BFBEnergyPaper

2.4The rising costs of EU energy regulation“This massive tide of red tape also means higher administration andmanufacturing costs which in turn… acts as a gigantic brake upon theentrepreneurial spirit.”– Owner of a medium-sized manufacturing business based in East EnglandIn addition to applying upward pressure on energy prices, EU energy laws also place asignificant regulatory burden on British firms. There is mounting evidence that the UK hasbeen particularly badly hit by the compliance costs that have stemmed from EU energylaws, in part down to the UK’s failure to secure exemptions or tendency to go beyondminimum EU requirements.The consequences of complying with a mounting complex regulatory burden has beennoted by firms with high energy demands:“The EU’s stringent hazard based / precautionary approach to regulation cancause serious implementation problems for companies.”– British Ceramic Confederation 39It is possible to calculate the cost of EU energy laws by looking at detailed HM GovernmentImpact Assessments (IAs). These are official documents produced by departments toaccompany new regulations, stating how far the specific recommended policy meets theGovernment’s objectives and to calculate the potential costs and benefits. While there hasbeen a noted failure by the Government to place all the IAs in one repository (previousattempts to compile such a collection have had notable omissions) it is possible to selecta large sample which includes as many relevant IAs as possible. Our methodology for bothselecting relevant IAs and analysing them can be found in the Appendix.The EU and British Government both claim that these directives bring benefits which oftenoutweigh the costs, but this claim has been widely disputed, not least by Open Europe. 40There is a lot of evidence to show that the benefits have been exaggerated: for example theETS Impact Assessment said the benefits were dependent on a scenario “where EU actionis pivotal in achieving a global deal”. 41 Clearly this was a flawed assumption. In other IAs theprojected benefits are based on an attempt to quantify predicted improvements in theenvironment.By looking at the total cost to British business via these IAs we can start to get an idea of thetotal cost of EU regulations, with a detailed breakdown of the costs and benefits providedin Table 2.Energy Policyand the EU39 British Ceramic Confederation, Response to the call for evidence on the Government’s review of the balance of competences, 17January 2014, p.1.40 Open Europe, Top 100 EU regulations cost the UK economy £27.4 billion a year – and costs outweigh benefits in a quarter of cases,21 October 2013, found at 41 Government Impact Assessment of the EU Climate and Energy package, found at 20