Draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022

Geraint Davies Excerpts

Monday 31st January 2022 General Committees

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great joy to serve under your chairmanship, Mrs Miller. I would like to make a couple of quick points on the operational improvements of the trading scheme.

First, I support the points made by my hon. Friends the Members for Southampton, Test and for Rotherham about the carbon border adjustment mechanism or tax, which could be in these changes. The steel produced in Wales, for example, has half the carbon of Chinese steel coming in. Over time, we want to be in a situation where we support jobs rather than export them to China and elsewhere, where dirtier production occurs. China produces some 30% of overall carbon emissions and uses half the world’s coal-fired power stations—we are talking about 1,037, with another 300 on the way. Perhaps the Minister could comment on that.

Secondly, will the Minister comment on why Drax is not included in the emissions trading scheme? Drax burns 7 million tonnes of wood pellets. That wood is grown in America. It is argued that the wood that is cut down is replaced. Even if it is, that in itself is a neutral operation, but then it is burned here, and it is not counted in our carbon emissions. That is amazing, given that it is the biggest emitter of PM10 in Europe. We basically spend £800 million subsidising it, which is £114 a tonne. In burning wood and coal, we burn a carbon store, but in burning wood, we also destroy a way of absorbing CO₂ and producing oxygen.

Thirdly, on airlines and aircraft, I am aware that British Airways is buying up Welsh farms in order to get the carbon offset to fly more planes. Some of those farms are sheep farms, so we will end up flying in Australian sheep and lamb, having basically allowed BA to use this scheme to create more carbon emissions through their planes.

Finally, will the Minister comment on the Government’s plan to double incineration by 2030? What impact will that have, and how will it be factored into the scheme, if at all?

--- Later in debate ---

[Greg Hands]

I will certainly look into that in conjunction with the Minister for Industry; I will make sure that he is aware of the issue that the hon. Lady raises. As she rightly pointed out in her speech, allowances were allocated freely in 2021. The 2022 free allocation amounted to 42 million allowances, as it did the year before, and will be issued by 28 February 2022, in advance of the 2021 compliance deadline of 30 April 2022. There is good continuity of approach there.

By putting a price on carbon emissions, the UK ETS incentivises market participants to find the most cost-effective solutions to decarbonising. We understand, of course, that there is a risk of carbon leakage, which we mentioned just a moment ago in relation to the EU’s approach. The UK ETS authority, which is the four Governments in the United Kingdom together, will consult in the coming months on the trajectory of the scheme’s cap, particularly to keep it aligned to our net zero obligation. As part of that consultation, we intend to review our free allocation in the UK ETS, for which we will start a call for evidence in the spring. Energy prices, policy and taxes are all things that we keep under constant review—particularly taxes—so I can assure the hon. Lady that we already have a total review.

Turning to the points made by the hon. Member for Swansea West, in terms of Drax, it is important to recognise that policies are not specific to any particular company. Currently, installations that use only biomass are out of the scope of the ETS, but I can take away the points that he made and follow up on them. He mentioned British Airways flying in Australian sheep; I think he might have meant sheepmeat or lamb meat, rather than the sheep themselves. Having negotiated the Australian trade deal, I am pretty sure that the movement of sheep themselves would not be within scope.

[Geraint Davies]

Just for clarity, the point I was trying to make was simply that British Airways is buying up sheep farms in order to offset the aircraft it uses to send people on holiday or whatever, and—separately from that—that obviously gives rise to less sheep production in Wales. We have an open-door deal with Australia to allow exports of sheep, so we end up displacing consumption of Welsh sheep with consumption of Australian sheep and burning more carbon, which does not seem to be very good, either economically or environmentally.

[Greg Hands]

The hon. Gentleman is tempting me down the path of debating the Australia free trade agreement—