Unless you are an off the grid hermit it can’t have escaped you that the EU referendum will be taking place on Thursday 23 June.
To date we have been under a barrage of fear based statements from both sides. I, possibly like many of you, want more facts, or at least a sensible discuss of what we do and don’t know.
So I thought that in this post I would review ESOS and Brexit – a subject I don’t think the mainstream media will cover.
- ESOS is a UK regulation that was introduced to meet EU legislative requirements.
- The Government established The Energy Savings Opportunity Scheme Regulations 2014 (ESOS) to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU).
- If the UK were to leave the EU, the initial driver for the legislation (complying with an EU Directive) would no longer be relevant.
- The compliance date for Phase Two of ESOS is 5 December 2019 with a qualification date of 31 December 2018.
- A vote to leave the EU does not constitute formal notice to quit. The Government needs to issue formal notification to the European Council under Article 50.
- The negotiation period after formal notification to leave the EU would be two years. During that time Britain would continue to abide by EU treaties and laws, but not take part in any decision-making, as it negotiated a withdrawal agreement. If all the remaining EU members agreed the two-year period can be extended – but this can be vetoed by any single member. Theoretically, there is nothing to stop the British Government unilaterally withdrawing from the EU by simply repealing the 1972 European Communities Act.
- At any time in the 2-year exit negotiation period the UK can reverse its decision, but this would require approval under Article 49.
- To be removed as a legal requirement the ESOS Regulations would need to be repealed by parliament.
- If we stay in Europe the ESOS regulations will remain in place.
- It is thought that if there is a vote to leave that the Government would wait at least six weeks to ensure that there was no legal contest to the outcome of the vote. There may also be issues within the conservative party over leadership that could impinge on the timetable.
- In practice it may take longer than two years to disengage, depending on how the negotiations go.
- A unilateral withdrawing from the EU would most likely have significant impact on the UK’s ability to negotiate trade and other agreements with the EU.
- We have no indication one way or the other if the Government would repeal ESOS or any other EU derived legislation. The Government could leave the ESOS regulations in place and not take enforcement action on the basis they intend to repeal at later date. We already have the ‘model’ of enforcement not being enacted in Phase One. In my opinion if there is to be a repeal of EU derived legislation it is likely that ESOS will be in the bottom half of the list.
- If The UK votes to leave and a ‘fast track’ time table is followed, notification would take place around 4 August 2016 and if the two-year period was met the UK would be independent of EU regulation by August 2018 – ahead of the next qualification date for ESOS.
- It has been suggested that the Government’s review of energy ‘taxation’ may look at a ‘scheme’ based on Climate Change Levy combined with ESOS as part of a more ‘joined up approach’.
I can see three scenarios (in no particular order) arising from the referendum.
Scenario One: The UK votes to remain in the EU. ESOS remains in place. Business as usual?
Scenario Two: The UK votes to leave but the exit process is protracted to, say, three years. In that case we would still need to meet EU requirements for the second Phase of ESOS.
Scenario Three: The UK votes to leave the EU and it has a fast track exit. The UK could be ‘free’ of European ‘control’ before the next qualification date for ESOS. The question is would the Government keep ESOS in place?
What is clear is that an exit from the EU will be a period of uncertainty of at least two years.
The essence of ESOS is that large undertakings either have ISO 50001 or undertake an energy audit process on a four-year cycle. Regardless of if we are in the EU or not there can be clear business benefits in both ISO 50001 and energy audits – if done properly.
Arguably, it may be sensible to defer any committed action in regard of ESOS until after 23 June. However, in my opinion I think it is most likely that we will still need to comply with Phase Two as will either still be in the EU or undergoing extended withdrawal negotiations.
For those wanting to plan ahead assume that ESOS will remain in place and start drawing up a staged plan to meet it is requirements – but focused on benefits to your organization, rather than basic compliance. This plan should either be a plan to implement ISO 50001 to cover at least 90% of all energy used – ideally 100%, or a business focused programme of energy audits and reviews as part of an integrated coherent energy management strategy.
There is always a case for effective energy management.