In July the transatlantic trade and investment partnership (TTIP) came a step closer to reality. Formal talks have been ongoing for two years, but trying to create the world’s biggest free trade zone is no mean feat. Essentially, if passed, the EU and US will be able to trade without each other’s pesky tariffs or regulations getting in the way.

David Cameron is a big advocate, arguing it could add £10bn to the UK economy. Many others, meanwhile, criticise the undemocratic nature of the closed-door talks and sinister influence of powerful lobbyists.

But what would TTIP mean for renewable energy?

Access to cheap fossil fuels

Currently, the only energy sources traded in significant amounts between the EU and the US are refined petroleum products and solid fuels – but TTIP could allow Europe to gain access to US crude oil and natural gas resources. The European commission has repeatedly called for the inclusion of energy and raw materials in the trade partnership, according to the European parliament’s internal policies department. Although, it adds, due to growing demand for natural gas in Asia, which is offering higher prices, fuel is most likely to flow in that direction.

Molly Scott Cato, the Green MEP, warns: “The import of cheap US gas from fracking could undermine renewable generation in the UK and across Europe.”

Removal of protectionist US rules

TTIP also brings two significant factors into play: public procurement rules and political appetite for green policies.

Protective public procurement is a major trade barrier for the renewable energy sector. Also known as “local content requirements”, this demands that companies source a certain percentage of goods and employment locally. Known as “Buy American”, this is extremely popular in the US – but prohibited in the European Union, where organisations must consider bids from across member states.

The requirements are likely to be banned for energy projects under TTIP, which Oliver Joy, political affairs spokesman for the European Wind Energy Association (EWEA), welcomes. “The removal of major trade barriers such as local content requirements could potentially have a very positive impact on the renewable energy industry,” he says. Renewable energy companies would no longer be forced to “buy local” as part of energy deals, meaning they can source the best market price – while continuing to boost local economies through job creation, says Joy.

Undermines local government

However, some fear that losing local content requirements would lose political appetite for renewable energy along with it. Concerns were raised at a roundtable held by RenewableUK, which represents the wind and marine energy sector: “If one of the reasons to have more renewable energy deployment is because it is good for [local] jobs and supply chain, how will politicians and the public react to some of the socio-economic value potentially draining to far-flung corners of the globe? This is a big dilemma.”

TTIP could even undermine the democratic authority of local government. The UK’s Local Government Association representative in Brussels, Dominic Rowles, imagines a situation “whereby a public authority, whether local or national, takes a democratic decision on energy generation … that TTIP then makes easier for corporations to challenge.”

More opportunities to sue

The bone of contention here is the investor state dispute settlement (ISDS), which allows private companies to sue governments for loss of profits connected to regulation. It is seen as a key US demand for the trade partnership. Precedents include a US tobacco firm suing the Australian government over packaging restrictions and a US fracking company suing the Québec government following a moratorium on drilling under the St Lawrence River.

“Where the US wants to engage it does so pretty forcefully”, says David Baldock, executive director of the Institute for European Environmental Policy. He questions why an ISDS provision is needed at all, given the robust nature of the courts in both jurisdictions and the “huge levels of trade already between the EU and the US”. Yet an ISDS independent tribunal which would bypass national courts (and “doesn’t sit at all comfortably with the European decision-making process”, says Baldock) appears to be strongly favoured by US negotiators.

Race to the bottom on regulation

Baldock also argues, “If you add TTIP to the language coming out of the commission about being less regulatory, lighter governance, letting states off binding targets around renewables and energy efficiency, then it is another layer that feeds … angst and lack of confidence for investors.”

Chair of the UK environmental audit committee, Joan Walley, believes there is a danger of TTIP coming at “the expense of throwing away hard-won environmental and public-health protections” and that combining US and EU regulatory systems becomes a “race to the bottom” – agreeing to harmonise the lowest regulations on either side, not the highest.

Baldock believes there could also be “a chill effect”, meaning that any new, stricter regulation is less likely to pass in future. “If we’re going to have a low carbon world we’ve got to [set] more targets, more product standards, more eco design directives,” he says. “The question is how far those are going to be inhibited by TTIP and giving the Americans a seat at the table.”

Free trade is good for business

One significant party remains silent on the issue – renewable energy companies themselves. Many were contacted for this article, but all declined to comment on TTIP. This, one industry source said anonymously, was because “all the large companies have a vested interest in this” – in other words, free trade and reduced regulation is good for business. They just don’t want to say so on record, given the controversy surrounding TTIP and the allegations of commercial influence over democratic decision-making.

The EWEA’s Joy said: “The ability to trade technology for renewables freely, without the restriction of tariffs, is a fundamental part of nurturing growth in the wind industry in Europe and beyond. Loosening restrictions on renewable technologies, which includes key components used in generators and wind turbines, can help reduce the cost of wind energy by eliminating duties. It can also unshackle those industry manufacturers and investors who are currently deterred from cross-border ventures by tariffs.”

That must be balanced, as Baldock outlines, with “the US making a case for their industry and their fracking regimes, and their lighter touch to fossil fuels generally”.

These issues are unlikely to be resolved any time soon. The original hoped for agreement date for TTIP was end of 2014. Now, many believe it will wait until after the US presidential elections in 2016. If agreed, it would rid the renewables industry of the regulatory barriers to trade. But whether it will accelerate the transition to a low-carbon economy remains to be seen.

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