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Green Technology - what the Government giveth, so Brexit taketh away
14 Sep, 2018

Two industrial initiatives, the Green Task Force Alliance and the EURIS report on the effects of a no-deal Brexit, were launched on the same day (12 September 2018). The interrelation between favourable trade policy with Europe and the development of low carbon energy technologies is clear, as L4E Secretary and technical journalist Andy Pye reports.

 

In reverse temporal order, the IET in Savoy Place, London saw the evening launch of the Green Alliance Task Force, which aims to focus on the use of smart technologies to boost the resource efficiency of UK businesses. In recognition of the economic divide highlighted by the result of the Brexit referendum, it is also hoped to springboard the economic prospects of the traditional manufacturing regions.

What are Smart Technologies?

Smart technologies adapt automatically and modify their own behaviour by taking input from sensors and drawing inferences from rules. They are capable of learning by using past experience to improve their own performance, anticipating, thinking and reasoning about what to do next. Such smart technologies are increasingly found in automated manufacturing industries, medical diagnosis and housing design.

Smart technologies are based on what is sometimes called the fourth industrial revolution, or Industry 4.0, or the Internet of Things. It involves adding artificial intelligence to once-dumb devices, such as industrial components, wearable devices such as wrist-watches, and white goods in the home.

Steve Brambley, chief executive of GAMBICA, the Trade Association for Instrumentation, Control, Automation and Laboratory Technology (Tech Task Force member), said: “Smart technology can be used to reduce energy consumption, eliminate waste and decrease carbon emissions. As well as being environmental imperatives, these are important goals for the UK’s long-term competitiveness.”

Unfortunately, while 80% of UK manufacturers say industry 4.0 will be a reality by 2025, only 11% expect to be ready to capitalise on it. In launching the scheme, Claire Perry, Minister of State at the Department for Business, Energy and Industrial Strategy, emphasised that the UK has a long history of brilliant ideas, but is less successful in holding onto the intellectual property (IP), which often leaks overseas. Perry describes her role as "the most exciting in Government, being at the coalface of technological innovation."

To fill the policy vacuum, this new Tech Task Force is bringing together businesses committed to smart clean growth to work out where policy can accelerate the adoption of technologies that could help businesses across the UK grow their profits by reducing their environmental impact. 

What is there to dislike about such an initiative, eagerly supported by central Government, which aims to counter climate change and environmental damage. among the top five threats to businesses, never mind poised to threaten the very existence of humanity?

The EURIS report

Earlier in the day, EURIS, an advisory body of 13 trade organisations representing industrial product suppliers covered by the Single Market, released the results of a survey conducted amongst its members by the UK Trade Policy Observatory of the University of Sussex. The vice-chair of EURIS is the aforementioned GAMBICA's Steve Brambley, while the Chair is Dr Howard Porter, CEO of BEAMA, which represents manufacturers of electrical infrastructure products and systems. EURIS collectively represents companies turning over £148 billion and employs 1.1 million people.

"Securing a competitive UK manufacturing industry post-Brexit" amounts to a hard-hitting condemnation of the impact of a no-deal Brexit. Such an outcome, the report concludes, will cause severe damage to industry and must be avoided.

What has the EURIS report to say specifically on Low Carbon issues of the type being promoted by the Green Task Force Alliance? The manufacture of low carbon energy products, the report laments, is one area where post-Brexit trade barriers could slow down the UK’s ability to capitalise on an innovative growth sector. Examples of strengths in the UK include smart grids, energy storage, offshore wind, electric vehicles and solar PV, amongst others.

Government support for renewables and cleantech has underpinned this growth by increasing deployment and allowing the establishment of cost-effective cross-border supply chains, whereby the UK imports components such as solar panels, wind turbines and energy storage systems. The EU accounts for around 64% of all low-carbon equipment imported by the UK. At the same time, the EU is also the UK’s primary market for low carbon equipment exports (55%), which includes growth industries like electric vehicles.

Failure to secure favourable trading arrangements could increase the cost of low-carbon products used within the UK while raising barriers to access our primary market, hampering deployment in the UK and affecting our competitive advantage to capitalise on these sectors post-Brexit.

EU Rules of Origin requirements could also play a significant role. Small innovative cleantech companies may lack the expertise to quickly prepare for this additional administrative burden, while the additional costs and general complexity could deter companies from considering their products export potential.

In a ‘no–deal’ WTO scenario, the focus for low carbon goods will switch to the adoption of the WTO Environmental Goods Agreement, which is a plurilateral deal currently being negotiated by 46 WTO members. This will aim to bring tariffs on environmental goods down to zero. However, it is not comprehensive, as it does not include cleaner vehicles and some low-carbon equipment used in heating, insulation and lighting. Furthermore, the agreement is currently stalled due to opposing demands from the EU and China. In the short to medium term, it would be better to be able to rely on a bilateral agreed trade agreement on low carbon products with the EU, rather than depending on plurilateral negotiations to be completed.

Export of Electric Vehicles

The EU currently accounts for a large proportion the UK’s export in electric and hybrid vehicles. It is currently unclear what tariffs the UK market may face on leaving the Customs Union, however, failure to secure a trade agreement could possibly see member states apply the Most Favoured Nation tariff of 10% on UK imports of electric and hybrid vehicles.

Britain has one of the fastest-growing markets for electric vehicles in Europe, with sales of electric or hybrid cars accounting for 8% of the market in August. The Financial Times reports (13 September 2018, paywall) reports that Britain’s departure from the EU threatens the country’s flourishing market for electric vehicles, with a no-deal scenario undermining incentives for carmakers to push sales in the UK. Government documents outlining a no-deal exit from the bloc say that cars sold in the UK would no longer count towards manufacturers’ EU CO2 targets, and so will reduce one of the reasons to sell battery vehicles in Britain.

This could cause carmakers to shift their efforts to selling electric cars in other European countries, driven by EU member state commitments to stop the sale of new petrol or diesel cars within the next two decades.

”While the UK will have its own CO2 targets, carmakers are likely to be more concerned to avoid EU fines — which have the potential to run into billions of euros— than smaller penalties in Britain.," says Ian Henry, an independent analyst who produces UK market forecasts for the industry’s trade body, the SMMT. "If the penalties are larger in the EU, the logical inference could be if they have to focus on selling these things into the EU they may decide it’s not worth trying to sell electric vehicles into the UK.”

Even more alarmingly, according to The Independent of 13 September 2018, a report published by the Government itself as part of its Impact Assessment suggests that the export of all vehicles from the UK to the EU may even be under threat.

EU Funding in Low Carbon Products

In addition, R&D and support for commercialisation of innovative low carbon energy products have been helped by EU funding. EU Regional Development Funds, Horizon 2020 and direct financing from the European Investment Bank have all helped to demonstrate the commercialisation of UK technologies and skills. It is reassuring that Government has so far committed to maintaining such funding out to 2020, but there is little clarity around what might then replace such funds.

Aside from trade concerns, the EURIS report adds, a failure to maintain energy system regulations, decarbonisation targets and environmental standards after Brexit will also impact the low carbon product manufacturing market. The UK has been an influential force in the design of the EU’s current energy policy, resulting in the development of a secure, and affordable low carbon energy system across Europe. The UK’s energy system is designed around European Network Codes and energy trading coupling systems that make up the Internal Energy Market. In addition are the UK’s commitments as part of the EU Emission Trading Scheme (EU ETS).

So far, the UK has provided strong indications that it wants to maintain alignment to these systems, remaining part of the EU ETS until at least 2020 and exploring the strongest possible continued co-operation with the Internal Energy Market. In the meantime, EU energy system integration is set to become yet more comprehensive with the current Clean Energy Package, which will likely come into force as the UK departs the EU.