Draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Sadik Al-Hassan Excerpts

Tuesday 27th January 2026 General Committees

[Claire Coutinho (East Surrey) (Con)]

It is a pleasure to serve under your chairmanship, Sir Desmond. I am sure that Members will have been hanging on to the Minister’s every word, but they may not have made it through the dense forest of governmentitis, so let me be very clear: the measures in the instrument, which will be imposed from 2027, will reduce the supply of free allowances, thereby increasing the carbon tax in this country. That is explicitly stated in the Government’s impact assessment.

Free allowances have been the mechanism that we use to protect businesses such as cement and steel from being undercut by cheaper imported products from countries that do not charge carbon taxes. That has meant that those businesses have not faced higher costs from the tax, and therefore, neither have consumers. Because of the CBAM, the protection is being moved to a tariff placed on imports at the border, which means the free allowances in the domestic UK market are being phased out. Members should be clear that that means the carbon tax will now start to be charged on the production of goods produced for the British market that otherwise had been protected by free allowances, and British consumers will face higher prices as a result.

What does this mean in practice? The carbon tax is paid by industrial businesses such as gas power stations, oil refineries and food manufacturers. The Government make them pay a tax for every tonne of carbon they release during their production. Naturally, those taxes are passed straight through to consumers in higher prices, so if the Government increase the carbon tax they increase the price of basic goods like electricity, petrol and sugar. The Government know that, because in the impact assessment for this legislation they admit exactly that: higher carbon taxes will be passed through to consumers as higher prices—it is in paragraph 18.8 for any Members who are checking. That means higher energy, food and petrol prices.

The Government insist that they need to do this because they have decided to link the UK carbon tax scheme to the EU’s. That was their decision—it was a political choice—and that alone has doubled our carbon tax since the start of last year. We are not talking about a slight increase; we are talking about a tax that has more than doubled in less than a year because of choices made by this Labour Government. Families across the country will have less money in their pockets, not because of an act of God or events outside the Government’s control but because of an active policy choice made by Labour Ministers. Doubling the carbon tax has increased electricity bills alone by £4 billion.

In fact, the carbon tax imposed by the Government now accounts for over £100 per year, or over 12%, of the average electricity bill. The increase is costing the wider British economy an extra £5 billion a year, and the legislation that Labour Members will vote for today will pile more costs on to consumers. The Prime Minister recently said that his priority is the cost of living, but across his Government hundreds of decisions like today’s are raining down more regulations and higher taxes, which are pushing costs up. These are policies that will push rents up, that have driven food prices up and that are landing on people’s energy bills.

The impact assessment accepts that today’s policy will push up energy bills but, extraordinarily for a Government who say that their priority is the cost of living, it does not give a figure of by how much. That is why the Prime Minister will fail and it is why this Labour Government are failing. There is no appetite, or accountability, in his Government for even understanding what these policies will mean for the consumer, let alone trying to act in the consumer’s interest.

[Sadik Al-Hassan (North Somerset) (Lab)]

Will the right hon. Member give way?

[Claire Coutinho]

If I am wrong and the Labour party has an assessment for what the order will do to energy bills, perhaps the hon. Member can give us the numbers. I suspect that he will not be able to, but I will happily let him try.

[Sadik Al-Hassan]

You referred to paragraph 18.8 of the impact assessment.

[The Chair]

Order. “You” would be me.

[Sadik Al-Hassan]

Thank you, Sir Desmond; I appreciate that, and it is a pleasure to serve under your chairship. Paragraph 18.8 says that the figures in the impact assessment

“should be treated with caution”

because they are

“at the upper end of estimates”.

Does that mean we should “treat with caution” everything the right hon. Member has said?

[Claire Coutinho]

I think what the hon. Gentleman is saying is that the impact assessment makes it clear that consumers will face higher costs. The question I am putting to him is what that will mean for people’s energy bills. I suspect that is something that his constituents would be concerned about. Given that he does not have an answer, he should ask of his Government what it will mean for people’s energy bills.

[Sadik Al-Hassan]

Will the right hon. Member give way?

[Claire Coutinho]

I will make some progress, unless the hon. Member has an answer on energy bills.

[Sadik Al-Hassan]

I can answer that quite clearly. The word “can” is written in paragraph 18.8; it does not say “will”. I think the right hon. Member’s assumption that these figures—which, as it is written quite clearly, only may lead to price increases—should surely be one for the Minister to answer in a minute.

[Claire Coutinho]

It is absolutely extraordinary that the hon. Member does not accept that a higher price of carbon imposed on the production of goods in this country will raise costs. The cost of the carbon tax now accounts for—rather than pointing to the document, it is worth him listening to what I have to say—£100, or 12%, of someone’s electricity bill. That is clearly a cost that has been passed through. If Labour Members cannot understand that taxes on businesses get passed on to consumers, I am afraid I cannot help them in this debate. Make no mistake: this is a massive burden on consumers and businesses.

Why are the Government doing this? Who benefits? The Treasury will see an extra £1.8 billion in tax revenue because it has doubled the carbon tax. Through this legislation, by reducing free allowances, it will rake in even more from ordinary families who are already struggling. That is in fact the entire point. The aim of the carbon tax is to gradually increase costs for British industry until businesses have no choice but to spend hundreds of millions of pounds they do not have at the moment to decarbonise their production, or shut down and move abroad. The fact that companies are choosing to do the latter means that there will be no reduction in global emissions because those businesses are just moving elsewhere. There will be fewer jobs in Britain, and more businesses in countries that have more polluting regimes—so more carbon in the atmosphere overall.

Page 68 of the Minister’s impact assessment says that the carbon tax would be £25 lower by 2030 if the Government did not make the changes we are discussing today. As the Government have admitted, higher carbon taxes feed through to consumers in higher energy bills and higher costs. The Minister is asking us to approve legislation that, by his own assessment, will hurt industry, fuel inflation and make people poorer. When defending alignment, Ministers point to a Frontier Economics report that says that alignment will save £800 million, but that is supposedly saved over five years, and completely ignores the costs that higher carbon prices impose on the wider economy. To be clear, they are imposing a £5 billion tax rise on the economy every year, in the hope of saving just £160 million a year. That is incoherent to say the least.

When I asked the Department how increasing the carbon tax affects consumers and businesses, its response was that the Government were

“not able to comment on current prices and price movements”

because they do not dictate the market. That is total nonsense. They can and should forecast what this will mean for prices, and how much our constituents will pay in extra costs on their bills. All I am asking is for Ministers to be open about the costs, admit they are imposing them on businesses and the public, make the argument as to why they are justified to do so and then let the public decide. I do not think that that is too much to ask.

I ask the Minister these questions: what is his assessment of how many jobs will be lost because of higher carbon taxes? How many more domestic industries will be replaced by foreign imports, which we are already seeing in gas, steel, chemicals and refineries? Does he accept that reducing free allowances through this legislation will increase energy bills? His own impact assessment says that reducing free allowances will increase carbon prices by £25 per tonne, so will he publish an assessment of what that increased cost will add to people’s household bills?

The world is getting more dangerous, and our raw industrial power is hard power. The Government should not be making our industry even less competitive with soaring carbon taxes, and making us more reliant on foreign imports, just as the world is becoming less safe. It is the wrong measure for the wrong time, and for those reasons we will oppose it today.

[Sadik Al-Hassan]

This order is crucial in ensuring that businesses are not penalised for the extraordinary circumstances of the pandemic. By correcting historical activity levels to account for reduced activity during covid-19 lockdowns, we ensure fair treatment for operators whose operations were disrupted through no fault of their own.

The order updates our efficiency benchmarks to reflect current industry performance and further drive decarbonisation: an essential goal that we must continue to pursue to protect our planet for future generations. The order also enables our carbon border adjustment mechanism to work effectively by phasing out free allocation where appropriate, ensuring a level playing field between domestic producers and imports. This is sensible housekeeping that supports both our climate ambitions and our industrial base, at a time when it is urgently needed.

[Harriet Cross (Gordon and Buchan) (Con)]

Does it support the ambition of reducing bills?

[Sadik Al-Hassan]

I think, actually, that when we fix some of the problems around climate change, like investing in energy infrastructure and making sure that we take the true cost of business, that will eventually bring down bills. At the moment, Conservative Members seem to be saying that they do not want to account for the cost of climate change, which is maddening, considering their previous position.

[Richard Tice (Boston and Skegness) (Reform)]

This is quite extraordinary. We have debates in the House of Commons every week where everybody bemoans the price of electricity, yet we have here an order that will increase bills on businesses significantly. When we reduce the annual allowance for those industries, we are increasing their bills. We have debates about businesses shutting down and having to be propped up by the Government in order to protect communities and jobs. And why are they shutting down? Because of the energy cost—all of them, without exception. This order, and this emissions trading scheme, is driving up bills, and is the sole reason why industries are leaving the country and going overseas.

[Sadik Al-Hassan]

Will the hon. Member give way?

[Richard Tice]

I would be delighted to give way to the hon. Gentleman, who I hope will clarify whether he has spoken to any of these industries, and the communities who are having their jobs slaughtered because of this lunacy.

[Sadik Al-Hassan]

I am sure the hon. Member, as somebody with a great degree of business experience, understands the global trading environment that we sit in, and the energy shocks that come from events like Russia’s invasion of Ukraine. I thank him for his note on talking with businesses in my constituency. I spend a lot of time talking with businesses in my constituency; I do not know whether Reform UK does the same. Would he like to clarify that?

[Richard Tice]

The reason so many industrial businesses are shutting down, whether it is at Mossmorran, Grangemouth, Immingham or elsewhere, or in the automotive sector, is because of the high cost of electricity. This emissions trading scheme, and the linkage of it to the EU emissions trading scheme, has driven up the carbon taxes, which of course has therefore driven up bills and costs. Therefore, industries are less competitive and, as was previously said, those businesses have to pass the cost on to the consumer.

What this is doing is making our industry and businesses less competitive, and the tragedy of that is that we are therefore destroying growth and jobs. All we are doing is sending these industries overseas, and then the carbon dioxide is produced over there, we have lost the jobs, we have lost the money, and we have become poorer. For that reason, I will vote against the order.