BURNING QUESTIONS
DESIGNED TO IMPROVE YOUR COMMERCIAL AWARENESS
Firms want their trainees to understand that, today more than ever, lawyers need to be clued up about the commercial environment in which their clients operate. The Burning Question section of LawCareers.Net is designed to get you thinking about the business world as it relates to your future career and the commercial issues that a modern lawyer must grapple with. Here is a selection of some of the best Burning Questions from the past year – read, absorb and hone those commercial skills. Brexit: the implications for UK renewable energy Question Will Brexit blow UK renewables off course? Answer Following the Brexit vote in the recent referendum on the United Kingdom’s membership of the European Union, it seems reasonably likely that the United Kingdom will ultimately leave the European Union. Renewable energy has been an area of strength for the United Kingdom in recent years, but subsidy cuts and tax changes have tempered the sector’s growth. The challenging regulatory environment for renewables looks set to continue and investment in the United Kingdom may well be negatively impacted by the threat of Brexit. The Brexit vote may bring potential opportunities and freedom to support renewables, but any such improvement won’t be apparent until the current uncertainty has dissipated.
Different models of Brexit The future of renewables in the United Kingdom will be shaped partly by the nature of the United Kingdom’s relationship with the European Union post-withdrawal. The three most likely models appear to be: • the ‘Norwegian model’ which contemplates continuing
However, the United Kingdom has not been passive in setting green targets; one week after the Brexit vote, the Fifth Carbon Budget was announced, setting a target of a 57% reduction in carbon emissions by 2030 against a 1990 base line. When contrasted with the EU target for reduction of carbon emissions of 40% by 2030, this underlines the United Kingdom’s green ambitions. Overall, Brexit seems unlikely to change the United Kingdom’s climate change objectives which are enshrined in the Climate Change Act 2008. However, Brexit casts some doubt over whether these targets will be adhered to so assiduously if the threat of EU- imposed fines is removed. EU regulatory initiatives The EU regulatory regime goes beyond just targets, with the United Kingdom benefitting from – and being subject to – a number of initiatives such as the Energy Union, the Third Energy Package and EU Emissions Trading Scheme. Continued participation in these schemes is largely in the balance pending the adoption of the United Kingdom’s favoured post- Brexit model. While the Brexit vote does create uncertainty regarding the ongoing regulatory climate, it can also be seen to provide opportunities for growth. As a member of the European Union, the United Kingdom must comply with EU rules on state aid, which have threatened a number of renewable projects including, recently, biomass conversion projects. An exit from the European Union would remove these EU state aid requirements and possibly give the State aid and environmental constraints
membership of the European Free Trade Association (EFTA) and the European Economic Area (EEA);
• the ‘Swiss model’ which contemplates continued membership of EFTA, but
requires negotiation of bilateral agreements for access to the single market; or
• the ‘Canadian model’ which would require the United Kingdom to renegotiate a free- trade deal with the European Union for access to the single market while falling back on World Trade Organisation (WTO) regulation. Dependent on the United Kingdom’s post-Brexit model, both the regulatory and investment landscape for renewables could be very different. EU v UK green targets The UK renewable sector has seen year-on-year growth, with generation from renewable sources increasing by 21% between 2013 and 2014. However, the sector’s future prospects have been shaken by the recent Brexit vote. The European Union has been influential in driving UK renewables through legally binding targets such as the EU Renewable Energy Directive, which set a target of 15% of all energy to come from renewable sources by 2020. Regulation
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