Draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022

Debate between Greg Hands and Sarah Champion

Monday 31st January 2022 General Committees

[Greg Hands]

I thank all Members for participating in this debate. The hon. Member for Southampton, Test mentioned the trouble with the lift opposite the Strangers’ Bar. It can sometimes be confusing, taking a lift directly outside a bar. I have to say that I took one of the two lifts there and came up without any difficulty. To be fair, he may well have taken the other lift, and it may well also not stop at the first floor. I am sure that the House authorities will want to have a look at it. Perhaps they might also find an explanation for the SNP’s failure to attend the Committee, which may also have its origin in that interesting feature of the House as it has been reconstructed.

The hon. Gentleman said that the draft order was not controversial, and I agree. He described the evolution of the affirmative SI that we are considering today, and he is correct that it is generated out of the 2020 order. One set of changes is subject to the negative procedure, and one set is subject to the affirmative procedure—particularly those changes that create new offences, which is what is before us today.

The hon. Gentleman asked two questions about the UK ETS system in general. Its intention, as he sees it, is to shadow the EU ETS. I do not think that is the right way to describe it. Its original features were based on the EU’s ETS scheme. He is right that our prices have been higher, but I would not say drastically so; as the hon. Member for Rotherham pointed out, they have been around 5% higher. We never said that the prices—or, indeed, the eligible elements within the scheme—would necessarily track, but the hon. Member for Southampton, Test is right that there is a common origin.

In terms of linking mechanisms, we are open to dialogue with the European Union in consideration of linking to the EU scheme. That follows our commitments in the trade and co-operation agreement. The two sides updated each other at the trade specialised committee on 12 October.

The hon. Gentleman also asked about the EU carbon border adjustment mechanisms. As he will know, that is an EU proposal that has not yet been legislated for. In my previous ministerial role at the Department for International Trade, the UK was well aware of that proposal, and we continue to watch it very closely. The two things that I would say in relation to it are that it needs to be World Trade Organisation compliant, and that we must make sure it does not discriminate against genuine developing countries. I know that the hon. Member for Rotherham, in her role as Chair of the International Development Committee, will take a strong interest in that point as well.

It is always good to hear about the practical impact that Government decisions and policies can have on successful small and medium-sized enterprises such as Beatson Clark in the constituency of the hon. Member for Rotherham, which has been there since 1751—a remarkable achievement in its own right. We want to make sure that, having been around for 271 years, that company might have a future for the next 271 years, so I will pass on the information about it to the Minister for Industry, my hon. Friend the Member for North East Derbyshire (Lee Rowley), who is more directly involved with the glass sector.

To respond to the points that the hon. Lady raised, we are in daily contact with energy-intensive industry stakeholders regarding ongoing concerns over energy markets. Ministers and officials continue to engage with industry to further understand the impacts of high global gas prices. Our priority is to ensure that costs are managed and supplies of energy are maintained. We are committed to minimising energy costs for businesses, which is vital. In 2020, relief to energy-intensive industries for electricity policy costs alone was worth over £470 million.

[Sarah Champion]

In debates like this I am normally arguing for steel, which I also have in my constituency. I know that Liberty Steel was a beneficiary of those grants, but I do not think that glass is getting the same support as steel. If the Minister could look into that issue, I would be extremely grateful.

[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.