Photographer: Andrey Rudakov/Bloomberg

Coal Power Restrictions Seen at Risk From Brexit Government

  • Candidates vying to lead may be less willing to regulate
  • Greenhouse gas rules may be watered down to boost industry

Britain’s decision to leave the European Union frees up the nation to set environmental rules independent of the other 27-nations in the bloc, raising the risk for renewable energy developers that restrictions will be loosened on coal power.

QuickTake Confronting Coal

Only one of the five candidates vying to replace Prime Minister David Cameron in September has a defined energy policy, according to Michael Jacobs, a former government climate adviser now at the Institute for Public Policy Research. Bloomberg New Energy Finance wrote in a research note that a new Tory leader may opt to ditch a commitment to phase out coal by 2025.

“Anything that changes policy at this point is a huge problem,” Jacobs said, “The coal phase-out should create some space for gas and renewables, which is good for investment and jobs.”

With attention fixed on how and when Britain intends to extract itself from the EU following the June 23 referendum, climate policy hasn’t featured prominently in any candidate leadership bid. That silence may not last. Government advisers in June told the U.K. it needed to double the pace of greenhouse gas cuts to meet obligations in national law. The country needs 100 billion pounds ($133 billion) of investment by 2020 just to maintain power on the grid.

‘Torrid Times’

“If somebody more friendly to coal or more of a climate skeptic becomes the new leader, they may ditch the coal phase-out or just shove it to one side,” said Meredith Annex, an analyst at Bloomberg New Energy Finance who co-authored research note titled, “Which Tories herald torrid times for U.K. energy?”

The U.K.’s planned phase out of coal by 2025 could save as many as 2,870 lives a year by curbing pollution, and almost half of those lives will be in continental Europe as it would reduce the amount of dust traveling across borders, according to a report Tuesday by four environmental groups -- WWF, Sandbag, the Health and Environment Alliance and Climate Action Network.

Only Andrea Leadsom, a junior minister in Amber Rudd’s energy and climate change department, has set out a clear policy, according to Jacobs at IPPR. Since the referendum, she’s promised to bolster energy security, keep power bills down and decarbonize the power sector. Leadsom’s also suggested renewable investments could be boosted by Brexit, which gives the nation more power over taxes and subsidies.

The three pro-Brexit candidates competing to head the government -- Andrea Leadsom, Michael Gove and Liam Fox -- may take a more hands-off approach to energy reform, according to BNEF. This could complicate transition plans in the U.K., which is seeking to boost investment in energy and networks as more than a dozen power plants are expected to come offline in the next decade.

Candidates Decide

Along with the decision to stick to coal phase-out plans, the new government will also need to make a decision about a long-term carbon-price floor in the Treasury’s autumn statement, according to BNEF.

Following is a summary of how candidates to lead the government may weigh questions on climate and energy:

  • Liam Fox, the pro-leave MP for North Somerset and former defense secretary, is “probably the greatest risk” to the coal-phase out pledge, according to Jacobs. Fox has promised to leave the single market, which could further destabilize the economy, said BNEF.
  • Michael Gove is being influenced on energy by Nigel Lawson, a climate-skeptic and former chancellor of the exchequer, according to BNEF. “This could lead to a change for the energy industry and a move away from carbon policies,” BNEF said. Yet Gove described himself as a “shy green” in a 2014 speech to the Conservative Environment Network, suggesting his views may be more complex. Jacobs said, “Gove is an ideologue, but I think economic sense will override any ideological pull.”
  • Theresa May, another front-runner, is backed by Rudd, who is likely to build on current energy policies and prioritize climate action. She is also likely to keep the U.K. in the single market, which be a boon to the energy sector, said BNEF.
  • Stephen Crabb, a centrist candidate who backed the U.K. remaining in the EU, may have a low priority for climate ambition, as he favored compensation to businesses for green policies while serving as Wales Office Minister, the London-based researcher said. Yet he has pledged to maintain economic ties with Europe.
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