Government seeks to reassure businesses of continued alignment with environmental rules during transition period, as Lords slam 'flawed' withdrawal bill and energy trade risks
The government has sought to reassure UK businesses that alignment with EU rules, including environmental regulations, will continue during the Brexit transition period, even as it faces fresh criticism over its withdrawal strategy and the impact it could have on the energy sector.
In an open letter published on Saturday, government ministers explained firms would continue to trade as usual in EU markets from March 2019 for "around two years" in order to allow them to adjust their operations and supply chains to the UK's future relationship with Europe.
The letter states that companies have been "clear that they need time to adjust to the terms of our new relationship with the EU", adding that the transition period currently being negotiated with the EU will be "strictly time limited" and determined "simply by how long it will take to make these changes".
However, the letter gave no indication as to what changes the UK will be seeking in the longer term, after reports suggested Prime Minister Theresa May is to postpone a planned speech on her preferred future relationship with the EU. Whitehall insiders suggested there is still no agreement within the Cabinet on the type of trade deal the UK should seek post-Brexit.
The new letter stresses that during the period of implementing changes to the UK's relationship ministers were "clear that the UK's and the EU's access to one another's markets should continue on current terms, meaning there will only be one set of changes at the end of the implementation period, as we move into our future partnership".
The ministers said they wanted to reassure businesses that the government will "mimic the breadth of our current arrangements" with the EU during the transition period, including the free movement of EU citizens to live and work in the UK.]
It follows calls from the Confederation of British Industry (CBI) for a "status-quo, jobs-first transition deal" with the EU, which it said needed to be agreed within the next two months to ensure regulatory certainty for businesses.
The letter was signed by the Chancellor Philip Hammond, Business Secretary Greg Clark and Brexit Secretary David Davis, but faced criticism from some 'hard Brexiteers' in the Conservative Party - such as backbench MP Jacob Rees-Mogg - who warned continued alignment would amount to "Brexit in name only".
The letter implies that businesses will retain freedom of movement amongst their workforces and will be subject to a raft of environmental and energy policies and regulations.
The continued adherence to current EU rules could spark a number of green political rows, given the UK is obliged to meet a number of targets for 2020 covering renewable energy and recycling, which it is currently on track to miss. As such, the UK government could technically find itself subject to EU fines during the transition period, despite having officially left the EU.
In addition, the government faced separate criticism today from the House of Lords over several aspects of its approach to Brexit. Two separate reports on future energy trade with the EU and nature of the Withdrawal Bill itself both criticised the government for introducing a raft of new economic and constitutional risks.
At present the EU supplies around 12 per cent of the UK's gas and five per cent of its energy, and trade between the two is therefore key to meeting domestic demand, the Lords' EU Energy and Environment Sub-Committee said today.
However, it warned that if future trade takes place outside the EU's internal energy market it is "likely to be less efficient", creating the potential for higher consumer bills as well as heightening the risk of energy supply shortages in the event of extreme weather of unplanned outages.
The Sub-Committee's report also said the Euratom treaty was "fundamental" to the current functioning of nuclear energy generation in the UK, and urged for its provisions to be fully replaced at the point of withdrawal or risk the industry grinding "to a halt".
Further concerns about the loss of specialist nuclear expertise from the EU, as well as the loss of European investment in the UK's energy system, are also raised in the report.
Industry insiders have repeatedly warned that exiting the energy market and Euratom will have a major impact on the UK's energy security and decarbonisation plans. Experts fear establishing a new domestic nuclear reactor will delay new projects and drive up costs, while renewables providers are similarly concerned that any barriers to cross broder trade will make it harder to match peaks in supply from variable renewables projects with peaks in demand.
Lord Teverson, chair of the EU Energy and Environment Sub-Committee, said it remained unclear how the benefits of the UK's current energy relationship with the EU can be achieved without remaining in the single market, internal energy market, and other bodies such as Euratom.
"Individuals and businesses across the UK depend on a reliable and affordable supply of energy," said Lord Teverson. "In recent years, the UK has achieved such a supply in partnership with the EU, working with other member states to make cross-border trade in energy easier and cheaper."
Meanwhile, a separate report today by the Lords' Constitutional Committee concluded that the Withdrawal Bill should be completely re-written as it is "fundamentally flawed from a constitutional perspective in multiple ways".
Chair of the committee, Baroness Taylor, said that the Bill as currently drafted risks undermining legal certainty, gives "overly broad" powers to ministers and has "significant consequences" for the relationship between the UK government and the devolved administrations.
"We acknowledge the scale, challenge and unprecedented nature of the task of converting existing EU law into UK law, but as it stands this Bill is constitutionally unacceptable," she said in a statement.
Green businesses will likely welcome the promise of a transition period where little changes, but concerns that Brexit will have significant impacts on the clean energy sector and the wider green economy are still a long way from being addressed.
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