Greenhouse Gas Emissions Trading Scheme Order 2020

Baroness McIntosh of Pickering Excerpts

Tuesday 27th October 2020 Grand Committee

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, I thank the Minister for introducing this regulation so clearly and comprehensively. I have a number of questions; if for any reason she is not able to answer the questions today, perhaps she will write to me, because some are technical and I have only just had sight of them myself.

I understand that the impact assessment gave a net cost to industry of between £5 million and £11 million which, I understand, is per year. Obviously, my concern is that this will be passed on to customers. All of us as users notice that even if we switch as often as we are asked to do, our electricity bills go only one way. That is as a single energy user rather than having electricity and gas. Is the Minister not concerned that this will impact heavily on customers’ bills? What action, if anything, is the Government likely to take to help those on fixed incomes, particularly in the current situation?

My next question relates to the impact of Covid, particularly on the aviation sector, which obviously has been heavily affected. I declare an interest in that, when I met my husband, he was working in the aviation sector. Its cashflow is clearly a matter of great concern: it has to carry on paying for the use of the aircraft whether they are flying or not. Will the Minister assure us that the impact of Covid, particularly on the aviation and aeronautical sectors, will be kept under review?

I would be pleased to have an update, if possible, on where we are with carbon capture and storage. As I understand it, that would make a massive contribution to reducing our greenhouse gas emissions. It is something that the Government are keen on and I applaud them for that.

The impact assessment says very clearly that one of the objectives of the policy is to incentivise cost-effective emissions reductions while balancing the competitiveness of UK industry. Given that the Government are coming forward with this scheme very late in the day, with two months to go before the end of the transition period, is the Minister absolutely sure that the industry—or all three sectors that are going to fall within this regime —has been given enough time to adapt to a new system?

I would like to place on record the industry’s view that it is critical across the board that the UK emissions trading scheme has the capacity to link to the EU ETS. Is it still the Government’s intention to follow that? I understand that everyone from industry to environmental non-governmental organisations share this view. Were the Government to diverge from the EU ETS, will the Minister assure me that we would not be simply diverging for divergence’s sake and that there would be a very good reason to do so?

I turn to some more specific questions that, as I said, the Minister might wish to write to me about. She said very clearly that this regulation has been consulted upon and has the support of all four devolved nations. Can she assure us today that whichever carbon-pricing scheme is chosen, it will have the full endorsement of the devolved authorities?

What procedure will be followed to ensure that the devolved authorities are actively involved in the decision-making process as we go forward? My noble friend was heavily involved in the discussions yesterday, which are ongoing, on the United Kingdom Internal Market Bill. This is a classic potential example of why we need to ensure we carry all the devolved authorities with us.

The Government have presented their proposals for a UK emissions trading scheme in this form, which is regulated by a legally binding emissions cap. What assurance is my noble friend able to give that it is possible to align the proposed carbon emissions tax with net zero given the lack, as I understand it, of an emissions cap? What further assurances can she give that the revenue collected by a UK emissions trading system would be hypothecated and reserved largely for climate measures and investment in low-carbon energy? That would at least ensure our industry remains competitive going forward.

Will the Government ensure that the level of the carbon emissions tax will also be set in a fair and transparent manner, to ensure that it is not subject to political considerations—Governments may change—and that it can be aligned with the UK’s legally binding net-zero trajectory? On that point, is my noble friend convinced that industry will be able to meet what I understood her to say would be a target capped allowance that will be 5% below what it might have been expecting to meet as part of an EU Emissions Trading Scheme? In opting for a carbon emissions tax instead of an ETS, with months to go before COP 26, is this sending the right message on the UK’s commitment to carbon markets as envisaged by Article 6 of the Paris climate agreement?

As I say, these questions are technical and, since I have a couple of others, it is probably best if I write to my noble friend. However, I am glad of the opportunity to debate this instrument and put the questions to her today.