What’s Next for the UK?

On June 23rd, in an unprecedented and historic move, the U.K. voted to leave the European Union by a vote of 52 to 48 percent.  Prime Minister David Cameron resigned shortly after the results were tallied and markets faltered at the initial shock.  While it is too early to know the full implications of this action, we do have some understanding of how the U.K. will begin to unwind its relationship with the EU and what this might mean for export/import industries like ours.

The legal mechanism that triggers exit discussions and negotiations is Article 50 of the Lisbon Treaty. The Treaty sets out the process—first, the U.K. must formally notify the EU of intent to leave, then a deal must be negotiated on phasing out of EU-funded programs, relocation of EU offices in the U.K., and on government services ranging from food safety to environment. The negotiation period must be completed within two years. The negotiated deal will need to be approved by 65 percent of the members of European Parliament (20 of 27 members).  Until the U.K. negotiates this pathway to formally depart the EU, there will be no change in operations or trade and EU law will still apply.

The leaders of the Leave campaign have portrayed an air of calm in order to ease uncertainties, indicating that Article 50 will not be invoked and the EU will not be formally notified of the U.K.'s decision to leave until a new prime minister is put in place in early September.  Party politics within the Conservative Party have evolved quickly as various members position themselves for a run for prime minister over the summer.

Response from the EU has been mixed with Commission President Jean-Claude Juncker calling for a quick end to what was “never a tight love affair,” whereas German Chancellor Angela Merkel has said there is no need for nastiness and anticipates the U.K. exit can be done in an amicable, businesslike manner.  Conversations at the EU level will continue over the summer until a new U.K. prime minister is elected.

U.K. residents have also shown a mixed response to the outcome of the vote.  There have already been media reports of regret among some Leave voters citing a lack of understanding of the full ramifications of this vote. The extent to which these feelings are pervasive remains to be seen. A majority of Scotland residents voted to remain in the EU and there are some calling for another referendum vote to separate Scotland from the U.K. and rejoin the EU as a new member state.  Similar sentiment has been seen in Northern Ireland.

There are still many unanswered questions: Will EU climate targets remain intact or will the U.K. develop its own?  Will these negotiations distract the European Commission from its work on a bioenergy policy for post-2020?  Will we see a domino effect across Europe with other countries that are skeptical of remaining in the EU?

As for the pellet industry, Drax Power remains committed to biomass and Amber Rudd, head of the U.K. Department of Energy and Climate Change, has publicly declared that the U.K.’s energy priorities remain the same—energy security, low energy bills and a low-carbon energy infrastructure.

We anticipate the U.K. will remain the largest importer of U.S.-produced wood pellets, and we stand ready to continue to make the case for biomass as an affordable, base-load, low-carbon energy solution—both inside and outside the EU.

Author: Seth Ginther
Executive Director
U.S. Industrial Pellet Association
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