Emissions Trading Scheme: Transport

Monday 11th October 2021 Lords Chamber

Question

15:09

Asked by

[Lord Oates]

To ask Her Majesty’s Government what plans they have to expand the United Kingdom’s Emissions Trading Scheme to include all forms of transport.

[Lord Oates (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I draw attention to my interests as set out in the register.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the UK Emissions Trading Scheme replaced the UK’s participation in the EU Emissions Trading Scheme on 1 January 2021. The UK ETS applies to energy intensive industries, power generation and aviation. In the energy White Paper we

“committed to exploring expanding the UK ETS to the two thirds of uncovered emissions”,

and we will set out our aspirations in due course.

[Lord Oates (LD)]

I thank the Minister for his Answer, but could he give the House some indication of the timescale in which the Government intend to bring shipping within the UK ETS? If they do not intend to do so, what alternative approach will they take to curtailing maritime emissions, which are currently forecast to rise by 50% by 2050?

[Lord Callanan (Con)]

I recognise the points the noble Lord makes and he will be aware that, in the transport decarbonisation plan, there is a commitment to assess how economic instruments could be used to accelerate decarbonisation measures alongside all the other aspirations of the plan.

[Baroness Blackstone (Ind Lab)]

How do the Government intend to respond to the report from the Climate Crisis Advisory Group on carbon pricing, which says that emissions reductions from the advanced economies fall far short of what has been promised? I quote:

“Much stronger policy action across all sectors is needed”.


In particular, can he indicate the Government’s intention on a carbon border adjustment mechanism, and whether such a mechanism could raise nearly €10 billion a year as the Financial Times has claimed?

[Lord Callanan (Con)]

Of course, these matters are never as simple as the noble Baroness makes out. Building on the previous Answer from my noble friend Lord Agnew, I say that it is important to recognise that the UK is proceeding faster than any other G7 country in our decarbonisation efforts. I am aware that the EU is looking at a carbon border adjustment mechanism—we will see if it happens or not—and of course we will look at the proposal.

[Baroness Boycott (CB)]

Are the Government supportive of the citizens’ climate assembly recommendation to introduce a frequent flyer levy? This would fit well with the polluter pays principle, which Ministers have advocated previously at the Dispatch Box, and the burden would fall on those most able to pay, something I am sure the Minister would deem fair.

[Lord Callanan (Con)]

I am sure the Chancellor will want to update Parliament in due course on any proposed levies.

[Lord Grantchester (Lab)]

Clearly the Government have not thought through the present crisis. So often it is the poorest throughout the world who bear the brunt of climate change. How will the Government apportion costs for the UK ETS to cover all forms of transport?

[Lord Callanan (Con)]

The effect on poor people, including in the UK, will be one of the factors that we will need to consider when expanding the ETS. These are important fiscal measures. We will need to look at them properly and consider all the implications, and we will set out our thinking in due course.

[Lord Fox (LD)]

My Lords, as the Minister pointed out, these schemes cover energy-intensive businesses. However, if the disorderly situation that is currently under way continues, manufacturers of ceramics, steel and cement—energy-intensive businesses—will not have any emissions to trade because they will have collapsed. Can the Minister clear up what is happening? Have talks between BEIS and the Treasury happened, as the Secretary of State said yesterday, or was the Treasury right that no talks have happened? When will the Minister let us know what is going on? Can the Government clear up this mess?

[Lord Callanan (Con)]

I agree with the comments made by my Secretary of State yesterday. There are always ongoing discussions between government departments on a huge range of measures, and I am sure that the Treasury and BEIS will be closely involved in further discussions.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, at the start of the pandemic last year, as a result of the lockdowns there was a significant problem in developing countries around the world in trading, due to the lack of access to shipping and other forms of freight. This problem could be exacerbated by the correct action to reduce and—I hope—eliminate emissions. Will the Government ensure that the COP 26 summit in Glasgow delivers enough funding and other forms of support to developing countries to make sure that there can be a just transition?

[Lord Callanan (Con)]

Again, in this matter we are leading with the funds that we have supplied to developing countries and we have promised. The Prime Minister and the joint president at COP are engaged in discussions as we speak, to try and drive up the commitment of developed countries to help lower-developed countries with their aspirations.

[Lord Berkeley (Lab)]

My Lords, air is the most polluting of all modes of transport, and most air transport is excluded from the UK Emissions Trading Scheme because it is international. Will the Minister confirm that he is working hard to bring CORSIA—the Carbon Offsetting and Reduction Scheme for International Aviation—within the scheme and make some positive announcement for COP 26?

[Lord Callanan (Con)]

The noble Lord makes a good point. The ETS already exists for domestic aviation and aviation to the European Economic Area. There is also a separate scheme developed by ICAO, which he referenced. We will need to look at how we implement that in the UK and its interaction with the UK ETS.

[Baroness Young of Old Scone (Lab)]

With apologies to Jane Austen, it is a truth universally acknowledged that ambitious action as early as possible this decade is required to reduce CO₂ emissions as early as possible. The Minister says that we are moving faster than anyone else, but the Government have stated that the implementation of any expansion to the UK ETS following the first review of the scheme will not happen until 2026. Does he agree that this is far too slow? Can he tell the House why it is utterly unambitious?

[Lord Callanan (Con)]

As I said in previous answers, we recognise the urgency of taking swift action on climate change. I repeat: we are moving faster than any other G7 country. I accept that the noble Baroness and other Opposition Members would like to be even more ambitious, but we must look at the implications of that on the competitiveness of British industry and the effect on people’s fuel bills, et cetera. These are important matters and we must consider them in the round.

[Lord Davies of Brixton (Lab)]

My Lords, I welcome what the Minister has said about the extension of the ETS to shipping, but will he take this opportunity to indicate the degree of urgency that the Government place on this issue, particularly the scandal of the continued use of bunker fuel by shipping worldwide?

[Lord Callanan (Con)]

We agreed to undertake a review of the extension of the ETS to maritime emissions in the transport decarbonisation plan, and will do so. However, like aviation, this is an international issue; ships do not just stay in British territorial waters but move overseas as well. Therefore, we need to work with our international partners and the EU to come up with solutions to this.

[Baroness Blake of Leeds (Lab)]

My Lords, in the Government’s recent transport decarbonisation plan, no modes of transport other than aviation were mentioned in relation to the UK Emissions Trading Scheme. Could the Minister tell the House exactly why this was? Also, building on the excellent points made by my noble friend Lord Berkeley, can he update us on exactly how the ETS will be developed to accelerate aviation decarbonisation?

[Lord Callanan (Con)]

I do not agree with the noble Baroness. The transport decarbonisation plan was the first such plan in the world. It sets out how the transport sector will move on a path to net zero and includes consulting on a world-leading pledge to end the sale of all new polluting road vehicles by 2040 and net zero in aviation by 2050. It is a world-leading, ambitious plan. I am sorry that the noble Baroness does not support it.

[Baroness Wilcox of Newport (Lab)]

If the Government are minded to review their policy and include all forms of transport, will the Minister consider seeking the views of municipal bus companies such as Newport Transport, which is the clear leader in Wales, in their moves towards zero-emissions electric buses? It is the first operator in Wales to achieve a modern-day emissions-free squadron service. I know that Newport City Council and the transport company would be willing to share their experience of this excellent practice with the UK Government.

[Lord Callanan (Con)]

I am sure we would be very happy to take into account the views of Newport Transport. I congratulate it on its commitment to zero-carbon transport. Of course, many other local authorities and bus companies around the UK are also developing battery buses, hydrogen buses, et cetera, so great progress is being made.