BFBEnergyPaper

In a recent letter to the President of the European Commission, José Manuel Barroso, theBritish Prime Minister, David Cameron, also made it clear that the EU needed to avoid placinga regulatory burden on British businesses:“It is essential that we avoid regulations or targets that will forcemember states away from their least cost decarbonisation pathwayor undermines a level technology playing field.”– David Cameron, Letter to the European Commission 3This paper seeks to highlight and calculate the impact of EU legislation on energy producersand users. This paper does not attempt to argue that the EU has been the main driverof energy prices, it cannot be disputed that UK Governments have, in some areas, goneconsiderably further than the EU in introducing expensive policies. Both unilateral UK actionand a tendency to ‘goldplate’ EU directives means that UK policy has, historically, accountedfor the bulk of, though not all, regulatory energy costs. However this should not cloudthe fact that the EU does play a role in driving up the cost of energy and has introducedexpensive policies.Some excellent research has been done to highlight how successive British Governmentshave driven up energy prices, both via their own initiatives and by ‘goldplating’ EU directives.Unfortunately relatively little research has been done on how the EU specifically is exertingan ever increasingly role in driving up the cost of energy.What is even more concerning for many British businesses is that this rise in energy bills isnot being felt everywhere. In other major economic areas, in particular the United States,the last few years have seen a marked decrease in energy prices as restrictions on accessingnew types of energy, especially shale gas, have been reduced.The research below shows that many energy intensive firms are now considering movingto areas where there are lower energy costs, a decision which would have a devastatingeffect on jobs in the UK. Those firms who can’t relocate face the prospect of closure, withthe same disastrous effect on employment. While expensive energy has had a particularlycorrosive impact on the manufacturing sector (especially the Energy Intensive Industriessuch as petrochemicals, metal founding, ceramics and glass manufacturing) it is worthremembering that high energy costs don’t just affect businesses; in 2012-13 alone theNational Health Service spent about £630 million on energy. 4Something needs to be done to help Britain’s manufacturers; however this report veryfirmly believes that the answer does not lie in subsidy or protectionism, but in devolvingdecision making powers back to the member states. Policy makers should aim to reduce theregulatory burden faced by energy producers and users. European leaders, in particular thePrime Minister David Cameron, have emphasised the need to simplify EU rules and targetsin order to reduce energy bills. There may be a case for the EU to set an emissions target- a target derived from the United Nations Framework Convention on Climate Change(UNFCCC) - but there is no need for the EU to micromanage member state’s energy policies.3 Letter from D. Cameron to J.M. Barroso, 4 December 20134 TaxPayers’ Alliance, Research Note 133: Energy and Water Bills in the NHS, 21 November 2013, found at9