Climate Change Act 2008 (International Aviation and International Shipping) Regulations 2026
(1 month ago)
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Lord Whitehead
That the draft Regulations laid before the House on 14 April be approved.
Relevant document: 58th Report from the Secondary Legislation Scrutiny Committee, Session 2024–26
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, I thank the House for its consideration. The draft Climate Change Act 2008 (International Aviation and International Shipping) Regulations 2026 were laid before the House on 14 April.
This instrument makes the necessary regulations under the Climate Change Act to include emissions from the UK share of international aviation and shipping in the sixth carbon budget, all subsequent carbon budgets and the 2050 net-zero target. It formalises the Government’s long-standing planning assumption that the sixth carbon budget, starting in 2033, will be the first to include emissions from the UK share of international aviation and shipping. This has been the position of successive Governments. In 2021, the previous Government set the sixth carbon budget, factoring in the UK’s share of international aviation and international shipping. It also reflects the advice of the independent Climate Change Committee.
This debate is not about whether we take action in these sectors—we already are. The Government are committed to ensuring that long-term growth in the aviation and shipping sectors is compatible with our climate obligations. We have been working multilaterally to reduce aviation and shipping emissions within the International Civil Aviation Organization and the International Maritime Organization. We are now formally reflecting this effort in our domestic legal framework.
For earlier carbon budget periods, international aviation and shipping were not formally included in our legally binding targets. Instead, we left headroom, setting tighter limits for other sectors in order to deal with the assumptions of being in those targets in general. We are now revising this approach by legislating to formally include these emissions in the overall emissions limit from the sixth carbon budget onwards.
Accounting for international aviation and shipping emissions within the formal framework is clearer and more flexible than accounting for them outside the framework. It allows the Government to choose the best overall pathway to meeting our targets. For example, if progress in reducing aviation emissions is faster than expected, it will make it easier to meet our targets overall. Equally, faster progress in other sectors could allow more flexibility for international aviation and shipping.
Although aviation is a hard to decarbonise sector, we are already taking great strides towards greener aviation. This includes implementing the sustainable aviation fuel mandate last year, providing a further £219 million to scale up SAF production through to 2030, and up to £2.3 billion over 10 years for the Aerospace Technology Institute to support the development of more efficient and zero-emission aircraft technologies. We are also driving cost-effective decarbonisation through carbon pricing mechanisms, including the UK emissions trading scheme, or UK ETS, and the global offsetting scheme, CORSIA.
We are also committed to decarbonising shipping through the UK maritime decarbonisation strategy, investment in clean maritime technologies and support for low-carbon fuels. The UK is proud of our leadership at the International Maritime Organization, ensuring the sector contributes fully to our net-zero ambitions while maintaining the UK’s competitiveness as a global maritime nation.
To note, this statutory instrument does not alter the stringency of the UK’s climate targets, introduce new sector-specific limits or set new policy requirements for the aviation or shipping industry, and nor does it alter the climate considerations in the draft Heathrow expansion national policy statement. What it does provide is legal clarity—something colleagues in the Environmental Audit Committee and the Transport Select Committee have called for repeatedly. Successive Governments have pledged to legislate for this change as soon as parliamentary time allows; now we are keeping our word.
I recognise the amendment tabled by the noble Lord, Lord Moynihan, for discussion today. The noble Lord raises two points of concern, which I shall address in turn. First, the noble Lord regrets that the draft legislation does not define a methodology for accounting for the UK’s share of international aviation and shipping emissions for the purposes of carbon budgets. That omission is for good reason. Not prescribing a specific methodology now allows for continued methodological development in the period before the sixth carbon budget period commences—that is, in 2033. That will be in line with developments in international carbon reporting practice, in which the UK participates in ongoing discussions. That has to be an international discussion with the international agencies responsible for getting that right on an international scale. I am sure that the noble Lord would not wish to tie the Government to an outdated methodology, out of sync with wider international practice. It is not that there is no methodology; it is a question of making sure that the final methodology is fit for purpose when the sixth carbon budget comes in.
That final methodology will be determined separately by the Secretary of State before laying the first annual statement of UK emissions for the sixth carbon budget period. In the meantime, I refer the noble Lord to the technical annex of the Government’s carbon budget and growth delivery plan, which sets out the Government’s working assumption on defining a UK share of international aviation and international shipping emissions when setting and making policies for future carbon budgets. If the noble Lord wants to cut to the chase early, I suggest that he refers to paragraphs 125 and 126 of the technical annex to do just that.
Secondly, the noble Lord suggests that the regulations will place additional costs on industry. As I noted earlier, this is an accounting change that clarifies how emissions are counted within UK targets; it does not set new policies for international aviation and shipping. The Government will continue developing policies to reduce emissions in international aviation and international shipping, and these will be subject to their own assessments.
Notwithstanding that, I emphasise that the Government are acutely aware of the importance of international aviation and international shipping to UK economic growth. We are committed to pursuing solutions that do not risk displacing emissions to elsewhere in the world or damaging UK competitiveness, working closely with industry to ensure that our high climate ambition is deliverable and affordable for them and passengers. Indeed, schemes such as the sustainable aviation fuel mandate are carefully designed to protect against excessive cost increases. At the same time, measures such as the Sustainable Aviation Fuel Act and grant funding will tackle barriers to investment and support UK manufacturers to gain a share of the growing global advanced fuels industry, with all the economic benefits that entails.
I urge noble Lords to consider these points when and if they consider voting in favour of the amendment tabled by the noble Lord. The measures formalise an approach supported by successive Governments and reinforce the credibility of the Government’s strategy for aviation and shipping decarbonisation, both domestically and internationally. I beg to move.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I thank the Minister for introducing today’s regulations. I know my noble friend Lord Moynihan is disappointed not to be here for this debate—the second one in a week on an instrument that we all believe will be deeply damaging to the economy. He offers his apology as he has to attend a long-standing political appointment to which he is committed. I declare my interest as the unremunerated chair of Eq.flight, working towards the development of nuclear-derived sustainable aviation fuel.
This House voted to regret last week’s instrument due to the nationwide effects that it will have on our economy and our way of life. Although this week’s is not quite so wide-ranging, we regret that the Secretary of State is taking his economic wrecking ball to two specific industries.
Before I speak to the economic impact that this statutory instrument and other associated measures the Government are taking will have, I first note that the implementation of the instrument raises concerns. The Explanatory Memorandum states:
“The exact methodology for determining the UK’s share of IAIS emissions for the purposes of measuring and reporting emissions from CB6 onwards will be determined separately by the Secretary of State, and before laying the first annual statement of UK emissions for the CB6 period”.
The Government are putting the cart before the horse.
International aviation and shipping will be expected to comply with regulations to help the Government reach their net-zero target without being told how and even when their emissions will be measured. But I note the Minister’s explanation of the methodology of the calculation of emissions for carbon budget 6 period.
This is becoming a worrying trend within the department. Two weeks ago, my noble friend Lord Moynihan rightly pointed out that the legislation brought forward to implement the RO to Exchequer policy in Northern Ireland was done without a comparable offer having been agreed with the Northern Ireland Assembly. Now, entire industries are to be expected to comply with net-zero policies without being told how to do so. Regardless of the policy’s aim, that is not how to instil business confidence in the Government’s plans. I hope that the Minister can today outline when we can expect to see the accounting methodology and more generally reassure the House that the department takes the practical implementation of policy as seriously as it does the principles behind it.
On the economic impact, this instrument is merely a formalisation of the Government’s recent drive to ensure aviation and shipping compliance with net zero. It will set into statute the adverse effects that government policy is already having. By carbon budget 7, shipping emissions are projected to have been reduced by more than 60%, at a net cost of more than £1 billion annually. This is to be done primarily through fuel switching. To incentivise this transition away from carbon-intensive fuel, the Government have extended the UK ETS scheme to the sector, at an up-front cost of more than £0.25 billion. That is despite the fact that alternative fuels still cost four times more than conventional fuel, while there are only two shore power facilities in the country.
The industry has said that these shortfalls would be manageable if the Government set out a clear revenue recycling plan to reinvest ETS proceeds into maritime transition, but they have yet to do so. The result is that the ETS scheme will operate as a tax rather than as a decarbonisation incentive for the industry that moves 95% of the UK’s goods. I hope that the Minister can outline how net zero-derived revenue will be recycled back into these industries in his response.
Similarly, the aviation industry will be forced to transition not through economic incentives but through state-mandated demand management. CB7 states that the supposed cost savings that net zero will bring the sector will come almost entirely through a reduction in demand operating capabilities. This will not happen naturally, but through “demand management” that will
“increase ticket prices, either directly through taxes or indirectly through technology costs”.
That is a highly unnatural market distortion. The industry will be forced to invest in net-zero technology, and if that fails in reducing emissions to the Government’s desired extent, they will simply raise taxes. This too is expected to cost over £1 billion annually by CB6.
These regulations incorporating these sectors into carbon budget accounting will now present an incentive for future regulations upon them. My worry is that aviation and shipping will now be seen as fair game to be sacrificed for the Government’s rushed drive to net zero. Given that the impacts of current regulations have already been highly damaging, I hope that the Minister will be able to reassure us that the regulations are entirely formal and that these sectors will not be subjected to future punitive measures.
Lord Teverson (LD)
My Lords, though it has been far from perfect, I would like to start by congratulating the Prime Minister on what has happened over climate policy over the last two years. Unfortunately, he seemed to forget it in his speech in Downing Street, but perhaps we could put on the record that the last coal-fired station was closed; onshore wind has started again; we have carbon budget 7 agreed; the future homes standard at last has been published; solar capacity has gone up substantially; and we had a very successful AR7 round in comparison with AR6. I was disappointed that the Prime Minister failed to mention these matters when he talked about his resignation in Downing Street last week.
What strikes me, remembering the Climate Change Act itself back in 2008, pretty well everybody around the House regretted at that time that it was pretty well impossible—for all sorts of technical reasons and where we were in terms of the start of this process—to include international air transport and international shipping. It was seen as a hole in the system that needed to be repaired as time went on. So, there we were, back in 2021, when the carbon budget 6 was agreed under the previous Government and they took that step on the Carbon Budget Order 2021 to put this into practice at last. Hallelujah from all of us who had been waiting since 2008 for that to happen. I congratulate the last Government on achieving that.
It is a shame that there seems to be this regression in terms of appetite to make sure that the climate for our children and grandchildren is on the mend rather than degrading from here. Let us be clear: we are kidding ourselves if we believe that this sector can be left out of our equations. It accounts for something like 10% of carbon emissions in terms of our own emissions, or part of them, and globally—much more for airlines than for shipping, but both are important and both are growing, which is the important thing. As we know, if you do not measure it, you cannot manage it, and if you do not manage it, it will not happen—and it needs to happen. These are important sectors.
To the Front Bench of the Opposition, I say that this is one of the occasions when we are liberated from the European Union. This is a Brexit win: in terms of airlines, the European Union still relies on the Coursier scheme, mentioned by the Minister, which is the offsetting system that the EU has been part of. We welcomed it as well, apparently, but it is a system that is far from perfect: much better that we include it within these systems ourselves.
I agree entirely that we have big challenges in terms of sustainable aviation fuels. There is a lot to do there and we certainly cannot grow crops to get us out of that problem.
Baroness Hayman (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Teverson. I agree very much with the final point that he made. I find many things depressing at the moment in reactions to issues of climate change, but one of them is the lack of enthusiasm about British innovation. We can grow the green economy; we can tackle climate change; we can tackle emissions; and we have the intellectual firepower and the companies and the individuals who are interested in doing that. Yet here we are tonight with a perfectly reasonable proposition being put to us by the Minister to approve these regulations. I will not be insulting and say it is a bit of process-ology, but it is part of a process, and it is a process that has been going on for a long time.
It is certainly not new news. It was announced in April 2021, nearly four Prime Ministers ago, by the then Conservative Government when the noble Lord, Lord Sharma, was our COP 26 president-designate, and when the atmosphere and the cross-party consensus on the need to change and to make progress was very much accepted. So what we are debating here tonight in terms of the regret amendment is something that has been agreed for many years—decades, actually—that has been accounted for in our forthcoming carbon budgets, and that industry has known about for many years. As I say, it is not new news.
I know that the noble Lord, Lord Turner, who I think could not be here this evening, would be telling us that he discussed this issue when he was chair of the CCC over 15 years ago. I look forward to hearing from the noble Lord, Lord Deben, as a more recent chair.
I understand that the methodology is not yet perfect, but the Minister clearly explained why it is sensible to allow ourselves some room to develop it and, I hope, for it to be widely adopted by others. However, it makes no sense whatever for aviation and shipping to be left out of our carbon budgeting. They are important areas; progress is being made and we should be leading in what they are doing, not cavilling. At the moment, the rest of the UK economy is captured under our carbon budgets. Although there have been many arguments about the benefits and disbenefits and the pace of transition, I have never heard it said that the simple act of having carbon budgets has imposed cost on any industry. What they will do is place a legal requirement on the Government to ensure that these industries, alongside all the others, reduce their emissions. We have already legislated in the Sustainable Aviation Fuel Act to get started here. Enshrining this in law will create the legal certainty that businesses need, especially after the political upheaval of recent years, to invest and innovate.
I am tempted to say, “Nothing to see here”. I see the Whip would like me to sit down, so I end by saying that, if we do need to have a vote, which I consider unnecessary, I would certainly support the Government.
Baroness Jones of Moulsecoomb (GP)
I am very annoyed that the Government and the Opposition keep talking about sustainable aviation fuel. That is a nonsense; it does not exist and it never will. However, I will direct most of my remarks at the regret amendment, which is ludicrous. I cannot even believe we are debating something like this. It is climate-denying nonsense. It is time that everybody understood and read up on the science. We have just had record temperatures for June and could easily be into the hottest year ever recorded. We cannot sit and talk about the economy being more important than the human ecosystem that the economy is destroying. We have to make the economy different.
Here is a better suggestion for debate. We could start naming those heat domes that sit over Europe in the way that we name hurricanes and storms. We could call them “Exxon”, “Texaco”, “BP”, or after any other highly polluting fossil fuel company that created them. We talk about the economy—what do you think will happen when we have the consequences of flooding, heatwaves and droughts? Do you seriously think that will benefit the economy? It absolutely will not. Insurance companies will be hit hard, food supplies will devastated and I will still be calling you clods.
Today, we heard a really anodyne, supercilious answer from Defra about the dangers to our food supply and food security—“No, it’s fine; it’s all sorted out. You don’t have to worry your pretty little heads about it”. That is absolute nonsense. Our food supplies are threatened. If we do not do something about it, we will be very hard hit. The Government are not warning the public about food supplies and food security; they are not moving fast enough. I spoke today to Tim Lang, a professor of food policy who wrote a report for the National Preparedness Commission that has still not been implemented. I suggest that the Government get on it very fast, as well as the Opposition so that they can attack the Government when they do not move fast enough.
I despair that, next year, climate deniers will be saying exactly what this regret amendment says and I will be standing here saying the same thing I am saying now. We will not have moved forward. We will not have made ourselves safer. We will have an economy that is slowly disintegrating because of the impacts of climate change. If we do vote on this ridiculous amendment, can we please all vote against it?
Lord Deben (Con)
My Lords, I remind the House of my declared interests and the fact that I was for 11 years chairman of the Climate Change Committee, appointed, reappointed and extended by Conservative-led Governments.
What is being proposed today was presented by the Conservative Government. My noble friend who spoke here supported that with me. I heard nothing explaining what has suddenly changed. This is just like last week. The Opposition are constantly putting forward these things without explaining why they have changed their view from what was the concerted view of every Conservative Government going back to the speeches that I used to write with Lady Thatcher.
Let us realise that this was a Conservative proposition and that the Climate Change Committee proposed it because it is a necessary way of explaining what will happen once we get the methodology right. Of course, we have to get the methodology right with the IMO and the international aviation authority. That is a perfectly reasonable way to do this. Had a Conservative Government been doing this a few years ago, they would have done exactly the same thing. There is no need for us to argue about it.
This is 10% of our emissions. It is not acceptable to come to this House objecting to what the Government are doing without an alternative. If you are not going to do this, you have to say that you will do something else. I exclude the noble Lord, Lord Moynihan of Chelsea, from this, because he has never believed that climate change is something that you need to fight. That is his position. He is entirely wrong, although we will listen to him, but he is not blameworthy. I think the Opposition are blameworthy, as they are coming forward without an alternative for what we need to do.
The reality is that this could become the largest-emitting sector if it is left out. It is stupid to leave it out. You need to have it in and help the industry get through and make its proper contribution. You cannot ask agriculture or manufacturing to make their contribution if you are not asking the aviation and shipping industries to do so. Only last week, the noble Lord, Lord Moynihan, was complaining that he thought we were sending emissions abroad and shipping them here. This is one of the things we have to get right to meet the proper complaint that he made.
I have to say to my noble friend that, if this is an economic wrecking ball, it was one created by the Conservative Party. This is what we did—and thank goodness we did, because it is not an economic wrecking ball. It is a means of enabling this country to play its proper part in ensuring that our children and grandchildren have an economic system of any kind. This general comment about how difficult things are ignores the fact that we are facing an existential danger. Thank goodness that the voices who speak out on that side, including the Pope with Laudato Si’, and all those who really bother about the future of our society and our children, are making it very clear that we have to make these changes.
This is a very modest thing for the Minister to have brought forward. I have real complaints about the Government not moving quickly enough, but I am very pleased that they have moved as quickly as they have. It is not acceptable to argue about these issues unless you have an alternative, particularly when what is being proposed is something you yourself put forward.
The Lord Bishop of Manchester
My Lords, it is a privilege to follow the noble Lord, Lord Deben, on matters of climate change. The way he spoke with such passion and wisdom is an example of this House at its best.
Climate change presents the greatest collective action problem of our age. Every nation would prefer others to act first, which is why strong climate leadership matters. I found myself challenging the Government for not doing enough earlier this afternoon in Committee of the Financial Services and Markets Bill, so I want to commend these regulations tonight.
Emissions from aviation and shipping have grown rapidly over the past 20 years. According to the Climate Change Committee, as the noble Lord, Lord Deben, has just said, aviation emissions are projected to become the largest sector by 2040. Legislating specifically to incorporate these industries into carbon budgets is, therefore, the fair and proportionate thing to do. These regulations are not introducing new sector limits or altering targets. As the Government have already said, they are fulfilling prior commitments set out in carbon budget 6, which has already been legislated for, and carbon budget 7.
Embedding these commitments in legislation empowers the Government to hold these industries to account for their emissions. It sets a clear example to other nations of our commitment to international climate goals. Omitting aviation and shipping from carbon budgets would weaken the credibility of our climate framework and damage our position when it comes to international climate diplomacy, which is so important.
Earlier today, in Grand Committee, one noble Lord sought to persuade us—if I understood the argument—that, because there are other nations with a worse record than ours on combating climate change, it would be detrimental to our competitiveness, and therefore a mistake, for us to take carbon emissions seriously. Britain’s role in the world should never be to seek to win some unsavoury race to the bottom.
Turning to theology, if I may, most serious modern Christian theologians—including the Pope, as the noble Lord, Lord Deben, has just referred to—have long discarded the old argument of dominion. At its least pernicious, this assumed humans could disregard our impact on the environment because God had given it to us to exploit. At its worst, often among ultra-conservatives in the USA, it positively encouraged exhausting the planet’s resources in the belief that destroying our environment would hasten the return of Jesus Christ. Those views may be less often publicly stated now than 20 years ago, but I fear their malevolent presence still lurks behind some of the most vehement opposition to limiting carbon emissions. We are not the planet’s despotic overlords; we are a part of creation. We have a responsibility, as others have said, to pass on to future generations a world as beautiful as the one we inherited.
We are already witnessing, as the noble Baroness, Lady Jones of Moulsecoomb, has reminded us, the effects of climate change through fluctuating weather patterns, pressures on food production and more extreme climate events. As time goes on, it will be the most vulnerable, those experiencing poverty and the generations after us who will feel the effects most strongly. This lunchtime, I was at the Trussell Trust food bank in Hammersmith and Fulham for the launch of a much-needed inquiry into the need for food banks, for which I am a member of the panel.
The rapid increase in prices of basic foodstuffs over recent times, so impacting on our poorest sisters and brothers, is a direct consequence of the increasingly extreme weather climate change we are already experiencing and which, last week, we lived through. If noble Lords had been trying to take a service wearing fancy robes on Sunday in Manchester Cathedral, they would be very much on my side.
The window of opportunity for action is quickly closing, but these regulations present an important step towards ensuring that every sector fairly plays its part in meeting our climate commitments. I commend them.
Lord Hunt of Kings Heath (Lab)
My Lords, it is a pleasure to follow the right reverend Prelate. Like the noble Lord, Lord Teverson, I very much welcome the regulations themselves; they have been a long time coming, but it is good that we are now including aviation and maritime within the sixth carbon budget. It is going to be challenging, and I certainly understand the need for flexibility in methodology. The Committee on Climate Change has set out some of the challenges we are going to face, but that we should do it I am absolutely convinced.
This debate follows last week’s rather dispiriting debate, when the Conservative Opposition essentially turned their back on net zero and on any concern about climate change. In criticising the Government last week, the noble Baroness and the noble Lord, Lord Moynihan, said nothing about the impact of climate change and nothing about what they would do in relation to net zero.
The Commons debated last week’s and this week’s SIs together, and I read the debate. The shadow Energy Secretary, Claire Coutinho, made not one mention of what the Conservatives would do to mitigate or adapt to climate change. Instead, her sole response was to get rid of carbon tax and repeal the Climate Change Act—as noble Lords here will know, we were the first country to establish a long-term, legally binding framework. Are the Conservatives really serious about wanting to axe this landmark piece of legislation? In 2019, they beefed it up with commitments on net zero under the noble Baroness, Lady May, and the last Conservative Prime Minister stated that energy transition and net zero were among the greatest opportunities facing this country.
We come back to the issue of economic growth. I thought that the noble Baroness, Lady Jones, was absolutely right: the real catastrophe to prosperity and economic growth is climate change, not the actions we are taking to try to mitigate and adapt to them. Noble Lords will have read the CBI report that came out a couple of weeks ago, looking at the green economy. It is massive. It is one of the only sectors which is really growing in this country, and we can add aviation and maritime to that. We now have a £105 billion net zero sector and 1.1 million full-time equivalent jobs—and they are good-quality jobs as well.
The issue of other countries taking advantage of the UK taking leadership is absolute nonsense. There is huge advantage to the UK in being a key player in a net-zero economy. We know from the work of the International Energy Agency that actually, despite what some leaders say, many countries are speeding on with a transition to net zero. We need to be part of that, and aviation and maritime need to be part of that. So I very much support the statutory instrument. Tonight, we are seeing that, around the House, there is a strong consensus in favour of dealing with climate change and moving to net zero as fast as we can.
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, I declare my interest as chair of InterTrade UK, which is beginning a piece of research on ports and connectivity between Northern Ireland and Great Britain. We believe this is an important piece of work, given what has happened in terms of the Windsor Framework.
I will concentrate my remarks on the shipping industry and the lack of methodology, which has been referred to by most of the speakers. That is not a criticism; it is just that I think there are things that need to be put on the record when it comes to adopting a methodology to deal with shipping, particularly in relation to Northern Ireland. As further carbon and climate policies are introduced, it is important that His Majesty’s Government recognise Northern Ireland’s specific circumstances and ensure that the cumulative impact does not disproportionately disadvantage businesses and consumers that rely on maritime services. Around three quarters of goods entering or leaving Northern Ireland do so by sea, meaning that additional costs imposed on shipping are borne ultimately by the exporters, importers and, of course, consumers. Does the Minister and the Government recognise that Northern Ireland has particular geographic and economic circumstances which should be taken into account when the methodology is adopted in relation to shipping?
The existing UK ETS recognises this. It has a 50% concession for Northern Ireland-Great Britain ferry routes. Of course, there is a zero concession for the Highlands and Islands, which we would say should apply to Northern Ireland as well. The existing UK ETS comes into effect this week, on Wednesday 1 July. Maintaining that concession for the industry is a priority and, despite the concession that the UK ETS implementation gives to Northern Ireland traffic, it will add £9 million annually in additional costs to the shipping industry.
It is important that the Government continue to monitor the real-world economic consequences. I hear voices saying that we should not be worried about them. Well, frankly, I am worried about economic consequences for Northern Ireland. There is no stand-alone economic impact assessment of this SI, but given Northern Ireland’s reliance on maritime services, its geography and economic circumstances, it would be very helpful to all if the Government would undertake a dedicated economic impact assessment for Northern Ireland, perhaps in conjunction with the Northern Ireland Assembly, because decarbonisation must be of course environmentally sustainable but also economically sustainable. As the Government pass decarbonisation into law, we must ensure that climate policy does not inadvertently undermine our economic competitiveness across the UK, including, in this instance, in relation to Northern Ireland.
I note from the Secondary Legislation Scrutiny Committee that both the Scottish and Welsh Governments have laid legislation to include international aviation and shipping in their carbon budgets. Can the Minister say what has happened in relation to the Northern Ireland Assembly?
Lastly, in his opening remarks, the Minister said that there will be flexibility between the different sectors impacted by this. Will there also be flexibility within the sectors—in other words, within international aviation and shipping—given our unique position in the United Kingdom? I welcome the debate on this issue and look forward to the Minister’s response.
Lord Moynihan of Chelsea (Con)
My Lords, I have three brief points to make and three questions for the Minister, and I hope in speaking to avoid the hysteria noticeable in some speeches this evening.
My first point is that this whole ETS approach is yet another failed attempt at “We know best”. I could give many examples, but perhaps the most interesting recent one is that with the recent collapse of scenario RCP 8.5—on which much of the climate catastrophists’ claims have been based in the past couple of decades—and with the complete collapse as being agreed as no longer plausible, those catastrophist claims can now be seen as disinformation. That is a good reason for the noble Lord, Lord Deben, to understand why change is needed. By 2050, despite the “net zero” words, 50% of aviation fuel will still be fossil fuel. Again, so-called clean fuels, as the noble Baroness, Lady Jones, so eloquently said, are not at all carbon zero. Does the Minister agree that the whole ETS is built on shaky foundations and is better off abandoned?
My second point is that the ETS market itself is a confected artefact. The intent was to create a free market in carbon. In fact, it is all government controlled and that is the direct opposite of a free market. In the end, and at the moment, 100% goes to government, so it is just another tax. It does not reduce carbon generation; it just transfers it to another country. Economic activity here is lower; economic activity elsewhere is higher. Does the Minister accept that the ETS is, in essence, another way of generating tax to “pay for more benefits”, in the words of one of his own MPs?
My third point is that it ends up as yet another hit to economic activity in the UK. Net zero has already hollowed out the economy. Adding ETS for aviation and shipping just worsens it. The ETS carbon price has gone from £34 to £70—so there is a cost, despite what the Minister claimed. Refineries have spent some £175 million on ETS and aircraft operators have spent over £200 million. There is a cost to all this. Our economy suffers, while not a dent is made in global carbon emissions. In India they recently increased their number from 74 to 164 airports, and they are adding another 50—there is no ETS there. Will the Minister agree that charging the ETS on aviation and shipping further damages our four remaining refineries, the only manufacturing entities that incur this in the UK, further accelerating the deindustrialisation of our nation?
Earl Russell (LD)
My Lords, I thank the Minister for introducing these regulations and all those who have spoken.
Extreme heat records and regret amendments appear to be competing with one another for frequency at the present time. Last week, the UK broke the record for the hottest June day three days in a row, reaching 37.3 degrees Celsius on Friday. Six NHS trusts declared critical incidents, and the London Ambulance Service recorded its busiest day in its entire history, with demand higher than even at the peak of the Covid pandemic. Europe is the fastest-warming continent on earth, and forecasters are warning that future heat events are likely very soon. I find it genuinely difficult to hear arguments that we are doing too much, too fast on climate change.
I will say something about the politics before turning to a couple of comments for the Minister. I want to return to the cross-party consensus on these issues, but I will first challenge the unravelling of our climate policy. When I hear calls from some to repeal the Act, abolish carbon taxes and cut renewable subsidies, with no credible alternative offered in their place, it becomes very hard to sustain the view that opposition to every government climate measure is made in good faith. If the Conservatives challenge settled climate policy, they should expect a response.
The challenge put today, and in our last debate, by both the noble Lords, Lord Hunt and Lord Deben, was: if not this then what? The policy assumption underlying these regulations was not made by this Government. It was made, as others have said, in April 2021, by the then Conservative Government, announced personally by Prime Minister Boris Johnson, who declared that the UK would set what he called the most ambitious targets to cut emissions in the world. That Government confirmed explicitly that the sixth carbon budget would incorporate the UK’s share of international aviation and shipping emissions as an important part of their decarbonisation efforts. These regulations do no more than formalise that commitment in statute. The Conservative Party supported this policy in government; the question before this House is simply whether to honour it.
I want to be clear about what this instrument does and does not do. It introduces no sector-specific limits, no levies, no charges and no cuts to aviation or shipping. It is an accounting measure. It formulates a framework already assumed in policy since 2021, and we are pleased to see it. If we exclude aviation and shipping from our accounting, we do not make those emissions disappear; we simply allow them to consume a disproportionate share of the UK’s available carbon removals and offsets, at the direct expense of agriculture and heavy industry.
I have two comments for the Minister. First, on methodology, I really appreciate the way the Minister set that out. I recognise the need for international negotiations and that those are also complicated at the moment. I simply seek a reassurance that we will continue to work internationally on these issues, and that the Government will continue to engage with the aviation and shipping industries to give them a formal role in that process. On economic impact, I similarly call on the Government to continue to monitor the impact of this and to continue to work with industry to make sure that this system and these processes are as streamlined as possible.
The honest answer to the noble Lord’s concern, introduced by the noble Baroness, is this: a clear framework actually helps these industries by giving investors the certainty and legal clarity needed, as the Minister said, to back sustainable aviation fuels and green maritime technologies. Uncertainty is the enemy of investment; these regulations reduce it. They fulfil a commitment made by a Conservative Prime Minister, have passed the Commons already and align with our Climate Change Committee’s advice. I support them and I urge the House not to support this regret amendment.
Lord Whitehead (Lab)
My Lords, I thank all noble Lords for their valuable contributions to the debate. I am greatly buoyed up by the tremendous speeches in support of this measure. It has restored my faith that this House is facing the right way on climate change and is behind measures to tackle climate change and get us to net zero. That is great.
In that respect, I recognise that I was gently chided by the noble Baroness, Lady Hayman, for being rather proceduralist in my first comments. I would like to put that right now by saying hurrah! We now have this on the statute book. It is something that the noble Lords, Lord Teverson and Lord Deben, and many others—including me—have been banging on about for many years. It always seemed that it was a terrible gap in our armoury to fight climate change that we were apparently allowing international aviation and international shipping to have a free pass as far as climate change contributions were concerned. In those days, it was partly because people could not think of how to do it easily.
The noble Baroness, Lady Bloomfield, underlined the point that we are not discussing methodology because we cannot think of what to do but because there is a still emerging and developing consensus across the world in the negotiations with the international aviation authority and the International Maritime Organization on exactly how this can best be done—not that it cannot be done, but to get it right.
As far as aviation is concerned, it is a question of getting a point-to-point arrangement, where your contributions are relevant for the outward flight and someone else’s contributions are available for the flight back. How to establish the point-to-point arrangement internationally and make it work within each country that agrees it is part of the discussion that is going on with the international aviation authority.
As far as shipping is concerned—and this is relevant to the contribution made by the noble Baroness, Lady Foster—we are now talking about international shipping coming into climate change arrangements. Obviously, domestic shipping has been in there for a while. The noble Baroness and I were engaged in an interesting discussion just recently about exactly how Northern Ireland gets treated as far as domestic shipping is concerned and the particular circumstances for Northern Ireland. As the noble Baroness said, they have led to a half-price arrangement for Northern Ireland shipping so that it is not disadvantaged compared with Republic of Ireland shipping.
There are things already that can be put into place in terms of taking account of particular circumstances. But the particular thing that has to be taken account of as far as international shipping is concerned is the fact that ships do not go to one place and then back to another place; they go to multiple places around the world. So how do you get a fair arrangement for what international shipping is paying in? You go through international bunkering arrangements and things such as that, but there is still some work to do in getting that absolutely right.
It is right that we do not put something down now on a statutory instrument and that we make sure, along with our international partners, that we have got this right on an international basis. This has to be done on an international basis to make sure that people do not escape or get out of their obligations and that it is fair to people all round. That demonstrates that this is clearly not a wrecking ball to UK industry. Indeed, as the noble Lord, Lord Deben, mentioned, if it was a wrecking ball, it would have been a wrecking ball firmly in the middle of the last Conservative Government’s arrangements for the economy, because that is what they did at the time.
It is not a wrecking ball because it will be fair to everybody. This will be the basis on which international aviation and international shipping will continue. There will not be people who get a free ride on the back of it. It will be fair shares for everybody. That is why it is important that we get the methodology right.
I do not think I need to go on a great deal about the rest of this SI, because noble Lords have made such a good case for it this evening and I do not need to add to it. If I have missed anything out in my contributions, I will write to the relevant noble Lords.
I do not agree that ETS is a method of tax raising. It is in the form of a tax, but it works with the market rather than against it to distribute properly how those contributions can be raised. It makes the cost of high-carbon activities higher than that of low-carbon activities—that is one of its purposes. However, it is not unfair taxation for particular groups of people or economies; it is a fair, market-based method of ensuring that the move towards a low-carbon economy is distributed among all people.
This measure should be passed by consensus among everybody in this Chamber. It is so important that that consensus is maintained. It was embedded in the Climate Change Act originally and has provided stability, certainty and credibility to our framework. These regulations do not raise our ambition or weaken it but ensure that it is applied consistently. I therefore urge noble Lords to support these regulations and, in doing so, uphold the United Kingdom’s status as a global leader in tackling climate change. Should this matter be put to a vote, I would urge that this Chamber vote solidly against the idea that there should be a regret amendment attached to it.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I thank all noble Lords for their contributions to this important debate and genuinely take note of their comments.
It is the speed of the rush to net zero that is harming our industry. I accept the entirely correct focus of the noble Lord, Lord Hunt, on the 1.5 million jobs and the contribution to the economy of the burgeoning green economy. However, these Benches are united on the focus needing to be on cutting energy bills. Our grandchildren will equally never forgive us if we destroy our economy with high energy prices. That must be a concern for us all. We currently have electricity prices which are four times higher than those of the US. That is the issue that we need to address.
Let us not ignore warnings from Tony Blair, who said that the net-zero policies being pushed forward are “unaffordable, ineffective” and “politically toxic”, or Gary Smith of the GMB, who recently said that the policies being pursued by the Government are “economic madness”. Even Unite the Union said:
“No ban without a plan”.
These points are worthy of consideration because the North Sea issue is very important. While everyone was distracted by Makerfield, an important referendum was, in effect, being undertaken in Aberdeen South. It was an overwhelming rejection of both measures in these climate change carbon budget regulations and the Government’s currently policy on the North Sea, which is referred to.
Having said all the above, I beg leave to withdraw the amendment standing in the name of my noble friend Lord Moynihan.