Rebuilding UK-EU Relations in the age of Decarbonisation and Digitalisation
The next British Government will find itself in a world where our relationship with Europe remains a political taboo. In the years following Brexit, Europe has slid down the priority issues for British voters, behind the economy and health amongst other issues. There seems to be little appetite for re-opening old wounds on the relationship with Europe, and any steps towards a closer relationship are likely to be met with staunch criticism from Brexiteers in Westminster and the press.
In this context, a Starmer-led government would face a dilemma – the political zeitgeist is firmly against steps towards further European integration, but in parallel, Labour has a clear desire to build closer ties with Europe in strategically important sectors such as defence and security, migration and climate change.
Behind the scenes, officials in Brussels and London think that a Labour government could usher in a new phase of cooperation, with a greater ambition to mend previous ties. Labour’s domestic political strategy, for now, is to draw a clear red line on re-joining the Single Market and Customs Union, in the hopes that this provides cover for piecemeal co-operation on other specific issues, such as a the mobility deal for students and young people, which just last month was rejected by No.10.
Starmer, as a former Shadow Brexit Secretary, was key in putting the case for rejoining the EU onto the party’s agenda during the Corbyn years, and loudly made the case for a second referendum, showing no lack of personal appetite for closer cooperation.
Net zero and tech are two key sectors, with significant overlap, where we are likely to see this dynamic play out.
The word from across industry is that regulatory alignment with the EU is for the best, and many areas of UK climate, environment and technology policy remain relatively closely matched to the EU’s. There are clear open goals, which will support Labour’s ambitious plans for decarbonisation, and growth in the economy.
For example, the overdue UK Green Taxonomy, aligned with the EU’s, could help to incentivise investment in low-carbon technologies, whilst reducing barriers to overseas trade. A UK Green Taxonomy would provide a common framework for investments defined as environmentally sustainable, and hence create a clear signal to invest in sustainable projects across Europe and in the UK.
Linking the UK Emissions Trading Scheme with the EU’s scheme would also eliminate a significant risk for British industry, many of whom are concerned about red tape and tariffs on carbon-intensive goods. These schemes place a carbon tax on goods and processes is some highly emitting sectors, with the aim of incentivising low-carbon alternatives. As long as the two schemes remain isolated, differences in the carbon price present a serious risk for the trade of carbon-intensive goods such as steel and glass, both of which are critical aspects of the supply chain for tech and clean energy industries.
There are also longer-term opportunities for a UK-EU agreement on Critical Raw Minerals – again vital to the future of the green and digital economies.
A UK Green Taxonomy, and linkage of the UK and EU Emissions Trading Schemes, would be quick wins for a potential Labour Government to get the ball rolling on their net zero ambitions. More than that though, it could show the EU that the UK is prepared to invest in the relationship following a turbulent decade. Politically, this could allow a Labour Government to gauge public opinion on cooperation with the EU. Beginning with these low-hanging pieces of regulatory alignment, where public support is apathetic, would be an effective legislative and political strategy.
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