Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021

Lord Callanan Excerpts

Tuesday 13th April 2021 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021.

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

My Lords, I beg to move that the regulations, which were laid before the House on 25 February 2021, be approved.

The statutory instrument is laid under the power of Section 8(1) of, and paragraph 21 of Schedule 7 to, the European Union (Withdrawal) Act 2018, to address deficiencies of retained EU law that arose from the withdrawal of the United Kingdom from the European Union. The purpose of this SI is to amend retained EU law related to the UK’s Kyoto Protocol registry to ensure that it will be operable in the UK. The statutory instrument is not introducing any new policy; it is simply ensuring continuity of the UK Kyoto Protocol registry, independent of the EU’s registry system.

As a party to the Kyoto Protocol, an international climate change treaty with which I am sure Members are familiar, the UK has a legal obligation to maintain a Kyoto Protocol registry. This registry enables the UK and UK-based account holders to hold and trade Kyoto units. Kyoto units are each equal to one tonne of carbon dioxide and can be traded on the international carbon market. Kyoto units held by the UK Government are used to demonstrate compliance with our emissions reduction targets under the Kyoto Protocol. Emission reduction commitments under the Kyoto Protocol covered the period from 2008 to December 2020. However, due to the time lag in collecting emissions inventory data, final accounting cannot be completed until several years after December 2020, hence the continued need for a registry. Future registry requirements under the Paris agreement, as the successor to the Kyoto Protocol, are due to be decided at COP 26 in November.

While the UK was a member state, the UK’s Kyoto Protocol registry was housed in the EU’s Consolidated System of European Registries. The UK has now established its own domestic platform to house the UK’s Kyoto Protocol registry, independent of the EU system. This platform is due to be operational in May 2021. The UK Kyoto Protocol registry enables the holding and trading of Kyoto units, just as a bank account does with money.

As an industrialised country with emission reduction targets under the Kyoto Protocol, the UK is allocated a number of units, known as “assigned amount units”. These units are held in the UK Kyoto Protocol registry. When finalising accounting for the Kyoto Protocol commitment period, countries have the option to trade or cancel any surplus units if they have met their emissions reduction targets through domestic action. The registry enables this activity.

Private entities can also open accounts in the registry to hold and trade Kyoto units generated through the clean development mechanism under the Kyoto protocol. The clean development mechanism allows a country with an emissions reduction commitment under the Kyoto protocol to implement an emissions reduction project in developing countries. Such projects can then earn certified emission reduction credits, each equivalent to one tonne of carbon dioxide, which can be counted towards meeting Kyoto targets. This mechanism can enable more cost-effective emissions reductions, and the emissions credits generated can be traded, thereby creating a carbon market.

This statutory instrument is about continuity and compliance rather than any substantive changes to policy. By amending the retained EU legislation relating to the Kyoto protocol, this statutory instrument provides a clear legal basis to operate and administer the UK registry domestically. This SI does not have any significant impact on businesses, charities, voluntary bodies or the public sector. The Environment Agency will continue its role as administrator of the UK Kyoto Protocol registry, as it did before our departure from the EU.

There are currently 112 businesses with accounts in the UK Kyoto protocol registry. The units and transaction history relating to these accounts are being transferred from the EU system to the new UK system hosting the UK Kyoto Protocol registry. As I mentioned, the new UK system is due to be operational in May 2021, which is when account holders will be able to register on the UK system to access their newly migrated accounts. Trading Kyoto units via the UK Kyoto Protocol registry should be possible from June this year.

Businesses with accounts in the UK Kyoto Protocol registry were given advance notice about changes to the registry while the transfer from the EU to the UK system takes place. The Environment Agency, in its capacity as administrator of the registry, continues to provide updates to account holders, and we are not aware of any concerns being expressed by those account holders. All four Governments of the UK nations have agreed with the purpose and content of this statutory instrument.

I therefore conclude by emphasising that I see the measures contained in these regulations as important, since they will ensure the UK’s ability to uphold its international commitments under the Kyoto Protocol, following our departure from the EU. I hope on this basis that noble Lords will feel able to support these measures and I commend these regulations to the House.

--- Later in debate ---

[Lord Callanan (Con)]

I thank all noble Lords for their contributions to the debate. The noble Lord, Lord Teverson, summed it up well. This is fairly uncontroversial territory and I am pleased that most Members are supportive certainly of the principle of this legislation. As I expected, most of the questions did not focus on the content of this fairly dry statutory instrument but covered a range of other areas connected to our emissions reduction and greenhouse gas policies. However, in an effort to be as helpful as possible to the Committee, I will endeavour to answer as many of those questions as I can.

The noble Lord, Lord Whitty, asked whether the methodology for measuring greenhouse gas emissions will not be changed by the UK. I can assure him that the UK will continue to report greenhouse gas emissions under the Kyoto Protocol using exactly the same methodology as it did when we were an EU member state. The noble Lord also asked whether the Kyoto Protocol allowances would be compatible with the UK ETS. I can tell him that, under the UK ETS, the Kyoto Protocol units will not be able to be converted to allowances, and international credits are not permitted in the UK ETS at this time. However, the Government and the devolved Administrations are open to reviewing the usage of offsets in future, especially in deciding how best to implement the carbon offsetting and reduction scheme for international aviation, or CORSIA as it is known, alongside the UK ETS.

The noble Lord, Lord Whitty, also suggested that the UK should include imported emissions in its climate target. That issue was also raised by the noble Baroness, Lady Bennett. In our view, targets should strive to follow the best available science and methodologies to account for emissions and it is currently standard international practice to set such targets based on territorial emissions. Including imported emissions would, of course, risk double-counting emissions that had already been captured in other countries’ national efforts.

The noble Lords, Lord Redesdale and Lord Grantchester, asked about the important subject of methane, as well as carbon. I can tell them that methane is covered under the KP and calculated as a CO₂ equivalent, following internationally agreed methodology provided by the IPCC.

My noble friend Lady Altmann asked about the costs of the new domestic registry system and plans to bring together all our climate commitments. The UK KP register has been developed as part of the same IT project as the UK emissions trading system registry. The two systems share a lot of the same IT functionality and we are able to maximise economies of scale and increase value for money by housing the two separate registries on the same system. I know that she will approve of that.

My noble friend Lord Bourne of Aberystwyth asked whether we have provided guidance to businesses affected by the change in the registry. The answer is yes, we have provided regular updates to account holders about the changes. Account holders were given advance notice that the UK KP registry would be inaccessible for a period while the transfer from the EU to the UK system took place. They were advised that, should they wish to trade Kyoto units before the UK registry had been successfully transferred on to the new domestic platform, they could open a KP account in another country’s registry. As yet, we have no evidence to suggest that any businesses with accounts in the UK KP register have felt the need to take that step.

My noble friend Lord Howell rightly expressed concern about the urgent need internationally to reduce emissions and he made some good points, particularly about the number of current coal-fired power stations built by China and elsewhere. That indicates the challenge that faces us for the COP meeting, but I reassure my noble friend that we are making progress on international efforts to address these matters. That is certainly a priority for the Government through our presidency of COP and we will continue to make those points strongly to other member states, jointly with Italy and in partnership with many other countries.

The noble Baroness, Lady Bennett, in her predictable manner, made many of the same points that she always makes in these debates, not many of which had anything to do with the subject facing us in the statutory instrument, but let me reassure her that over the past three decades the UK has achieved record clean growth and has met its climate change commitments. Those commitments are indeed world-leading. I understand that they will never be enough for the noble Baroness, but nevertheless we think that we have made considerable efforts. Between 1990 and 2019, our economy grew by 78% while our emissions decreased by 44%, which is faster than any other G7 nation. The Prime Minister is building on that progress and has set out his 10-point plan for the UK to lead the world into a new green industrial revolution. This innovative programme sets out ambitious policies and significant new public investment to support green jobs, to accelerate our path to reaching net zero by 2050 and to lay the foundations for building back greener.

The noble Baroness, Lady McIntosh, asked about the impact of the changes to the KP registry on account holders. The instrument impacts a limited number of organisations that hold the Kyoto Protocol registry accounts. Our analysis has shown that the costs to businesses are expected to be minimal, as the instrument allows for the continued functioning of businesses through the operation of a UK KP registry, rather than making any substantive changes to existing policy. As I mentioned, account holders were advised that, should they wish to trade Kyoto units before the UK KP registry had been successfully transferred on to a new domestic platform, they could access another county’s register, but so far, as far as we are aware, none has done so.

I can also tell the noble Baroness that the UK will not be lowering its climate standards or commitments as a result of leaving the EU. Our UK ETS is more ambitious than the EU system that it replaces—I know that this will be hard for some noble Lords to appreciate, but it is true. From day one, the cap has been reduced by 5%, which just goes to show that, as usual, we can do things better than the EU does.

The noble Lord, Lord Teverson, asked about the gap in trading for account holders following the end of the transition period. As I said, we have provided regular updates to them. I earlier covered the point about what they could do in the meantime. The value of CERs, the most commonly traded unit on the Kyoto Protocol registry, is approximately 20p.

The noble Lord, Lord Grantchester, asked whether the registry will be ready for June and why there are two separate systems. I can reassure him that the scheme will be ready for trading in June. That may be a commitment that I will regret, but I give him it. We are working closely with the Environment Agency and the IT software developer and keeping in regular contact with account holders to ensure that the transition goes smoothly. The registry must be connected to the UNFCCC international transaction log. Before being reconnected, it must pass a series of tests that meet the international standards. The registry is currently undergoing those tests and is on track to pass them. Once those tests are passed, the register will be able to go live.

In response to the question of the noble Lord, Lord Teverson, about linking the UK ETS with the EU ETS, of course we recognise the importance of international co-operation on carbon pricing and the important role that international carbon markets can play. We are indeed open to linking the UK ETS internationally in principle. We are considering a range of options, but no formal decisions have been made at this point on any linking partners.

I hope that I have been able to reassure noble Lords, following the breadth of their questions, that the statutory instrument is worthy of their approval. I think that the only remaining question was from the noble Lord, Lord Bourne, about scheduling a debate. In asking the question, he predicted the answer: this is a matter for the usual channels. I am sure that the Whip has taken careful note of his concerns and will relay them to the Chief Whip, who will consider them accordingly. With that, I commend the regulations to the Committee.

Motion agreed.