On the morning of Friday 24 June, the UK awoke to a position in the world that had changed irrevocably. Overnight, the result of the referendum called by the prime minister, David Cameron, on the UK’s forty year membership of the European Union (EU) was delivered: 52% of those who voted had chosen exit. The UK, and the EU, are now in uncharted territory.
Within hours, the prime minister announced his resignation, adding further uncertainties to the political landscape; the UK currency nose-dived and the governor of the Bank of England urgently sought to calm the financial markets. Whilst nobody can be sure what is in store, the overwhelming weight of expert opinion predicts difficult times for the UK economy.
The referendum revealed a deeply divided nation: Scotland and Northern Ireland, London, university graduates and the under 25s, all voted strongly to remain. Wales and provincial England voted – in some cases narrowly – to leave.
chinadialogue’s London-based staff also exercised their right to vote. I betray no secrets when I say that we are deeply disappointed by the result. However, the task now is to understand what it means and what its impacts will be on the UK, on Europe, on climate policy, and on relationships with the wider world, including China.
The process of disentangling the UK from the EU will be long and costly. In formal terms, it will involve invoking Article 50, which sets out a two-year time frame for departure. The whole process is likely to take much longer: four decades of legislation will have to be examined, as will more than 12,000 regulations, to determine which will be kept and which discarded; powers will have to be repatriated, and a parliament that has in its majority supported remaining in Europe will now have to approve the many steps required to exit. At the same time, the UK will be obliged to seek new trading relationships, not only with 27 EU members, but with all the countries with which, until now, the UK has traded under EU agreements.
To add to the domestic complications, there is now renewed uncertainty about the future of the UK itself: since Scotland voted clearly to remain in the EU, there will certainly be pressure to renew a bid for independence that was narrowly defeated in a referendum only two years ago.
What will this mean for the UK’s foreign policy, its climate policy and its relationships with the wider world, including the US and China? Clearly the British state’s time and attention will be bound up in the aftermath of this political and economic earthquake for many years to come. This will make it a less active member of the international community, unlikely to resume its former leading position in, for instance, international climate diplomacy for some years.
Today, the only clear decision is that the UK will leave the EU. The terms of that departure and of the UK’s future relationship with Europe will not be settled for months, if not years.
We at chinadialogue have spent a decade working towards the profound economic, social and industrial transformations required to avoid catastrophic climate change, and towards a world in which nature and our own human species can thrive in a clean, healthy and productive environment. The UK has been proactive in climate policy inside the EU and beyond. It remains, for us, an urgent priority.
Like other EU member states, the UK’s climate policy has hitherto been bound into a wider European framework, as have the regulations that govern domestic environmental policies. In the past, the UK was a positive voice in Europe in support of climate action. Now the EU may have to revise its INDC to reflect the withdrawal of the UK and to consider whether other targets need to be reset. The UK’s departure will weaken and distract an EU already shaken by multiple crises. In this new landscape, there is a risk that climate and environmental policies will be seen as second order priorities.
The UK also has its own history of climate action: it signed the Kyoto Protocol in 1995 and passed its own Climate Change Act in 2008, committing the country to at least an 80% reduction in greenhouse gas emissions on 1990 levels by 2050. The UK will remain a Party to the UN Framework Convention on Climate Change, and a signatory to the Paris Agreement.
Domestically, the fifth carbon budget under the Climate Change Act will shortly be agreed; the UK’s Electricity Market Reform will continue to support low carbon energy and the commitment to phasing out coal by 2025 is unchanged. The UK will almost certainly ratify the Paris Agreement, although it will have to submit its own separate INDC.
None of this is immediately altered by the referendum vote. However, withdrawal will have implications for the UK’s role in the EU internal energy market, the EU Emissions Trading Scheme, the Effort Sharing Decision on climate action and the EU’s collective commitments to the UNFCCC.
The UK’s trading relationships have also been bound up with Europe for 40 years. Now it must choose between other options, from membership of the European Economic Area (EEA), the European Free Trade Association (EFTA) or neither. In addition, the UK will have to reach new trading relationships with the rest of the world, with implications for its role in clean technology markets, energy imports, and inward investment in the energy sector.
In recent years, the UK has pursued an active and positive relationship with China, seeking synergies in energy and climate policy, in low carbon development, and in the constructive combination of markets, innovation and technology. There is no reason to suppose that the UK would actively seek to downgrade such important relationships. But many have pointed out that a UK that has sacrificed its influence in the world’s largest trading bloc is a diminished partner, and one that will find it difficult to persuade others to consider it a priority.
Will we see a loss of momentum in China’s low-carbon technology investments in the UK? Earlier this year, the high-end UK automobile company Aston Martin signed a deal worth £50 million (450 million yuan) with China Equity to develop an electric sports car; the Chinese carmaker Geely promised an extra £50 million for research and development into a zero emissions version of the UK’s distinctive black cabs; and a UK bus company agreed a £660 million deal to build electric buses in partnership with China’s BYD. It remains to be seen if such ventures will prove as attractive if the UK is no longer a gateway to the EU.
Today, the UK needs £100 billion of investment in its energy sector to update its power stations and develop low-carbon energy. The referendum result may have negative implications for inward investment, including that from China, as the UK’s economy comes under pressure and its relationship with its major market in Europe changes.
The referendum result is likely to cast new doubts over one flagship UK-China project in particular — the £6 billion investment by China General Nuclear Power Corporation in the troubled plans for Hinkley Point C nuclear plant in Somerset, in south-west England. The project’s main developer is the French company, EDF, and China has promised to take a 33.5% equity stake. China also promised to provide finance new nuclear reactors at Sizewell in Suffolk, in return for being allowed to build and operate a Hualong reactor at Bradwell in Essex. Repeated delays have already shaken confidence in Hinkley Point C. Today’s wider uncertainties may prove fatal.
It is up to the people of the UK now to defend today’s climate and environmental gains and to push them forward. Despite the shock and unavoidable uncertainty that we feel this morning, this remains a key priority, if, as of now, one that is rather less straightforward than it was.