A new free trade agreement will be needed to maintain the current tariff-free trading on gas and electricity.
The Prime Minister has triggered Article 50, formally notifying the European Commission and other member states of the UK’s intention to leave the European Union. The two year period for any deal to be reached has begun.
So what does this mean for the energy sector?
The short answer is that nobody knows for sure how all this will pan out. But, there are some things we do know and they are explored in this paper, covering topics including:
The Prime Minister made clear in her speech on 17 January that the UK will be leaving the EU Single Market. Little has been said on energy explicitly, as it is not a top tier issue for the Brexit negotiations. But the implication is that the UK will also be out of the Internal Energy Market, since the rules governing how that market works are set out in European legislation (“the acquis”) and subject to the jurisdiction of the European Court of Justice (ECJ). The government has also said in the European Union (Notification of Withdrawal) Act that the UK will leave the Euratom Treaty, which governs the handling of nuclear fuels and nuclear waste across the EU.
The logic of the UK Government’s position is that it will now need to negotiate a new FTA to ensure that harmonised tariff-free trading of gas and electricity can continue, we explore both the reasons to be optimistic and pessimistic.
In the immediate term, the answer is “not much”, as the UK remains an EU Member State for now. However there are a number of things that industry and investors should be aware of.
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