Blowout Week 130 – Brexit Special

The news this week is totally dominated by the Brexit vote and so is this edition of Blowout. How will Brexit affect the UK, the EU and the world economies? Will there be a sea change in UK energy and climate policy? How long might it take to complete negotiations for an orderly exit? Will the EU now start to unravel? Will the UK itself start to unravel with a Scottish independence vote? All this and more below:

Slate:  Brexit Could Trigger the Breakup of the United Kingdom

Scotland last held an independence referendum in 2014, voting 55 to 45 percent to remain in the United Kingdom. Sturgeon’s Scottish National Party has maintained that it would hold another referendum if there were a “significant and material change in the circumstances that prevailed in 2014.” Thursday night’s vote was about as significant a change as you can imagine. The last time around, EU officials were skeptical about the idea that Scotland could declare independence and simply remain a member state, suggesting that as a new country, it would have to apply for membership and wait its turn along with Albania, Serbia, and other wannabe members. It seems very possible, though, that the eurocrats may be friendlier to the notion of Scotland keeping its membership this time around, if only to stick it to the English. The consequences for Northern Ireland, which voted 56 to 44 percent to remain and is the only part of the U.K. that has a land border with the EU, could be even more serious. EU integration has been critical to the peace that has mostly prevailed in the region since the 1990s, after years of sectarian violence. Thanks to the EU, Northern Ireland has been able to remain under British rule, while still enjoying free commerce and unencumbered travel to the Republic of Ireland. Additionally, Northern Ireland has received billions of pounds in funding from the EU, helping it attract growing tourist, IT, and film production industries, after decades of economic stagnation.

Independent:   Scotland leaving EU is ‘democratically unacceptable’, says Nicola Sturgeon

Nicola Sturgeon has put Scotland on course for a new independence vote by autumn 2018 to prevent the country following the rest of the UK out of the EU, as the shock waves from the Brexit vote threatened to bring an end to the United Kingdom. Scottish voters backed Remain by 62 per cent to 38 per cent, and the First Minister said it would be “democratically unacceptable” if the country was taken out of the EU against its will. While not calling for a referendum outright, the Ms Sturgeon said that the Scottish Parliament would begin preparing legislation for a second vote and indicated that it was “highly likely” that Parliament would back plans for a fresh plebiscite. “If Parliament judges that a second referendum is the best or only way to protect our place in Europe it must have the option to hold one within that timescale,” she said in a statement in Edinburgh on Friday morning. “That means we must act now to protect that position.”

Independents:   Northern Ireland’s Remain vote prompts Irish union call

A UK exit from the EU in the context of Northern Ireland voting to Remain must prompt a poll on Irish unity, Sinn Fein has demanded. Sinn Fein’s national chairman Declan Kearney said the question of Northern Ireland remaining as part of the UK had now been brought into sharp focus. “We have a situation where the north is going to be dragged out on the tails of a vote in England,” he said. “That is a huge democratic deficit for our society, building on the existing democratic deficit of partition. The British Government have now forfeited its mandate to represent the north of Ireland in relation to the European Union.” He added: “We now have a situation where Brexit has become a further cost of partition, a further cost of the Union and Sinn Fein will now press our demand, our long standing demand, for a border poll.”

USA Today:   Brexit spurs right-wing calls for other nations to exit the EU

The United Kingdom’s historic vote to leave the European Union is emboldening far-right, anti-immigrant parties across Europe to push for their own referendums to leave the political bloc as an expression of independence and freedom. In France, Germany and the Netherlands, anti-EU leaders hailed Britons for voting to leave the 28-nation union. “Victory for Freedom! As I have been asking for years, we must now have the same referendum in France and EU countries,” Marine Le Pen, the leader of France’s anti-immigrant National Front party, wrote on her Twitter account. Beatrix von Storch, leader of the anti-immigrant and Euro-skeptic Alternative fur Deutchland party also celebrated with a tweet thanking Nigel Farage, leader of the anti-immigration UK Independence Party, which campaigned for the “Brexit.” Geert Wilders, the anti-immigrant and anti-Muslim member of the Dutch parliament and Freedom Party chairman, tweeted: “Hurrah for the British! Now it is our turn. Time for a Dutch referendum! #ByeByeEU” Similar calls have taken place in Denmark, Italy, Greece and Sweden, a sign of the deep disaffection for the EU at a time when European countries are coping simultaneously with weak economies and a flood of migrants who are taxing their social welfare systems.

BBC:  Brexit puts UK on new economic path

With the UK again able to tailor financial regulation to its own needs, the City of London can prosper outside the EU. The most-traded currency in the City is the dollar. But the UK is not a state in the US – it has not had to become the 51st state in order to maintain its high share of international financial business denominated in dollars. Securities issued in many nations and in more than 100 currencies are bought and sold in London, and that will continue after Brexit. Of course, when they export to the EU, British companies must comply with EU regulation, whether the UK is in the EU or not. But is there any reason why the UK should not seek an arrangement with the EU like that of, say, the US, Australia or Canada? They flourish without belonging to the Single Market. Arguably, the UK does need special deals with the EU in such areas as cars, aerospace and food, but it should pursue its own interests. On no account must the UK pay any money to the EU for access to the Single Market, as Norway and Switzerland do. Nations benefit from free trade. The acme of free trade is indeed the absolute, unconditional and unilateral free trade pursued by Singapore and Hong Kong. There must be no doubt about Britain’s ability to establish a successful trade policy of its own outside the EU.

New York Times:   How ‘Brexit’ Will Affect the Global Economy, Now and Later

The immediate effects of “Brexit” will flow almost entirely through financial markets. Economic shifts happen slowly; financial shifts happen overnight (literally, in this case). The truth is that the stock market declines that took place worldwide Friday are nothing to be too concerned about. The British stock market, as measured by the FTSE 100 index, was down 3.2 percent late Friday afternoon in Britain, above its levels of mid-June. That suggests that investors do not envision the Brexit hit to hammer corporate profits in the near future. But what is happening in the bond and currency markets suggests bigger problems are brewing. The 7.6 percent drop in the British pound against the dollar is indeed a seismic move — major currency pairs just don’t do that. Since 2012, the average daily move in the pound-dollar exchange rate is 0.35 percent. This move is 21 times that. Combined with a rally in British government bonds (and consequently lower interest rates), the currency shift will mean a burst of inflation for British consumers as imported goods become sharply more expensive. It will also make the nation’s export industries more competitive (for the moment, at least).

Business Insider:  Brexit will cause wide-spread ‘contagion’ in Asia

Britain’s vote to leave the European Union is going to cause widespread “contagion” across the globe, with Asia’s markets and economies being hit hardest, according to research from Japanese bank Nomura. Being a Japanese bank, Nomura is clearly heavily focused on the Asian markets, and as a result of the Brexit vote has not only predicted more monetary easing, but also cut all of its forecasts for growth in Asia’s main economies in 2016 substantially. Here is the chart from the bank:

Australian:  No lasting global Brexit impact

Britain’s vote to leave the European Union won’t have a lasting impact on global financial markets and interest rates, said John Edwards, a member of the Australian central bank’s policy-setting board, Friday. In an email to The Wall Street Journal, Mr Edwards said it was a “very bad and misinformed decision for the UK,” that could see years of weaker UK growth because of uncertainty over investment, and especially over the future of London as a financial center. “But I also think most of the pain and difficulty in this decision will be borne by the UK and not by the rest of the world. The UK is not a sufficiently large economy that a set-back to growth there will have much influence elsewhere.” Mr Edwards added that even prolonged negotiations over the UK’s exit from the EU, or a long leadership crisis, shouldn’t affect trade, investment or output across the remainder of the EU, China, the U.S. or Japan.

Bloomberg:   Oil Tumbles After Brexit Vote

Oil tumbled with most commodities amid a global flight from risky assets after the U.K. voted to leave the European Union. Whether the rout lasts depends on how world governments deal with the turmoil. Futures dropped 4.9 percent in New York and London, the biggest decline in four months. Global equities plunged, while safe-haven assets such as the dollar and gold surged. UBS AG said traders will soon focus again on the re-balancing of the crude market as a global surplus fades, while weighing any lasting impact from the U.K.’s decision on the world economy and oil demand. “The initial impact is all about risk aversion,” said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. “We’re getting big moves now but there will probably be little impact, if any, in the longer term.” West Texas Intermediate for August delivery dropped $2.47 to $47.64 a barrel on the New York Mercantile Exchange. It’s the biggest decline since Feb. 9. Brent for August settlement fell $2.50 to $48.41 on the London-based ICE Futures Europe exchange. It’s also the biggest drop since Feb. 9.

BBC:  Brexit throws uncertain EU off balance

A while ago France’s National Front (FN) leader Marine Le Pen said that if the UK voted to leave the EU, it would be like the Berlin Wall falling in 1989. She was right. Brexit is a momentous event in the history of Europe and from now on the narrative will be one of disintegration, not integration.That does not mean that the EU will fall apart, or even that another country will leave, which is highly unlikely in the foreseeable future. But the centrist politicians who run nearly every EU member state will henceforth be on the defensive against the populist forces who oppose them and the EU. At the top of the EU there are two competing approaches to the future of Europe. The European Commission, led by President Jean-Claude Juncker, believes in further integration. It generally seeks to respond to crises by pressing member states to accept “European” solutions that involve more powers for EU institutions.But the President of the European Council, Donald Tusk, takes a different line. In recent weeks he has repeatedly warned that more centralisation would turn citizens against the EU. “Obsessed with the idea of instant and total integration, we failed to notice that ordinary people, the citizens of Europe, do not share our Euro-enthusiasm,” he said.

Guardian:  EU governments pile pressure on UK to leave as soon as possible

EU governments have piled pressure on the UK to leave the bloc as soon as possible, saying talks on the UK’s exit must begin promptly and urging a new British prime minister to take office quickly. As Europe scrambled on Saturday to limit the damage from the momentous Brexit vote, however, there seemed little it could immediately do to force Britain to speed up the pace of its departure from the 60-year-old bloc. Meeting for emergency talks in Berlin, foreign ministers from the EU’s six founding member states demanded the earliest possible start to the Brexit process. France’s foreign minister, Jean-Marc Ayrault, said Britain must trigger article 50 of the Lisbon treaty, the procedure for leaving the EU. The German foreign minister, Frank-Walter Steinmeier, said the ministers “join together in saying that this process must begin as soon as possible, so we don’t end up in an extended limbo period”. The German chancellor, Angela Merkel, speaking separately at a news conference in Potsdam, said that it “shouldn’t take forever” for Britain to deliver formal notification that it wants to leave the EU, but she “would not fight over a short period of time”. Much as the EU might like Britain to go fast, there are few legal means to compel it to start the process of leaving. “There is no mechanism to compel a state to withdraw from the European Union,” said Kenneth Armstrong, professor of European law at Cambridge University.

Radio Free Europe: Russia Revels In Brexit Vote

Russian politicians, journalists, and nationalists are reveling in the United Kingdom’s historic vote to leave the European Union, banking on a Brussels more amenable to Moscow, and casting Brexit both as a sign of Europe falling apart at the seams and of waning U.S. influence. Russian television stations spoke of a victory for “Little England,” cast the referendum as a “real nightmare for Brussels,” and carried images of Nigel Farage — the leader of the populist, anti-immigration U.K. Independence Party (UKIP) — drinking beer and declaring a “victory for ordinary people, a victory for decent people.” Russian ultranationalist Vladimir Zhirinovsky hailed the vote as a “heroic deed” by the British people, telling journalists that “agricultural, provincial, working Britain has said ‘no’ to a union created by the financial mafia, globalists, and the rest of them.” The flamboyant politician predicted that “after the British leave, NATO will collapse, Schengen, the euro” before declaring: “Long live the ruble and the development of Russian ties with all the democratic countries of Europe!” Communist Party chief Gennady Zyuganov, too, prophesied a chain reaction in Europe, predicting that France, Italy, and the Netherlands would be next to pull out of the EU.

Washington Post:  Why an E.U. without Britain is bad news for the fight against climate change

One oft-voiced concern is that the departure of Britain — which has been a climate leader within the bloc — could weaken the E.U.’s climate ambitions, on top of the general chaos expected to ensue as Brexit now unfolds (which will surely distract all parties from climate policy). “The UK has generally argued for stronger action on emissions within the EU, so its absence will make it more difficult to counter the arguments of those Member States, such as Poland, which want slower and weaker cuts in emissions,” said Bob Ward, policy and communications director of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science. And then there’s the added complexity and uncertainty that now arises when it comes to determining how the E.U. will meet its ambitious climate targets and orchestrate the complex dance it must undertake to formally join the Paris climate agreement, said Andy Jordan, a professor at the Tyndall Center for Climate Change Research at the University of East Anglia in England. But with Britain’s pending departure, it’s not clear how this is going to work.

PV Magazine:  What Brexit means for UK’s renewable energy development

The UK has recently abandoned (or drastically cut in the case of PV FITs) its past renewable energy subsidy schemes and the country’s electricity sector post-2014 is governed by the Electricity Market Reform (EMR). Based on the EMR, all electricity investments are publicly subsidized: the fossil-fuel sectors receive subsidies via the capacity market and the renewable energy sector via the Contracts for Difference (CfDs) scheme. The implementation of the EMR in the last two years has shown the government is not interested in renewable power development. It has run only a CfDs auction dedicating a fraction of funding compared to the capacity market, while in addition it is about to support the building of a nuclear power plant, further supporting the centralized energy system of the past. What the referendum result adds is that it frees the UK government from its obligation to meet the EU-set renewable energy targets. At the same time, energy markets in the rest of Europe move in opposite direction than the UK. EU countries work towards an internal EU energy market, build electricity interconnectors, decentralize their systems and rely on each other to achieve higher penetration of renewable energies and a stable grid. UK’s post-Brexit energy sector will be left in the continent’s corner, meddling though the subsidies that allow it to keep its fossil-fuel fleet running.

Climate Change News:  Will UK government approve 2030 climate target?

The first climate test of the UK’s new politics comes next week, when ministers are due to approve greenhouse gas cutting targets through to 2030. Government advisors say the UK should aim to cut emissions 57% on 1990 levels by 2030, based on a 52% cut in the mid-2020s, with a decision due by 30 June. Four-year carbon budgets are legally mandated under the 2008 Climate Change Act, but it’s a piece of legislation long detested by many in an emboldened and swelling Brexit camp. With government approval already delayed due to the referendum vote, Labour’s climate envoy Barry Gardiner said he has “huge concerns” over the budget’s future, despite an assurance from energy minister and leave supporter Andrea Leadsom it would be signed off. One private briefing by a London think tank in May warned of “opportunistic attacks on clean energy and climate policy” in the event of a vote out, given the climate sceptic views of many in the leave campaign. Those could yet intensify through the summer. With David Cameron stepping down as prime minister, Boris Johnson is the bookies favourite to assume office in Number 10 in October. He has previously warned of a mini ice-age and suggested the 2015 Paris climate deal was agreed because of the unusually warm weather last December.

National Geographic:  Why Brexit Freaks Out So Many Scientists

The decision has dismayed scientists in the United Kingdom and across Europe, as it stands to disrupt scientific funding and the United Kingdom’s stature in the European and international research communities. “It’s depressing, but the uncertainty doesn’t help,” says Philip Jones, research director of the University of East Anglia’s Climatic Research Unit in Norwich, England. “I just hope that science doesn’t get forgotten in all of this.” The pending breakup has scientists concerned that the U.K. could suffer a brain drain of researchers, either because their funding suffers or because the loss of the EU guarantee of free movement across member states causes scientists to lose their status in the U.K., or to not feel welcome. “My main concern in the big picture is potential damage to the U.K.’s reputation as a destination for top-flight researchers,” says Myles Allen of the University of Oxford’s Environmental Change Institute. “Researchers put a lot of emphasis on the ability to recruit and ability to travel, and if these changes affect our ability to recruit the best and brightest of the world’s academics, then we’re in trouble.” Also at stake is European funding for the United Kingdom’s research universities, which totals more than a billion pounds (1.37 billion dollars) per year.

REnews:  EIB contracts ‘secure’ post-Brexit

The European Investment Bank will fulfill all contracts signed for UK project before the Brexit vote, which will end the country’s membership of the EU. The EU bank has loaned more than €7.5bn to UK renewables projects over the last 10 years – largely offshore wind and grid – and said the status quo would apply until official withdrawal. “We expect the UK shareholding in the EIB and EIB lending in the UK to be one of many issues to be discussed in withdrawal negotiations,” said the bank. “Any contracts signed by the EIB will be respected.” It added: “We expect the UK to remain a shareholder in the EIB with a 16% shareholding until a withdrawal agreement in implemented.” The bank most recently committed £525m to help finance SSE’s 588MW Beatrice offshore wind farm in the far north of Scotland.

Reuters:  EDF stays committed to Hinkley Point following Brexit vote

French utility EDF on Friday confirmed its commitment to build a nuclear plant at Hinkley Point following Britain’s vote to leave the European Union. The 18 billion pound ($24 billion) project in southern England is one of the largest French investments in Britain and a final decision has been repeatedly delayed since it was first announced in Oct. 2013. “EDF confirms its commitment to the Hinkley Point project, which continues,” an EDF spokeswoman said on Friday. CEO Jean-Bernard Levy told reporters in France that the Brexit vote had no impact on the strategy of EDF and its UK subsidiary, according to a translation of his comments provided by EDF’s British unit EDF Energy. He said EDF’s business strategy was not linked to Britain’s political affiliation with the European Union, and therefore EDF has no reason to change it. Levy also played down any negative impact from the fall in sterling after the referendum result.

Express:  Household energy bills should be slashed post-Brexit

Boris Johnson has been urged to keep a promise made during the Leave campaign to axe VAT on energy bills. The former Mayor of London made the pledge to scrap the five per cent tax on fuel bills, along with fellow Leave campaigners Michael Gove and Gisela Stuart during the campaign. Mr Johnson’s comments were made after Energy Secretary Amber Rudd and the Remain campaign team warned consumer bills would rise if the UK quit Europe. The Leave team’s statement said: “The least wealthy are hit particularly hard. The poorest households spend three times more of their income on household energy bills than the richest households spend. “As long as we are in the EU, we are not allowed to cut this tax. When we Vote Leave, we will be able to scrap this unfair and damaging tax. It isn’t right that unelected bureaucrats in Brussels impose taxes on the poorest and elected British politicians can do nothing.”

Grist:   U.K. favorite for prime minister is Trump-Lite on climate change

The widely-regarded frontman of the successful Vote Leave campaign, (Boris) Johnson is a favorite to take the nation’s helm in October when current Prime Minister David Cameron steps down in the wake of Thursday’s vote. And since the next U.K. general election isn’t until 2020, he’ll likely be sticking around for awhile. Environmentalists had expressed deep concern with the thought of the U.K. leaving the EU, often citing the tendency of the “Leave” camp to deny climate science. BoJo himself has climate views that have been described as “an embarrassment to London’s scientists.” His closest climate consultant is Piers Corbyn, a fierce proponent of global cooling (apparently a thing that people still research). Johnson previously suggested Britain was witnessing the onset of a mini-ice age. Yet the former mayor is also a previous deputy chair of the C40 Climate Leadership Group, and he recently declared that it is “vitally important that world cities unite and work together to mitigate climate change.” As the Brits would say, what in blazes is going on? Just as Donald Trump signed a public letter urging climate action back in 2009, Johnson appears to adjust his language as a function of political convenience. It’s hard to know what he truly believes.

Wall Street Journal:  Trump Sees Brexit as Positive Sign for His Presidential Campaign

Donald Trump, celebrating the U.K. vote to leave the European Union, took the historic decision as a sign that the world is awash with nationalist, anti-elite sentiment that will propel his candidacy in the U.S. The British vote came at a time when Mr. Trump’s presidential campaign has been faltering in polls, and questions were being raised, by allies and adversaries alike, about the strength of the anti-immigrant, populist wave that is carrying him to the GOP nomination. Developments in Britain emboldened Mr. Trump, who happened to be in Scotland when the results were announced, to declare that the wave of discontent is international and not fading. His Democratic rival, former Secretary of State Hillary Clinton, argued that the vote is the latest tumultuous chapter in world affairs that calls for a tested leader like her, not an unpredictable neophyte like Mr. Trump.“This time of uncertainty only underscores the need for calm, steady, experienced leadership in the White House,” Mrs. Clinton said. Meanwhile, President Barack Obama acknowledged that the British vote reflected deep undercurrents of economic distress that reach across the Atlantic. “Yesterday’s vote speaks to the ongoing changes and challenges that are raised by globalization,” Mr. Obama said at an entrepreneur’s event in California on Friday.

New Yorker:  British Lose Right to Claim That Americans Are Dumber

Across the United Kingdom on Friday, Britons mourned their long-cherished right to claim that Americans were significantly dumber than they are. Luxuriating in the superiority of their intellect over Americans’ has long been a favorite pastime in Britain, surpassing in popularity such games as cricket, darts, and snooker. But, according to Alistair Dorrinson, a pub owner in North London, British voters have done irreparable damage to the “most enjoyable sport this nation has ever known: namely, treating Americans like idiots. When our countrymen cast their votes yesterday, they didn’t realize they were destroying the most precious leisure activity this nation has ever known,” he said. “Wankers.” In the face of this startling display of national idiocy, Dorrinson still mustered some of the resilience for which the British people are known. “This is a dark day,” he said. “But I hold out hope that, come November, Americans could be-come dumber than us once more.”

RA note: I hold both American and British citizenship, so this makes me at least “half-dumb” whatever the outcome of the US November elections.

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28 Responses to Blowout Week 130 – Brexit Special

  1. Andy Dawson says:

    I supplied the following to Rod Adams as input to his “Forbes” piece about Brexit impact on nuclear development in the UK:

    “The honest answer is – who knows? In the larger scheme of things, this hasn’t been a major subject of debate on either side of the channel in the run-up to the referendum.

    However, there are a number of key themes from which we can infer possible impacts. The first is:

    1 – The UK has been significantly more open to new nuclear development than almost any other EU state – and in fact, EU policy has been at best neutral, and at worst actively obstructing nuclear development. For example, as part of accepting carbon targets, the EU has adopted targets for both overall emissions and for proportions of each state’s energy mix to be produced by Renewables – note that, because nuclear is explicitly excluded from that latter measure. The UK will presumably no longer be bound by the renewables targets, but I believe it’s unlikely we’ll repudiate carbon targets (having actually been the first EU country to write them into law, and will be the first to remove coal from the generation mix).

    As things stand, only Finland, Hungary, Bulgaria and the UK are committed to new build. Poland is also potentially pro. France wishes to upgrade and life-extend its fleet, and Sweden appears likely to shift ground to allow one-for-one replacement. Beyond that, Germany, Austria and others appear actively anti, to the degree that Austria and Luxembourg are attempting to kill Hinkley via the European Court of Justice. That route is now obviously a dead duck, but the loss of the UK’s lobbying power will hurt prospects elsewhere.

    2 – The effect on the Hinkley Point B project is hard to define. This project is anyhow in deep trouble, not least from internal opposition within EDF. Unions and managers within the company are against the scheme, because of the financial risk to their pensions and other benefits, and would prefer EDF’s limited investment funds to be dedicated to the completion of Flammanville, and upgrades for the existing fleet. The Paris government takes a different (and frankly schizophrenic) view. On one hand it is nominally committed to reducing nuclear to a 50% share of generation, while showing no action beyond the planned closure of Fessenheim to meet it; at the same time it is desperate to resurrect the EPR as an international sales project, most notably to India, South Africa and possibly Saudi Arabia. The failure of Hinkley to go ahead would almost certainly kill that prospect.

    EDF is stating that Brexit makes no difference to this strategy – but as it’s dependent on support from the Elysee, any strain on Anglo-French relations inevitably increases the risk. Will this be the proverbial last straw? Don’t rule it out.

    3 – I doubt there’ll be an impact on the other consortia. Hitachi and Toshiba-Westinghouse have designs (ABWR and AP1000 respectively) nearing the end of their UK GDA approval processes. Unless economic turbulence make financing of those unduly difficult, they’ll proceed to conclusion and subsequent build. Frankly, those vendors have no other real options in Europe as launch pads for the designs. The same applies to CGNPC with Hualong-1, and Brexit reduces the possibility or EU interference in the design and financing process.

    4 – Contrary to most people’s assumptions, the EU isn’t particularly free-trade friendly. It’s much vaunted 60 free-trade deals are mostly with minor states within the EU geography (eg Andorra or Monaco), Balkan “minnows” (eg Kosovo), of basket case economies in the Maghreb (eg Tunisia or Egypt) and a a tiny sample of significant economies – South Korea, South Africa, Chile and Colombia. In that sense, it’s hard to see how Brexit would limit the ability to reach deals with new vendors (South Korea has already put the possibility of a UK free trade deal on the table).

    5 – The final issue is if general economic dislocation reduces the ability of the UK government to offer support to new developments. This is at best a “second order” effect, and one that’s unlikely. The only credible impact would be on the SMR competition, and I suspect that a non-EU UK government would be seeking new export markets.”

    Since, I’ve thought further- in fact, this proudly had a positive impact on the potential for the UK to be a player in the global nuclear supply chain. It could be argued that there’s a negative impact on the the attractiveness of the UK for new build, if the pound is reduced in value in the long term- however, in the context of a 30 year CfD, this is unlikely.

    On more speculative ground, we’re now effectively outside EU rules on state aid, and I suspect a Johnson-Gove conservative leadership would be more flexible in the state taking minority stakes in infrastructure projects, or relaxing rules on institutions like permission funds holding stakes in long term projects as opposed to gilts.

    Watch this space.

    • Willem Post says:


      Sweden was going to phase out its nuclear plants, but found to replace 8849 MW of operating nuclear capacity, it needed to have 22,300 MW of IWTs (lasting at most 25 years), at about $2 million per MW, or $45 billion, PLUS for peaking and filling-in, about 8600 MW of gas-fired CCGT plants (lasting at most 40 years), at about $1.5 million/MW, or $13 billion, PLUS about $6 billion for grid build-outs, for a total of $64 billion. The combined system would produce about 64.8 TWh/y.

      Because wind energy is near zero many hours of the year (in New England, Sweden, Germany, Enland, etc) and wind peak output is wind-dependent, whereas peak demand is people-dependent, gas-fired back-up plants are needed for peaking and filling-in. Sweden also has a large hydro plant capacity that could perform a part of that service.

      Sweden will get rid of an onerous tax that had been adverse to nuclear, allowing existing reactors to keep running longer; the tax amounted to 25% of production costs. The country’s utilities will also be permitted to build up to 10 new reactors to replace those scheduled to retire, on the SAME sites. This minimizes balance of plant and grid build-out costs. Whether utilities will replace existing reactors is an open question.

      These two measures reversed a 30-year-old ban on building new nuclear reactors. The 9000 MW of new reactors (lasting at least 60 years) would have a capital cost of about $45 billion, at $5.0 million/MW. The plants would produce about 63.8 TWh/y. The EU and US should take note.

      There was also the question of what to do during Sweden’s winter, when electricity demand for space heating soars, and with IWTs often in shutdown mode, due to extreme cold, and with solar output at near zero during most of the hours of the winter. New England should take note.

    • Alex says:

      Out of interest, do EU rules on state aid apply in the EEA – e.g. to Norway?

      I think Norway does a lot of subsidising – so I suspect not. Though the EU might object overly damaging subsidies, there isn’t much more economically damaging than Germany’s renewables subsidies.

      • matthew_ says:

        Yes. The EU rules on state aid apply in the EEA, including Norway.
        There has been a considerable discussion in Norway regarding if it was allowed to change the tax depreciation rules for wind turbines or if it would be considered an illegal state aid. The government has determined that it will be allowable and has sent the formal notification letter to EFTA (link).

        • Alex says:

          Thanks. That appears to be an example of Norway’s issue. Bound by the rules, but no role in making the rules. Meanwhile, Germany is free to pump in massive amounts of state aid to solar and wind projects and support the dumping of their surplus product on its neighbours.

  2. Leo Smith says:

    Well the Beeb at least seems to be realising which side its bread is buttered.

    And in terms of no longer being tied to EU carbon targets or renewable obligations can only be good for Britain if the next givernment grasps the nettle..

  3. Even after leaving the EU the UK will still be stuck with the self-inflicted 2008 Climate Change Act. Can we now expect that this misbegotten piece of legislation will be repealed?

  4. oldfossil says:

    Even if Boris or Nige became PM tomorrow, no climate legislation would be repealed. The best we could hope for is that no new legislation is passed. No new state guarantees for renewables would at least stop electricity prices from soaring ever higher, but existing guarantees cannot be withdrawn. Until the contracts expire, the UK is stuck with its 5000-odd wind turbines.

    • Tom Bates says:

      Britain is not stuck with anything, that is what the legislature is for. You can simply change the contract and in the legislation make it retroactive to any contract language. In that same legislation you can take the courts out of the picture so nobody will be bogged down in endless court battles. To be fair you can simply repay any actual losses to the parties involved which is actually not that much for older contracts.

    • One way to de-fang the Climate Change Act without repealing it would be to invoke clause (1)(a) of the Act, which allows the Secretary of State (presently Amber Rudd) to “amend the (80% by 2050) percentage specified in section 1(1) … if it appears to the Secretary of State that there have been significant developments in scientific knowledge about climate change, or European or international law or policy.” A Tory government inclined towards climate skepticism could probably put a case together on one or other of these grounds, but the problem is that 2050 is still much too far away for politicians to worry about.

  5. Tom Bates says:

    If is a wonder to me as a US citizen why the political types calling for the dismemberment of Britain are not in jail on treason charges. Britain can go the way of Yugoslavia so all the little frogs can make believe they are big frogs by why do that? We had our civil war on the subject and frankly speaking we are much better off that the south lost and we are a big pond instead of a bunch of little ponds. Britain does not need the EU and the communists who infest the EU bureaucracy which raises the questions does the EU need Britain? If one looks at history it sure does. When Merkel goes maybe Britain can revisit the EU in the meantime unless you guys shoot yourselves in the foot over trade and taxes you will be better off.

    • Andy Dawson says:

      This is where this gets entertaining…

      Remember the farce about the SNP’s positon on what currency an independent Scotland would use? Well, that’s just got worse.

      Leaving aside the fact that the EU demands that new accession countries adopt the euro, the option of remaining in a currency union with a non-EU member (the rUK) would now be completely off the table.

      Which would leave two options – a uniquely Scottish currency ((let’s call it the Leck), or the Euro.

      Now, I don’t think the Euro’s getting any more attractive – in fact, Brexit may well retrigger the crisis, since Italian banks have been on the brink of failure for some time – and the Milan Bourse dropped four times as much as the FTSE on Friday. If that doesn’t get things going again, then the highly probable election of a PODEMOS led government in Spain would do the same job.

      And if it’s the Leck, then Scotland faces the interesting challenge of financing itself in an new currency with a huge deficit – since Oil’s not going back the $115/bbl needed for Scotland to self finance any time soon (in fact, there’s a very good argument that the development of unconventional techniques like fracking will mean it’s capped permanently at the $80-90/bbl level for many years to come).

      I have to say, I’d take great delight in watching the SNP explain how they’d make an independent Scotland work – and then, should they win, watching it founder.

      As to Northern Ireland, a little fiscal reality is called for. About 70% of NI’s GDP is state spending. Of that, less than 1/3rd is covered by locally raised taxes. So, I make that just over hald of NI’s GDP is provided by cash transfers from elsewhere in the UK (which in practice means England, since Wales is also a net recipient, and Scotland is only a net contributor when the poil price is well past $100/bbl).

      When that load is spread over 54 million English, it’s manageable. Shared over 4 million Irish, or Five million Scots, it looks very different.

      NI doesn’t have an independence option. It doesn’t have a reunification option. In fact, it’s only option is the status quo. As an overtaxed Englishman, I think that’s unfortunate.

      • Andy: While I agree with what you say I don’t think it applies in this case. If Scotland held a referendum today I don’t have much doubt that a majority would vote for independence, basing their votes on emotion rather than facts and believing the twaddle that the SNP serves up about Scotland being a self-sustaining economy because it’s what they want to believe.

        • JerryC says:

          Yes, but there won’t be a referendum today. Plenty of time for reality to sink in yet.

        • Euan Mearns says:

          This is more complex than I’d like to believe. A choice between one of the most successful economic, political and currency unions of all time and a basket case that has dumped all Mediterranean countries into the mire and that is now more impoverished by UK citizens exercising their democratic right.

          I am writing an opinion piece on this and so need to focus on that. But I particularly liked this bit that I just wrote:

          “any hint of retribution against the UK smacks of dictatorship.”

      • Alex says:

        Andy, EU requirements are never hard requirements. Scotland wouldn’t have to adopt the Euro.

        It would however have fiscal challenges, though it might take the view than sticking to a weakened, impoverished England is less attractive than staying in the EU. That would especially be the case if it can attract it’s share of London’s financial services (recall at the last debate, it was about Finance companies moving to London).

        What is best for Scotland depends on what sort of deal the UK can get. If it can get a “Norway deal”, then the damage may not be too great, and it makes sense to stay. If it can only get a “WTO deal”, then the advantages of leaving would be increased.

        • Javier says:

          The chances of an independent Scotland joining the EU are nil.

          Scotland is not legally a member of the EU as it has not signed any treaty. It does not meet many of the requirements to become a member and its membership would be vetoed by Spain at least, not to create a dangerous precedent.

          Of course rules can be broken as they have been broken before. I wouldn’t hold my breath though.

          • Alex says:

            A Spanish veto could indeed be an issue, depending on the willingness of the Spanish Government to be difficult.

            Perhaps a better solution for Scotland would be for England and Wales to leave the UK.

            All messy. Better would be a compromise with the UK joining the EEA and keeping access to the single market.

  6. Alex says:

    “EDF confirms its commitment to the Hinkley Point project”

    Not sure what this means. EDF confirms it is committed to making no decision on Hinkley?

    “Boris Johnson has been urged to keep a promise made during the Leave campaign to axe VAT on energy bills.”

    Since Government revenues are due to fall, I doubt this will be possible.

    • Euan Mearns says:

      I’m not sure government revenues will be due to fall. Weak Sterling will work wonders and might even drive us towards the holly grail of inflation and higher interest rates.

      • Alex says:

        It seems that these days, fluctuations in the pound don’t seem to have much effect. The UK exports a lot of financial and business services which are not highly price sensitive. The UK imports lots of manufactured things for which there are limited domestic substitutes.

        The 10% fall in sterling is akin to a 10% paycut – which can help people and firms to increase output. However, as UK unemployment is quite low, that would normally need more investments in productivity improvements, and people will be unwilling to invest. Hence firms will probably increase prices rather than output.

        Inflation will then rise, but if output is falling, then it puts the BoE in a quandary.

        More important will be the fall off investment and transfer of financial services jobs out – especially if the Banking Passport is lost.

        However, I’m not an Economist, so would go on the IMF forecast of a 1.5% hit to GDP if the EEA terms are agreed, and 5% of worse if they’re not. That would have a magnified impact on Government revenues, equating to an extra 2 to 10 years of austerity.

        • I do not think this is a bad reading of a possibility (really who knows).

          As regards manufacturing well it depends. As a beleaguered steel producer, the drop in sterling will of course increase the value of the 40% or so we export to the eurozone. However our materials become more expensive particularly though against the dollar, the ruble and the yen. I feel there is a slight plus but we are not expecting earth shaking changes as all are changing and the gap is not known yet.

          As for car manufacturers, it is likely that steel prices into the UK will become more expensive but steel source from inside the UK may remain fairly static. Their exports could be a hit though most manufacturers are negative about Brexit.

          The main stumbling block though is how free trade will be with the EU.

          • Paradoxically even with all the “uncertainty” bond markets have headed in the right direction if you wanted to borrow to complete major infrastructure projects.

  7. Douglas Brodie says:

    In the run-up to the UK’s EU referendum, the global political establishment insisted that the UK had to remain in the dysfunctional European Union on the basis of politically fabricated scare stories. The EU referendum gave the UK public the chance to blow a well-deserved raspberry to the ruling elite, which they duly delivered.

    The same global political establishment insists that we must accept the unproven theory of alleged man-made global warming and follow incoherent and futile climate change policies which are crippling our energy infrastructure and rendering our businesses uncompetitive, all on the basis of flimsy, politically motivated evidence.

    Just as in the EU referendum campaign, the establishment invokes the authority of favoured “experts” for propaganda to support their misguided climate change policies. In a further parallel to the EU referendum, it was striking how the establishment Remain campaign used the obfuscatory phrase “single market” in a similar way to how climate change alarmists use the meaningless and obfuscatory term “climate change”. It was depressing that Leave campaigners always ducked from challenging the Remain camp’s repeated absurd claim that it was essential to stay in the EU to “tackle climate change”, surely one of the most inane phrases in the modern political lexicon.

    Now that we are free of EU misdirection on this subject, it is time for the UK public to blow a further raspberry to the political establishment on so-called “climate change”.

    • Alex says:

      There was certainly a parallel, in that both cases, people choose to avoid or deny the opinion of experts – i.e. people who have spent decades studying the subject and putting it to rigorous analysis – in favour of listening to the guy with the funniest wise cracks.

      Next thing is this will be extended to other areas. Perhaps when building nuclear power plants we will ignore the engineers and regulators, and get Greenpeace to design them And when out Doctors say we really ought to have MMR vaccines, we can listen to some random blogger saying they cause autism.

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