WIREDGOV

In its latest report, the European Scrutiny Committee (ESC) considers recent approved and draft EU legislation and policy documents deposited in Parliament by the Government.

• Read the report: Documents considered by the Committee on 20 January 2021
• European Scrutiny Committee

In most cases, each document is accompanied by an Explanatory Memorandum from the relevant Minister. The Committee examines the legal and political significance of the documents and where appropriate asks further questions of the Government about its implications. The Committee also has the power to recommend documents for debate.

In its latest report, published yesterday, the Committee highlights the importance of several documents, and how it intends to follow up with the Government. The documents are, in summary:

BEIS – EU Climate Policy

Important because:

• In the UK and EU Trade and Cooperation Agreement (TCA) that came into force on 1 January 2021, the EU and UK made commitments to cooperate on climate-related policy.
• As a basis for cooperating, both the UK and EU have shown ambition by increasing their emissions reduction targets by 2030, as part of the preparations for the “COP 26” international climate change conference to be hosted by the UK in Glasgow this year.
• The EU’s target reduction is 55% by 2030, while the UK’s is 68% by 2030.
• Under the terms of the TCA, certain elements of emerging EU climate policy could be relevant to the UK, notably amendments to the Emissions Trading System and proposals to apply a tariff on carbon-intensive imports into the EU.

The Minister for Climate Change and Corporate Responsibility, Lord Callanan, welcomed the EU’s proposed new emissions reduction target by 2030 and said that, as the incoming President of COP26, the UK was calling on all countries to reduce greenhouse gas emissions. Now that the TCA has been agreed, the Committee will invite the Minister to update his analysis on the implications of the EU’s climate policy for the UK.

DEFRA – Fisheries discards

Important because:

• The EU has approved legislation, that took effect 1 January 2021, on how it will implement exceptions, over the next three years, to the general rule under the Common Fisheries Policy that all captured fish should be landed (known as the ‘discard ban’).
• Because these EU rules took effect 1 January 2021 they do not apply to the UK. However, under the TCA, both Parties have agreed to cooperate on shared fish stocks through a Specialised Committee on Fisheries.
• In an October 2020 Explanatory Memorandum, the Parliamentary Under-Secretary of State, Victoria Prentis MP, was clear that, post transition, the UK can make its own discard rules regardless of what the EU decides. The Committee agrees with this legal position. However, the role of the Specialised Committee on Fisheries means there is potential for the two Parties to agree on discard rules.

The Committee has therefore written to Victoria Prentis MP requesting an update on her position. She was asked how UK exemptions to the discard ban now differ from those of the EU (and where the UK has made the same changes as the EU). She was also asked how the Specialised Committee on Fisheries would work and, given that the Specialised Committee is able to take binding decisions which would then need to be incorporated into UK legislation, what the Government’s intentions were for parliamentary scrutiny of the Specialised Committee’s work.

DEFRA – Northern Ireland Protocol: Batteries Regulation and Electric Vehicles

Important because:

• The proposed EU electric vehicle (EV) battery Regulation will apply in Northern Ireland under the Northern Ireland Protocol of the Withdrawal Agreement. Given the Government’s desire to avoid any legislative divergence from Northern Ireland that could have a negative effect on the UK internal market, this may also have UK-wide legislative implications.
• The draft Regulation has wide-ranging provisions to promote the sustainability of batteries, including for example on carbon footprint rules, origin labelling and recycling targets.
• Batteries make up roughly 40% of the value of EVs. The TCA will phase in a requirement that, by 2027, the non-EU or non-UK origin value of finished EVs will be limited to 45% if they are to qualify for tariff-free trade between the EU and the UK. This means, combined with the proposed new EU Regulation on the full life cycle of batteries, that, in practice, EV batteries in use in the EU or the UK will need to be made in the EU or the UK. The combination of the TCA rules of origin and the proposed new Regulation means that, to ensure investment in EV battery manufacturing in the UK, it may be important for the UK quickly to clarify its own regulatory framework.

The Committee has written to the Parliamentary Under-Secretary of State, Rebecca Pow MP, emphasising the need for the Government to engage closely with the draft Regulation. It has asked for an analysis of the implications for the UK, particularly Northern Ireland. The Committee has also asked to what extent there is a risk that the proposed Regulation may encourage investment in the battery market in the EU rather than in the UK, and if so, what new rules may be required in the UK to encourage investment in the UK in this sector.

EU financial support for regions and sectors affected by the UK’s withdrawal (The ‘Brexit Adjustment Reserve’)

Important because:

• The EU has proposed a €5.4bn (£4.8bn) support fund for EU member states to compensate them for their less integrated trading relationship with the UK since 1 January 2021. More than €1bn of this sum is earmarked for Ireland alone, with most of the rest going to near neighbours that trade extensively with the UK and/or will also be particularly affected by the phased reduction in access to fish stocks in British waters under the TCA. The EU support fund is known as the ‘Brexit Adjustment Reserve’.
• This EU support fund does not include any financial support individual EU countries may give from their own funds to sectors adversely affected by Brexit. The full amount of public expenditure on Brexit adjustment support in EU member states is therefore likely to be much higher than €5.4bn.
• While the Government has spent significant sums on UK Brexit preparations, there does not appear to be a comprehensive overview of current or near-future financial support for the most affected sectors. However, the ‘Reserve’ could serve as a useful comparator for any similar Government scheme to help UK businesses. If the money from the EU fund is used to subsidise businesses that trade with the UK, this could also raise “level playing field” concerns under the new subsidy control provisions of the Trade and Cooperation Agreement.

The Chief Secretary to the Treasury, Steve Barclay MP, is due to submit an Explanatory Memorandum on the ‘Reserve’ in the coming weeks. The Committee may re-examine the relevance of the proposed EU scheme for the UK in the light of this Memorandum.

Further information

• About Parliament: Select committees
• Visiting Parliament: Watch committees