Draft Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021 Debate

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Department: Department for Business, Energy and Industrial Strategy
Wednesday 21st April 2021

(2 years, 11 months ago)

General Committees
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Alan Whitehead Portrait Dr Alan Whitehead (Southampton, Test) (Lab)
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The Minister hopes that the SI will have the support of the hon. Members present. It certainly has the support of the Opposition Members present, small in number though we are, so there will be no Division or opposition to the proposal.

However, we need to be clear, among ourselves at least, about what the measure does. It is not the commencement of trading under the new UK ETS arrangement. It is not in any way a measure relating to alignment of the new UK ETS arrangement. It is instead essentially a preparatory measure to enable the UK ETS to operate properly. It clears up a lot of issues about the KP—Kyoto protocol—registry, brings the registry arrangements under the control of the Environment Agency, and regularises the arrangements for membership of that registry for UK companies trading in that protocol area.

The measure is not the UK ETS itself; it is breaking the ground for it, four months after we have formally left the EU ETS, and were supposed to be setting up our own ETS and trading independently. The Minister has indicated that the UK ETS will be better, if anything, than the EU ETS, and has warmly heralded its arrival, but of course it has not actually arrived. However, we have an announcement by the body that has been commissioned to undertake trading at auctions for the new ETS that the first auction will take place on 19 May, subject to regulatory approval.

I am not sure whether this afternoon’s proceedings are part of the regulatory approval that will allow those auctions to take place. I suspect that they are not, but interestingly I see that there is, as the Minister mentioned, an aim for the IT platform for the UK KP registry to be ready in spring 2021. I think that she and I will agree that we have anything but spring-like weather at the moment in the UK. Nevertheless, it is spring, so that platform should have been ready by now, but it is not. As the Minister mentioned, it is not projected to be ready until May and there will not be activities on the UK registry until June—which is the summer, by my reckoning. Can she say, reasonably hand on heart-ish, that the platform really will be ready by, shall we say, the end-ish of spring and working as she described? As she clearly understands, that is important to the workings of the ETS scheme as a whole.

The Minister indicated, as the explanatory memorandum to the regulations indicates clearly, that companies who have accounts in the UK’s KP registry have lost access to the original registry for the period during which the new UK registry is being compiled and the software sorted out for the platform. Indeed, the explanatory memorandum has the strange advice that companies involved in the original KP registry and awaiting transfer should, if necessary, open accounts in Europe to use the original KP registry. This is getting to be a bizarre state of affairs. It really should have been sorted out simultaneously with UK withdrawal so that a reasonably seamless transition could have taken place, but that that is clearly not the case.

The Minister mentioned that we have no reports of UK companies being seriously incommoded, but it could be that they are giving up on progress for the time being and awaiting further developments, as indeed they are on the auctions with the new UK system that we are promised. Can she assure us that no damage to the future of the UK ETS has occurred by the strange set of affairs of companies being in a hiatus, unable to trade in the UK and perhaps having to trade in Europe?

Finally, what are the arrangements likely to be for the alignment of UK ETS systems with other carbon trading platforms in the world and, most essentially, with the EU ETS? The UK-EU trade arrangement, signed on Christmas eve, clearly indicated that there would be alignment between the EU and UK systems at an early stage, but the energy White Paper, published at about the same time, merely says that

“the UK is open to linking the UK ETS internationally in principle and we are considering a range of options, but no decision on our preferred linking partners has yet been made.”

Can the Minister tell us whether that range of options has been considered, and whether any decisions about preferred linking partners have been made, or are in the process of being made, to allow the UK ETS to work in the best possible way?

To be helpful to the Minister, I can indicate that the EU authorities confirmed at the beginning of March that no negotiations with them about any EU ETS-UK ETS linkage had started. Perhaps the Minister can let us know today whether any negotiations have started and, if they have not, whether the decisions on preferred linking partners might concern schemes operating elsewhere in the world—China, some states of the USA or South Korea. I would have thought the rather obvious one to link with was the EU ETS. I am anxious to hear whether that is the Minister’s view. If it is, what has happened to allow that linking to happen?