Government EU lobbying risks higher energy bills

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The lobbying came to light after Greenpeace obtained leaked documents, which were originally sent on March 29th (the day the UK triggered Article 50), and which saw the Government petition the European Commission (EC) to dilute or discard key energy saving objectives.

One of these involved a binding goal of increasing energy efficiency by 30% by 2020, a goal which the UK Government want reduced to 27% and made non-binding.

It's therefore feared among environmental activists that, once Britain's exit from the EU is formally completed, the Government may begin removing or relaxing energy regulations, in the process causing energy bills to rise.

Scaling back on ambition

The request from the Government to have the 30% target reduced was also repeated in a subsequent document, this time dated to May 22nd and seen by the Guardian.

In addition, the EC was also asked to remove another binding requirement for energy suppliers to make energy efficiency savings of 1.5% a year until 2030, or at least to make the requirement non-binding.

Such lobbying has already attracted criticism for being unnecessary, insofar as the above obligations won't come into force until after Brexit is complete.

Yet it has also been criticised for risking harm to investment in the energy efficiency industry, and for the related risk it carries of causing domestic bills to rise.

The Head of Energy at Greenpeace UK, Hannah Martin, said, "The government is trying to lock the rest of the EU into weaker energy policies ... The message ministers seem to be sending is that Brexit could trigger a race to the bottom and be used as cover for getting rid of key environmental safeguards".

Similarly, the Environmental Director at consultancy WSP, David Symons, remarked: "It's surprising that the government is lobbying against a measure that is expected to deliver €70bn of additional gross domestic product and 400,000 jobs across Europe by 2030".

For the Big Six?

Why the Government are moving to have energy efficiency targets watered down isn't entirely clear, and their actions may even seem contradictory in light of their promise to cap standard variable tariffs. Nonetheless, the support their efforts have received from the UK energy industry suggests that they may be acting on the behalf of the Big Six suppliers.

For example, the Chief Executive of Energy UK, Lawrence Slade, said, "Market-based measures, rather than binding obligations, should be used to drive energy efficiency investment".

However, in trying to enable suppliers to set their own efficiency targets, the Government seem to be contradicting many of their own past pronouncements on how such targets have helped to keep bills down.

In November 2014, they stated in a guidance, "Accounting for energy efficiency savings delivered through government policies, the average impact of policies is estimated to be a net saving for households of around 6 per cent (£90) in 2014".

In other words, they've acknowledged that non-market-based measures also have a big role to play in keeping costs down for customers, yet for whatever reason, they're campaigning on behalf of the bigger energy suppliers to reduce efficiency targets.

Implications

The implications of this campaigning are somewhat ominous, since if it results in a relaxation of efficiency targets, then ultimately there will be a shorter supply of energy (because more energy will be used up).

In turn, a shorter supply of energy will lead to higher prices, which should be something to be avoided in light of how bills have risen this past spring for customers of all but one of the Big Six providers.

And once again, lowering obligations for energy efficiency would discourage investment in the renewables industry, as we've noted before with regards to previous Government actions.

In fact, the implications of the Government's lobbying are potentially wider and more serious than this, since in leaving the EU, the UK may end up leaving behind other EU measures for improving energy efficiency.

For instance, there's a possibility that it may leave the EU Emissions Trading System (ETS), which places a limit on how much CO2 a business can emit and encourages them to be more energy efficient.

And more generally, the EU regularly places updated efficiency standards on white goods such as fridges and washing machines, standards to which the UK will no longer have to subscribe after March 29th 2019.

It's still an open question as to what will replace such standards once this date is reached, and given that the Government is currently lobbying the EU to loosen its efficiency obligations, it's possible that the UK's post-EU future may be a less energy efficient one.

And if it is a less efficient one, then, unfortunately, it will also be a more expensive one for energy customers.