UK energy industry in urging Theresa May to clarify her post-Brexit environmental policy.
  • As things stand, over 1,400 industrial sites across the UK participate in the Emissions Trading Scheme (ETS) – the EU’s programme for tackling harmful carbon emissions.
  • British businesses across a wide range of sectors export carbon-based goods on ETS rules.
  • The ETS has also given financial support to British businesses which are outdated and struggling financially.
  • The UK government still has not clarified its plans for the ETS.
  • “We need an urgent decision on whether we continue participating in the EU Emissions Trading Scheme,” the chief executive of a leading energy group tells Business Insider.

BRUSSELS – Theresa May has been urged to clarify her post-Brexit environmental policy amid increasing concern that nearly 1,500 industrial sites owned by businesses across the United Kingdom face a cliff-edge scenario.

MPs, MEPs and industry leaders have called on the UK government to confirm whether it wants to keep Britain in the Emissions Trading Scheme (ETS) – the EU-wide programme for tackling carbon emissions – after Brexit.

Though not the most-discussed element of Brexit talks, the ETS is significant as its regulations cover over 1,400 industrial sites in the UK, across a range of sectors from steel works, to cardboard production, to the aviation sector.

Participating businesses cap their annual carbon emissions in return for financial incentives, as part of the EU’s wider push for green, more climate-friendly business across the bloc.

Earlier this year, energy minister Claire Perry said the UK will remain in the ETS until the end of 2020, coinciding with the time frame of the proposed 21-month transition period.

However, MPs and MEPs say the UK government has been silent on its plans for after the transition period.

There is widespread concern that if the UK leaves the ETS after Brexit and fails to replace it with a replica body, it will pave the way for the Conservative government to take a more lax approach to reducing carbon emissions.

“It is absolutely vital that the UK remains in close cooperation with the EU on tackling climate change and protecting the natural world,” Caroline Lucas, co-leader of the Green Party, told Business Insider.

“The EU referendum was not a vote to weaken essential protections for our wildlife, oceans and food – yet we’re currently careering towards a hard Brexit that could see British business facing a cliff-edge as we crash out of the Emissions Trade Scheme.”

Lucas was echoed by Seb Dance, Labour MEP for London. “The UK has long been a European leader in innovation in CO2 reduction, and being part of the Emissions Trading System, which we were instrumental in establishing, is vital to UK industry,” he told BI this week.

“The businesses I have spoken to want to remain part of a system that allows access to, and maintains standards across, their largest market, whilst imposing substantial tariffs on high carbon, high polluting goods from elsewhere.”

Caroline LucasGettyGreen Party co-leader, Caroline Lucas.

“It is critical that the UK remains inside the ETS”

Concerns over the UK’s place in the ETS do not just relate to the environment. There are fears about major financial ramifications, too.

The ETS has played a significant role in protecting and modernising carbon-intensive businesses in the UK. In some cases, it has released “modernisation funds” to older factories and plants, helping them pay for making their means of production more environmentally-friendly.

Additionally, it has given money to UK steel companies which have encountered financial trouble in recent years, namely factories in Port Talbot and Scunthorpe.

Last year, Energy UK – the group which represents Britain’s energy companies – asked May’s government to provide clarity on its plans for the ETS by “by the second half of 2017.” This week it told BI it still waiting for answers.

For Energy UK, the UK would ideally stay in the ETS permanently after Brexit. This would come with oversight from the European Court of Justice, a tricky pill to swallow for staunch Brexiteers. If not, then the second best option would be UK creating a replica body, which would effectively mirror ETS standards. However, this would likely take years to develop, and probably wouldn’t be ready in time for the end of transition in late 2020.

Lawrence Slade, Energy UK’s chief executive, said: “We need an urgent decision on whether we continue participating in the EU Emissions Trading Scheme – something we would support, certainly over the next few years, as crucial to keeping up the pace of decarbonisation, of which the UK has been a leading proponent.

“Climate change is evidently unconstrained by borders – virtual or otherwise.”

Moreover, as part of the EU’s mission to have as few carbon-heavy goods as possible in its markets, the ETS slaps large duties to heavy goods imported from outside the EU which are high in carbon content, effectively a tax on carbon.

There is concern that if the UK leaves the ETS, British companies which want to import carbon-intensive goods into the EU after Brexit could face similarly high charges on carbon, making exporting much more expensive. For example, British steel will be regarded in the same category as Chinese steel.

Julie GirlingJulie Girling MEPJulie Girling MEP.

Julie Girling, MEP for South West of England, told BI “it is critical that the UK remains inside the ETS if environmental commitments are to be met and ambitious UK pledges realised.”

Girling has played a key role in the recent development of the ETS. Last year, she navigated ETS legislation through the European Parliament, and believes ditching the initiative would be bad for British businesses.

“The trend in global governance is towards three large polities: China, the USA, and EU. It would be very unusual for the UK to extricate itself from one of these with only a vague alternative,” she said.

“The ETS is the world’s first major carbon market and remains the world’s largest, a position UK industry understands and responds well to.”

The UK Department for Business, Energy and Industrial Strategy, which is responsible for matters relating to ETS, was contacted for comment.

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