Post-Brexit Climate Tax Uncertainty

“Most of our climate change legislation raises taxes, and the government is unlikely to do anything that will reduce that status,” explains Will Todd, MD of which advises high-energy users such as the brewing, drinks and food manufacturing industries and NHS Trusts on energy efficiencies, benchmarking and tax implications.

“The government has used the EU as a convenient scapegoat for the climate change taxes that have helped make various UK industries less competitive, whereas in reality that tax burden is to a large degree UK imposed and within the power of our government to change. They just aren’t minded to do so because it’s a big revenue spinner.”

Will ESOS change post-Brexit?

“The ESOS (Energy Savings Opportunity Scheme) was implemented in response to an EU directive and seeks to drive businesses towards energy efficient behaviour and practices – think of it as ‘ISO50001-Lite’. But it raises no taxes, so its future in four years’ time when it’s next due will depend on any value that the government perceives in ESOS at that time.”

“ISO50001 is most likely to be the common ground across the international community.”

The UK has been a key force in the liberalisation of energy markets in the EU, but the question stands as to whether we will be allowed to continue participate in the Energy Union. In either event it is unlikely we will have a say in the formulation of the rules.

Brexit could mean that the UK will be released from EU renewables targets and this will give the government more freedom to choose how to support – or phase out – renewable schemes.

The EU Emissions Trading Scheme EU ETS affects large energy users and they will be keen to know the impact.

“It is possible the UK may continue to operate in the EU ETS as do Norway, Lichtenstein and Iceland, but if the UK doesn’t participate then some arrangements will need to be made to ensure companies with large carbon reserves don’t miss out in the transition,” explains Will Todd.

“Current international markets and currency uncertainties are likely to trigger short-term rises in energy costs, but for Brexit to have a long term impact on UK prices, it would need consequences like export tariffs on EU gas flowing to the UK.” he adds.