Climate change to feature in Brexit battle over 'dynamic alignment'

Climate change looks set to become a point of contention in post-Brexit trade talks, with the EU pushing for much stricter commitments than the UK appears willing to give.

Both sides have published draft agreements which, while similar in many respects, differ in many important areas including the future relationship’s legal structure, the concept of “dynamic alignment,” and fisheries.

Dynamic alignment is the idea, supported by Brussels and opposed by London, that the UK should be obliged to remain in lockstep with EU standards in key areas, even after the Withdrawal Agreement expires and it has fully left the bloc. Judging by the EU’s draft deal, environmental regulation will be a key part of this.

The EU document — drafted by the European Commission and published after consultations with EU lawmakers and the bloc’s national governments — dedicates an entire section of the future economic partnership with the UK to climate change, precisely in the provisions aimed at guaranteeing a “level playing field” in trade.

As well as an affirmation of the two sides’ objective to reach climate neutrality by 2050, the EU is also seeking “non-regression” in the UK’s level of climate protection, the draft suggests.

“A Party shall not adopt or maintain any measure that weakens or reduces the level of climate protection provided by the Party’s law and practices, and by the enforcement thereof, below the level provided by the common commitments and targets applicable in the Union and the United Kingdom at the end of the transition period, and by their enforcement,” it reads.

It goes on to demand some degree of future alignment from the UK: “Where both Parties have increased … the level of climate protection … neither Party shall weaken or reduce its level of climate protection below a level of protection which is at least equivalent to that of the other Party’s increased level of climate protection.”

From the perspective of the EU — where a major set of energy, transport and agriculture policies is expected to be overhauled in the coming months under the Green Deal — this would be a way to guarantee its businesses can continue to compete fairly with British rivals.

UK approach

But that approach won’t be an easy sell across the Channel. In its own approach to the negotiations, the UK government has stressed that it would not agree to measures in areas such as climate and environmental law "which go beyond those typically included in a comprehensive free-trade agreement."

This suggests that for the UK, including a reference in the trade deal to the Paris Agreement — a global climate accord signed in 2015 — would be enough to prove its commitment to fight against climate change. The EU has done so in other trade agreements, such as those with Canada and Japan.

Persuading the UK to commit itself to non-regression and future regulatory alignment — including on carbon-pricing measures — will be a much harder nut for EU negotiators to crack.

The UK won a concession from the EU in the earlier round of Brexit talks that yielded the now-active Withdrawal Agreement. At the UK’s insistence, non-regression clauses on environmental protection were moved from that binding treaty into the non-binding Political Declaration that accompanied it.

Nevertheless, the Political Declaration is meant to guide this phase of trade negotiations, so the UK must still back away further from this commitment, if it wants to avoid it being included in the binding trade deal.

Another area of difference is in the structure of the deal. Whereas the EU wants all parts of the future relationship to be covered by one framework, the UK wants a series of separate agreements.

The UK is “open to considering” an agreement on energy that, among others, could cover carbon pricing and climate change, its approach reads. “This agreement should recognize both parties’ right to regulate to meet our respective climate goals.”

Carbon pricing

Carbon pricing could be an area of particular difficulty, as it has a direct impact on the costs faced by businesses and is a policy area that could see changes on the EU side — in scope, pricing level or both — in the coming years.

The EU’s Emissions Trading System caps carbon emissions for airlines, power generators and heavy industries, and imposes a price on any emissions above those limits.

The UK is due to leave the ETS once the Withdrawal Agreement expires. In the budget published last week, the government said it would aim to introduce a national emissions trading system, while also preparing “alternative legislative plans” for a carbon emissions tax.

This is not clear enough for the EU, which insists that any future UK mechanism should be “of at least the same scope and effectiveness as that provided by the EU Emissions Trading System.”

Here, too, the concept of dynamic alignment comes into play. The commission is currently exploring the possibility to extend its carbon market to sectors such as shipping, buildings and transport. It might insist on the UK being legally obliged to follow its lead to maintain a level playing field for these sectors.