The report recommends maintaining access to the Internal Energy Market and retaining membership of the Emissions Trading System until 2020 at least. Longer term, MPs are concerned that the UK will become a 'rule taker', complying with but unable to influence European rules and standards. The report cautions that Brexit must not distract Government from delivering essential climate change policies.
The Committee warns that any interval between the UK leaving the European Atomic Energy Community (Euratom) and entering into secure alternative arrangements would severely inhibit nuclear trade and research and threaten power supplies.
The Government argues that the UK must leave Euratom as a result of the triggering of Article 50, but the report states that legal opinion is divided. The Committee says withdrawal from Euratom is an unfortunate, and perhaps unforeseen, consequence of Prime Minister's objective of ending the jurisdiction of the European Court of Justice in the UK. Ministers must end the uncertainty and resolve the matter by securing alternative arrangements as urgently as possible, the report adds.
The Committee notes strong concerns in the sector that new arrangements will take longer than two years to set up and recommends delaying departure from Euratom to give the industry more time to establish alternative arrangements. If this is not possible, the Government should seek transitional arrangements, which may need to be longer than the three years proposed by the European parliament.
Iain Wright MP, Chair of the Business, Energy and Industrial Strategy Committee, said:
"The impact of Brexit on Euratom has not been thought through. The Government has failed to consider the potentially disastrous ramifications of its Brexit objectives for the nuclear industry. Ministers must act as urgently as possible. The repercussions of failing to do so are huge. The continued operations of the UK nuclear industry are at risk.
The Prime Minister has made it politically unfeasible to remain in Euratom long term. The Government now has a responsibility to end the uncertainty hanging over the industry and ensure robust and stable arrangements to protect trade, boost research and development, and ensure safeguarding of the highest level."
Climate change policy
The UK must also remain committed to domestic climate change policies and not let Brexit undermine emissions reduction targets, enshrined in domestic law. The report notes calls for clarity on the Government's long term objectives and prompt publication of the Clean Growth Plan, which has delayed since the end of 2016.
Rules and standards
In the longer term, the Committee is concerned that the UK will be a rule taker with little influence on the rules and standards with which it must comply. The Government should seek continued participation in European regulatory bodies.
The report highlights concerns that if UK standards diverge too far from those in the EU, the UK could become a dumping ground for energy inefficient products. The Committee urges the Government to mirror or retain European standards for the immediate future at least.
Internal Energy Market
The UK should seek to maintain ongoing access to the Internal Energy Market, with no accompanying tariffs or barriers to trade, the Committee says. This should include continued participation in trading arrangements established by the European Network Codes to ensure efficient use of interconnectors.
EU Emissions Trading System
The Committee also recommends retaining membership of the EU Emissions Trading System (ETS) until at least 2020. The report recognises that in practice in the EU ETS is performing poorly but says that the UK should seek to negotiate longer term membership on the condition of commitments to future reform.
Iain Wright MP added:
"In the short term, the Government should seek to avoid disruption the energy sector and domestic climate change agenda. Government needs to provide as much clarity and stability as possible to support investment and avoid damaging UK competitiveness and adversely affecting consumers. In the long term, the UK must maintain standards and seek to retain our influence."