Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026

Lord Dodds of Duncairn Excerpts

Thursday 12th March 2026 Lords Chamber

[Earl Russell (LD)]

It is not for me to respond to what is a question for the Minister. The Government’s impact assessment estimates central abatement investment of around £22 million, with administrative costs of £179 million over the period. The allowance-purchase cost is largely a transfer to the Exchequer and devolved Administrations, with many operators being non-UK based. Carbon pricing must therefore be matched with a credible transition plan. Without that, this becomes not a nudge for transition but could simply be a tax. However, the Government have announced £448 million for the UK Shipping Office for Reducing Emissions—UK SHORE—between 2026 and 2030, the largest public investment yet in commercial maritime.

Phase 2 will support larger projects through the Clean Maritime Demonstration competition and the Zero Emissions Vessels and Infrastructure competition. That is the industrial policy that must sit alongside carbon pricing. At the same time, the measure is expected, on the Government’s central estimate, to generate around £1.9 billion in allowance-sale revenue: around £95 million a year. Will the Minister confirm that a material share of ETS maritime revenues will be reinvested in maritime decarbonisation, including cleaner vessels, shore power, alternative fuels, and support for local transition in coastal and island communities, rather than simply disappearing? Will the Minister commit to publishing annually how much is raised from maritime ETS and how much is invested in maritime decarbonisation?

The cruise industry is an important and growing part of our economy, calling at some 50 UK ports and making over 2,500 calls a year, supporting tens of thousands of jobs and adding billions to the UK-wide economy. The industry’s concern on ETS is that revenues are not being visibly recycled into cleaner fuels and infrastructure specific to their industry. We only have a handful of onshore connections for cruise liners at the moment, so will the Minister tell us what investment will be made as a result of this scheme to bring shore power, and on what timetable for the cruise industry?

The Government and the UK ETS have done substantial preparatory work, including consultations, a digital monitoring platform and voluntary onboarding since November 2025, ahead of the July 2026 start. The Government’s impact assessment estimates an average administrative cost of around £5,700 per operator per year. This may be modest, but it has real implications for real firms. We recognise that this should reduce over time.

We welcome the formal review at the end of 2028 to assess emissions outcomes, administrative burdens and any needed adjustments to scope or thresholds. We have a number of specific concerns about any plans to expand the scope to international voyages. My noble friend will address the specific issues relating to Northern Ireland aspects. We believe the right approach is to keep these provisions under review and match carbon pricing with practical support, not to abandon maritime decarbonisation. Extending the UK ETS to domestic maritime emissions also helps keep our scheme aligned with greater integration with the EU. In turn, a genuinely linked system will help strengthen our trading relationship.

The fatal and regret Motions both reflect genuine anxieties about costs, competitiveness, and the union, but neither justifies rejecting this order. The suggestion that there is no alternative is not borne out by the evidence. Improved operating practices, routing efficiency and gradual fuel switching all represent viable abatement pathways.

Near-zero emission fuels remain expensive and infrastructure is incomplete. But that is exactly why revenue recycling and UK SHORE matter. The right course is to pair a robust carbon price with predictable investment that keeps the maritime sector on its net-zero path, while keeping the UK economy competitive. To call this measure simply a tax misunderstands how the ETS works. It is designed to minimise the cost of meeting our climate goals, to give business flexibility and to limit carbon leakage: this is a practical measure. It becomes a tax only if the Government pocket the proceeds and fail to reinvest them. Revenue is a byproduct: the purpose is to cap and reduce emissions over time. We are supportive of the extension of emissions trading to domestic maritime. Done well, emissions trading drives real reductions, supports innovation and underpins our net-zero transition.

[Lord Dodds of Duncairn (DUP)]

I am grateful to the Minister for introducing the statutory instrument in the way that he did, to the noble Baroness, Lady Hoey, for introducing her fatal Motion, and to the noble Lord, Lord Moynihan, for introducing the regret Motion. It is very important that we in this Chamber debate these issues: this matter got 47 minutes in the other place. Often, matters that affect Northern Irish consumers and businesses in a very direct and detrimental way do not get any time at all in the other place. It is therefore all the more important that your Lordships have the opportunity to debate these matters.

The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have powerfully set out what happened in relation to the Northern Ireland Assembly’s consideration of this matter. This Government are supposed to be pro growth; they are supposed to have the cost of living at the heart of their consideration, and indeed they say that they are pro union and are committed to this through various command papers and policy statements. Thank goodness we are not debating the Windsor Framework edifice today, but it always needs to be taken into consideration, because it was certainly a matter for the Secretary of State when he was interacting with party leaders on this particular issue. This statutory instrument runs counter to all these priorities of the Government, yet they proceed with it nevertheless.

The noble Lord, Lord Moynihan, and the noble Baroness, Lady Hoey, referenced the intense lobbying on the part of His Majesty’s Government, at Secretary of State and ministerial level, to parties in Northern Ireland when it became clear that they were deeply concerned about the effects on Northern Ireland. The introduction of the CBAM argument led Ms Finnegan, the Sinn Féin MLA, to say just this week in the Assembly debate:

“While the challenges facing businesses as part of the changes remain, doing nothing is simply not an option. Failure to implement the ETS would result in the costs being incurred through the carbon border adjustment mechanism”.


That proves that this argument changed minds. This was the deciding argument for Sinn Féin. Interestingly enough, it was Sinn Féin, and the SDLP and the Alliance Party, who succumbed to the arguments of the UK Government. It was an interesting turn of events that those parties succumbed to that type of argument. But that is mainly to do with their total allegiance to anything that advances the cause of the EU, even above the interests of their own constituents, as has been evidenced in many debates in the Northern Ireland Assembly.

I also raise the fact that not only was the CBAM argument introduced at a very late stage but, in messages to party leaders, and certainly my party leader, the issue of the SPS agreement and the EU reset negotiations was also raised, and it was explicitly said that this would be put at risk if this SI was not passed by the Northern Ireland Assembly. These are very serious matters. Raising issues such as these as threats and blackmail, at the last minute and without any proper consideration, as the noble Lord, Lord Moynihan, pointed out in the other place, or indeed when the matter first came before the Northern Ireland Assembly, is totally unacceptable.

It is an outrage that these matters should be considered in this way, especially when we consider what is at stake for Northern Ireland, because this is a discriminatory measure. It is a measure that disproportionately affects Northern Ireland, as has been said. I am not going to repeat all the arguments that have been set out on the economic detriment to Northern Ireland—they have been powerfully set out already—but given our dependence upon maritime transport, it is absolutely clear that this is going to have a knock-on, detrimental effect on businesses, on consumers and on every aspect of life in Northern Ireland.

--- Later in debate ---

[Baroness Foster of Aghadrumsee (Non-Afl)]

Does the noble Lord have any information as to whether the Government have considered this scheme under the United Kingdom Internal Market Act 2020, given that we are told that the exemptions for the Western Isles come from a duty under, I think, the Scotland Act? Surely, the discrimination that is evident here is contrary to that UK internal market Act.

[Lord Dodds of Duncairn (DUP)]

I thank the noble Baroness, who raises a very important point, because when the Safeguarding the Union Command Paper was published, and was heavily sold in order to get the restoration of the Assembly and the Executive and so on, great emphasis was put upon this guarantee in the United Kingdom Internal Market Act that this would ensure Northern Ireland would not be put at any detriment by the introduction of new measures and so on. So, I echo what the noble Baroness has said and ask the Minister to address that specific piece of legislation, which is meant to protect Northern Ireland as part of the UK internal market. The sad reality, of course, is that that is overridden. Not to pre-empt the Minister’s answer, but I suggest he will probably say that it is overridden by the superior obligation to the EU under Section 7A of the European Union (Withdrawal) Act 2018. That is the real answer, even if he does not say it, and until we address that point we will not get any satisfactory resolution to the problems that we have.

I have a number of questions for the Minister. On the issue of the Scottish exemption, he really needs to come forward and explain, on this issue of economic unfairness, what the rationale is for excluding Northern Ireland. What is the rationale for comparing Northern Ireland with the Irish Republic in saying that a 50% reduction is satisfactory, given that this is what applies on trade between the Irish Republic and Great Britain, when Northern Ireland businesses are in competition with their British counterparts on the mainland? This is the comparison that needs to be made. Traders, consumers and businesses in the rest of the United Kingdom do not have to concern themselves so much—hardly at all, most of them—with any maritime transport issues, but Northern Ireland is utterly dependent upon that, so the issue of why the Scottish islands are exempt and Northern Ireland is not needs to be addressed.

There is an issue about where the money is going from this. There is no reference to the fact that this money will be used in any particular way. It is important that the Minister clarifies how the revenue is going to be used to help in relation to decarbonisation, if at all. I want to ask the Minister about the time to prepare, since the order was published on 13 January. It seems to me that there is an inordinate rush to get this through. What is the reason for that? Would one solution not be to give more time for consultation before this is brought into full implementation?

I want to ask about the maritime decarbonisation fund, with £271 million in funding to support shipping and coastal communities. Will Northern Ireland have access to that fund? I want to ask about state aid provisions in this regard, because under the Windsor Framework we are under the EU state aid regime, not the UK state aid regime. Is there any impediment to access to that fund for operators in Northern Ireland as a result of those state aid obligations? I would like a clear answer, because there seems to be some confusion on the issue and it would be helpful if the Minister would spell it out.

This is a very important debate. It raises a number of issues, not only substantive ones to do with the economy and trade. Those are important, but it has exposed a wider issue about the political process, which has been very helpfully and skilfully brought to light by both the noble Lord, Lord Moynihan, and noble Baroness, Lady Hoey, in introducing their Motions. It will do damage to the political process in Northern Ireland. This type of manoeuvring by the Northern Ireland Office is extremely unhelpful to the Assembly set-up, which is fragile and difficult enough.

It seems that the NIO engages with the Assembly only on its terms and when it is in its advantage to push its particular arguments. It does not seem to operate as a voice for Northern Ireland within the Cabinet or Whitehall machinery, and that really needs to be looked at. We were promised that there would be an engagement unit set up between the Cabinet Office and the Northern Ireland Executive under the Safeguarding the Union Command Paper. What has happened to that? It seems that the NIO picks and chooses whatever it wishes to raise as issues but does so to implement its view of what should happen, rather than advancing the cause of Northern Ireland within the Whitehall set-up.

[Lord Berkeley (Lab)]

My Lords, I am grateful to my noble friend for introducing this draft order and the many noble Lords who have expressed concern. The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have both set out their concerns, which I share because I live in the Isles of Scilly. Although the Minister briefly mentioned the Isle of Wight, the comments made about the difficulty of getting to and from, and living in, the islands—I include Northern Ireland in that—are well known. We have been fighting the Government for years to try and get some benefit for the Isles of Scilly and Isle of Wight, in some kind of support for transport—which is ships, of course. Although the Scottish Government were clever in sticking with what they have, we have so far failed.

Some noble Lords may say, “Well, you’re talking about little baby ferries”—those that go across to the islands I mentioned—whereas this order is at the moment limited to 5,000 tonnes. That is true, and none of the ships that go to the Isles of Scilly, except cruise ships, weigh more than that. However, we are also told by many, and I am sure it is true, that when the European Union reviews all these related regulations it will wish to reduce the limit from 5,000 tonnes to much less, so that could affect the freight and passenger ships to the Isle of Wight and the Isles of Scilly. Let us be clear that, at the moment, the costs of services to these islands are very high. The cost of freight to the Isles of Scilly probably means that it comes out at about four times what you would be paying on the mainland for a bag of cement or a tin of baked beans. It is very serious.

The second issue I have with this draft regulation is the timing, as my noble colleague has just mentioned. The timing is quite serious if we are to come up with some alternative means of propulsion. It is fine to say that they can all be electric, and electric ships exist—but not everywhere. In parallel to electric ships, you need a lot of power to ports, but, at the moment, we seem to have a shortage of power. We have had many debates here about the high-power demands for AI, railways, buses and everything else like that. To say that ports must have enough power available to service all the ships that are going to come in in two or three months is cloud-cuckoo-land. We are talking just about ferries—nice though it is to talk about ferries to Ireland. Cruise ships have also been mentioned, as have general cargo and container ships. All kinds of different craft that could reach the 5,000 tonnes or less in the future need to know what the future limits are going to be and to assess what they will do in terms of rebuilding, refitting, or whatever.

I conclude by asking my noble friend the Minister what information has been given to the industry about the need for and the availability of shore power. I also ask him whether he thinks it would be a good idea to ring-fence some of the shore power availability to some of the bigger ports, and whether there is enough generating capacity. I hope my noble friend will be able to tell me that.

I support other noble Lords who suggest that this regulation should be delayed until we have much better proof of alignment with the EU and are given a much longer-term feed-in notice so that the industry, be it ports, shipping lines or anyone else, can adapt and avoid being fined, because that is not what we want for this business. I hope also that we can continue to have a good debate and get some exemptions for Northern Ireland, which I fully support, and for the Isles of Scilly and the Isle of Wight.