UK must play ‘careful game’ to balance green policy and new trade deals

Upon the release of a new Brexit: environment and climate change” report today (14 February), the Sub-Committee’s chair Lord Robin Teverson urged the UK Government to ensure that any new trade deals create “equivalencies” for UK products and services to ensure that businesses can still trade freely within Europe.

Teverson said that a stable regime post-Brexit would allow legislation to act with more flexibility as more knowledge on environmental impacts arise. This includes generating products and services that would match some of the European Union’s (EU) flagship green agendas such as the Emissions Trading System (ETS) and the Circular Economy Package.

“Once we hit midnight on day one of Brexit, we are free from the EU and we’ll rely on equivalency immediately for what we export,” Teverson told edie. “There will inevitably be changes and the policies for products and services will likely move apart in the long-term. How we trade with other parts of the world could make life more difficult.

“It will be an issue and could affect our ability to access the EU Single Market. It’s a difficult and careful game when negotiating trade deals but a stable regime would allow use to be more flexible to changes.”

The recent Government white paper on Brexit revealed that the UK would no longer remain a member of the Single Market once it leaves the EU. Access to the Single Market could still be granted through a membership with the European Economic Area (EEA) and while no agreement has been made on this, current EEA requirements to adhere to the principle of the free movement of people will likely prove a stumbling block.

This leads to the likelihood that the UK attempts to strike a free trade agreement with the EU, which would not oblige the UK to preserve or adopt environmental acquis. But access to the trading system with Member States under this agreement would mean that the UK would have to align or comply with policies in areas such as vehicle emissions, energy efficiency and recyclability to current EU standards.

The risk, Teverson argues, is that any trade deals with United Nations members could see the environmental performance of policies and products downsized from the “aggressive and intensive” EU standards – as highlighted in a report this week from Green Party Co-Leader Caroline Lucas.

Quick-fire deals

Teverson did not speak directly about the potential global green policy impact of new US President Donald Trump, but noted that a lot of climate and trade agendas are set at a state-level in the US. However, the President’s penchant for stripping back environmental legislation could allow UK businesses to bypass slack production standards if a trade deal, which focuses on productivity rather than performance, is established with the US.

In the UK, former Deputy Prime Minister Nick Clegg has already voiced these concerns, warning that hastily introduced trade deals with the US and Trump could lead to “harsh compromises” on issues including the environment and food safety.

It is therefore important, according to Teverson, that the UK aligns itself with countries that have ambitious climate aspirations to ensure the environmental standards remain high, and access to trade deals with the EU won’t erode as a result.

“We pressed a large number of witnesses for benefits [of new trade deals] and it was difficult to pin these down,” Teverson added. “Regarding trade, standards and chemicals most would confirm that they would still look to get access to European markets by producing equivalents.

“China is trying to be the aspirational leader and maybe this would tie-up with our trade opportunities as well. But I think we have to give a lot of work into finding new natural allies.”

Key areas of EU regulation that the UK would have to consider when attempting to strike trade deals outside of Europe include the REACH Regulation – protecting human health and the environment from risks posed by chemicals – the Classification, Labelling and Packaging Regulation and the Ecolabelling Regulation.

In the EU Energy and Environment Sub-Committee’s report, the Chemical Industries Association’s chief executive Steve Elliot highlights the importance of free trade for goods claiming that “some 60% of chemical exports go to the continent and 75% of chemical imports come from the continent”. Any trade deal that waters-down standards relating to chemical productions would limit UK exports to Europe due to a failure to comply with REACH Regulations.

Another witness in the report, the Grantham Institute, also argues that adopting EU regulations relating to energy efficiency, vehicle fuel standards and product standards would be the “sensible choice”.

Closing-loops

And when it comes to resource efficiency, the Circular Economy Package could also add extra complexity to the UK’s ability to trade. The European Academies Science Advisory Council is pushing for the European Commission to promote the circular economy to international trade negotiations. If successful, the UK may be forced to produce closed-loop equivalencies to encourage trade.

Members of the European Parliament’s Environment Committee have moved to increase draft EU recycling and landfill targets that had been lowered by the European Commission. A 70% recycling target could be set for 2030.

Sue Armstrong-Brown, the chair of the UK’s Circular Economy Taskforce – a business-led group convened by Green Alliance – has previously claimed that the only way for Britain to open up trading streams with the EU after it leaves the bloc will be to create much more recyclable, repairable and reusable products and services. The UK was thought to be complying with the Package’s lower 65% recycling target for municipal waste – although this could drop by roughly 10% in the near future as better data management is attained.

But, Defra minister Thérèse Coffey has described the old 65% goal as “too high to be achievable”, despite suggestions that the UK would be an active member in the negotiations of the package. Coffey has criticised the recycling target in particular, favouring re-use instead. Indeed, this has often been cited as a key factor for England’s recycling rates slowing significantly over the past three years. 

However, the real fallout from leaving the EU could come from the ambitious framework established by the European Commission’s Action Plan for the Circular Economy. The Action Plan creates a pathway to implement eco-design and second material standards for products and materials. This is extended to electronics (e-waste) and plastics.

Funding streams

Last month, the European Commission secured a Circular Economy Finance Support Platform with the European Investment Bank (EIB) in order to help European Businesses accelerate closed-loop product deployment. Once the UK has formally relinquished its role as a Member State it is unlikely to receive this financial support.

The House of Lords report found that the UK had been a huge recipient from EIB loans. Since 2000, more than €37bn has been funnelled into the UK in EIB loans for energy infrastructure and low-carbon development alone.

Teverson admitted that these funds won’t disappear completely, but that the UK Government will have to incentivise the low-carbon market for UK businesses to remain competitive. The new Industrial Strategy places an emphasis on increasing exports by opening funding and collaborative opportunities to accelerate the low-carbon transition, but Teverson wants to see more long-term commitments to this pledge.

“The EIB funds are unlikely to totally disappear, but it is unlikely we’ll get the same level of funding and how that is going to be replaced will be a real challenge,” Teverson added. “Research and development is a positive area of the Industrial Strategy and the recognition of our science and technology industries should be applauded. But whether these relationships will be stronger over a longer course is another matter.”

Matt Mace