EU notebook: Climate policies an early test for Brexit

Plus, coming together on deforestation, and Greta goads One Planet organizers

By Vish Gain

(Vish Gain is a journalist based in Dublin. He is a correspondent for AML Intelligence covering the financial crimes sector in Europe and beyond.)

DUBLIN (Callaway Climate Insights) — One might think that Britain’s departure from the European Union spells bad news for the country’s climate policy, but that’s not entirely true. The UK’s climate targets are in fact more ambitious than the EU’s, with its 2030 emission reduction goal at 68% compared to EU’s 55% being currently negotiated. Moreover, fines for exceeding emission limits stand slightly higher at £100 instead of €100.

But climate analysts are still worried about the future of climate policy in Britain as the country’s internal policies and regulations diverge from the European framework with time. In particular, they are worried about Europe’s Emissions Trading Scheme (ETS), the largest in the world, and how Britain’s own take on the crucial scheme is unclear.

While the UK is free to define its own climate change targets and policies, December’s last-minute trade agreement established an ambitious framework for the two parties to co-operate within after the divorce.

“Both sides agree that the fight against climate change, and in particular the 2015 Paris Agreement on climate, constitute an essential element of their partnership,” said the European Commission in a post-deal statement. “Any violation of this essential element by one Party gives the other Party the right to terminate or suspend all or parts of the Agreement.”

The good news is that both the UK and EU share a (legally-binding) interest in achieving economy-wide climate neutrality by 2050.

The Commission says a “strong principle of non-regression, including on carbon pricing, is included in the agreement, ensuring that the current level of climate protection in the EU and in the UK will continue to be upheld.” This means that both sides have agreed to ensure that, at a minimum, the level of climate protection in place at the end of the transition period shall be guaranteed also in the future. Over time, these levels of protection are set to increase.

Brexit and the ETS

But what about the ETS? Unfortunately, the UK will no longer participate in the EU's Emissions Trading System. But the Commission says the two economies will consider linking their individual carbon pricing systems “in a way that preserves the integrity of these systems and provides for the possibility to increase their effectiveness, for instance by adding further sectors, such as buildings.” No such negotiation has taken place yet.

It has only been two weeks since the deal was implemented, but the divergence in policies has already started to become apparent. On some fronts, this divergence manifests itself in the form of UK’s higher ambitions —  such as British Prime Minister Boris Johnson’s announcement of a ban on the sale of petrol and diesel cars by 2030, one-upping the EU.

But on the other hand, the divergence in ETS may be a cause of concern. British Conservative MP Alexander Stafford told Euractiv, “It is worth bearing in mind that the more the UK diverges, the harder linkage will become, so early action is crucial.”

“Negotiations must begin as soon as possible to ensure that the 2021 compliance year is covered by a linked UK-EU ETS,” said Stafford, who is a member of Westminster’s business, energy and industrial strategy select committee.

The UK announced its own ETS ambitions when on Jan. 1 it launched what it described as “the world’s first net-zero carbon cap and trade market” to help reach its legally-binding target of reaching climate neutrality by 2050. Similar to the EU ETS, it covers emissions from electricity and heat generation, industry and aviation.

But ambition without action is like a bird without wings. To begin with, the UK government has not passed the necessary legislation to replace the EU trading system yet, with the 2020 environment bill still pending a vote in the House of Commons and is yet to make a debut in the House of Lords.

The new environment bill seeks to establish a new office for environment protection to oversee climate issues post-Brexit — a seemingly independent UK watchdog to replace Europe’s dwindling influence on the island.

While many businesses are eagerly waiting for action on this front, one group in particular — energy traders — are pushing for quicker action. In a letter to the British minister for business, energy and clean growth Kwasi Kwarteng, the European Federation of Energy Traders said they were concerned about “the functionality of the standalone UK ETS in the short- to medium-term.”

“In particular, the adverse consequences that the delay to auctioning of UK ETS allowances has on the functioning of the UK carbon market.” said aid Jan van Aken, secretary-general of the federation, adding, “we encourage UK government to publish the auctioning calendar as a matter of urgency,” van Aken wrote, warning that any uncertainty over the start of auctions “creates a significant challenge for risk hedging for UK installations.”

“With that in mind, we urge the UK government to accelerate the primary auctions for the UK ETS and launch them as soon as possible in Q1 2021, rather than in Q2 2021,” the letter stated. “This will not only reduce market uncertainty but also provide UK generators with the opportunity to hedge January deliveries, which are already underway.”

Europe turning a new leaf

While the UK is still moving on from its tumultuous relationship with the EU, European leaders are busy making strides in reinstating their global climate dominance. In a recent global summit, EU President Ursula von der Leyen and council president Charles Michel harmonized over Europe’s lead in fighting deforestation.

“We committed ourselves to protecting primary forests and to planting three billion trees by 2030 and that sends a very strong signal,” Michel said in at the fourth One Planet Summit, spearheaded by French President Emmanuel Macron, the UN, and the World Bank Group.

Von der Leyen chimed in: “When we lose forests, we don’t ‘just’ lose green space or natural habitat. We lose a key ally in our fight against climate change,” adding, “we will invest several hundred million euros over the next four years for research: on biodiversity, animal health, emerging diseases and much more.”

“But we know we need to do more. Being a major economy and trading superpower comes with responsibilities… Europe is ready to lead the way and I hope others will join us in that effort.”

One wonders if UK leaders were watching the summit with their camera turned off.

Greta expectations

Within hours after the summit ended, none other than teen activist Greta Thunberg made a post on Instagram summarizing the event in her own trademark fashion:

“A short summary from the ‪#OnePlanetSummit in Paris yesterday: Bla bla bla nature… Bla bla bla very important… Bla bla bla (while locking in decades of further destruction),” the post read.

“10 years ago our leaders signed the ‘ambitious’ Aichi goals ‘to protect wildlife and ecosystems.’ By the end of 2020 it became clear they had failed on every single one,” she said, adding, “it gives me absolutely no pleasure or joy to keep pointing this out, but as it is now, we can have as many meetings and conferences as we want — unless we start to treat this like the existential emergency it is, no real sufficient action will be possible.”

A WWF report published on Tuesday found that 43 million hectares of forests were lost in 24 hotspots over the past 13 years, the majority of them (52%) situated across Asia, Latin America and Africa. According to EU estimates, European consumption is thought to be responsible for 10% of global deforestation.

“The proof will be in the pudding,” said Ester Asin, director of the WWF’s European Policy Office. “The EU’s new deforestation law must be far-reaching, ensuring the protection of the world’s forests and other ecosystems, like savannahs and grasslands, and safeguard the human rights of the people that depend on them,” she said.

2021 will be an interesting year for climate action, with most of it leading up to COP26 in London at the end of the year. It remains to be seen if the UK aligns its climate policies, including the ETS, with the EU — like Norway, Iceland, and Switzerland already do. Moreover, it will be interesting to see if the EU pay heed to Greta’s scathing criticism and step up its efforts to create targets that are more in tune with the urgency of climate change.

As Greta put it succinctly in her Instagram post: “We cannot solve a crisis without treating it like a crisis.”