Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022

Lord Teverson Excerpts

Thursday 3rd November 2022 Grand Committee

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

My Lords, I beg to move that the draft Greenhouse Gas Emissions Trading Scheme (Amendment) (No.3) Order 2022, which was laid before the House on 7 September 2022, be approved.

The UK Emissions Trading Scheme—the ETS—was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme to encourage cost-effective emissions reductions, contributing to the UK’s emissions reduction targets and our net-zero goal. This scheme replaced the UK’s participation in the EU Emissions Trading Scheme—the EU ETS—and the 2020 order applied existing rules on the monitoring, reporting and verification of emissions with modifications to ensure that they work for the UK ETS.

The 2020 order was subsequently amended by several statutory instruments in 2020, 2021, and 2022 to set up the scheme. These included provisions for the free allocation of allowances and the UK ETS registry, as well as a series of technical and operational amendments to improve the running of the scheme. Regulations under the Finance Act 2020 established rules for auctioning allowances and mechanisms to support market stability.

The purpose of this order is to amend the 2020 order to enable the inclusion of flights from Great Britain to Switzerland within the scope of the UK ETS. The existing UK ETS currently covers domestic flights, flights from the UK to the European Economic Area, and flights between the UK and Gibraltar. Since our departure from the European Union, flights between the UK and Switzerland are not covered in either the UK ETS or the Swiss Emissions Trading System, creating a gap in ETS coverage.

The Government consulted on the policy in this draft instrument between May and July 2019 as part of a consultation on the future of UK carbon pricing. In the 2020 government response to that consultation, we committed to include UK to Switzerland flights within the scope of the UK ETS if an agreement could be reached with Switzerland. I am happy to say that we have now agreed with Switzerland to cover these flights, and Switzerland has amended its relevant domestic legislation to ensure that flights from Switzerland to the UK are included in the Swiss ETS from 2023.

This instrument amends the 2020 order to include flights from Great Britain to Switzerland in the definition of “aviation activity” and to bring them within the scope of the UK ETS for the start of the 2023 scheme year. In 2019, UK to Switzerland flights amounted to approximately a quarter of a megatonne of CO₂, which is less than 0.2% of the UK ETS cap for the 2023 scheme year.

Noble Lords should note that the policy intent is to include flights from across the UK to Switzerland within the scope of the UK ETS. However, as the Northern Ireland Assembly was not able to consider affirmative legislation at the time when the instrument began the legislative process, this legislation brings only GB to Switzerland flights into the scope of the UK ETS. Once the Northern Ireland Assembly is functioning, equivalent legislation will be proposed to the Assembly as soon as possible to ensure that all flights between the UK and Switzerland are then covered. This order will enable the inclusion of flights from Great Britain to Switzerland within the scope of the UK ETS.

In conclusion, this SI will close a gap in coverage in the UK ETS, fulfilling the commitment set out in the government response to the future of UK carbon pricing consultation and upholding our agreement with Switzerland. On that basis, I therefore commend this order to the Committee.

[Lord Teverson (LD)]

My Lords, I very much thank the noble Lord for that explanation. It is good to see the usual BEIS team opposite.

I went to Switzerland on holiday this summer. I was very lucky to do so. We went by train.

[Lord Callanan (Con)]

Do you have pictures for us?

--- Later in debate ---

[Lord Teverson (LD)]

Yes.

We avoided airfares and carbon emissions from aeroplane travel. I bring this up because one of the issues is that the cost of travelling by train all the way through from Cornwall where I live and back again was significantly more expensive—I would say up to three times more—than travelling by air. This is a real issue in terms of climate change emissions and the whole way we manage this area.

At the heart of that to some degree is the tradition that comes from the EU ETS, which is a free issue of permits. I am sure that the Minister will be able to tell me what it is, but I think that the price per tonne of carbon in the UK ETS is around £60—I am not sure, but it is a significant amount of money anyway. I am interested to understand how much money or valuable assets we are offering as a public authority to the airline industry in terms of the number of permits times their value. I would be very interested to understand that. The airlines are able to sell on these permits, and quite rightly, because it is a marketplace. That is how we incentivise the industry, and other industries, to make their carbon emissions much more efficient.