Draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Steve Barclay Excerpts

Tuesday 27th January 2026 General Committees

[Steve Barclay (North East Cambridgeshire) (Con)]

Can the Minister explain why his impact assessment says opposite things on the same page? In respect of the £92 million direct net cost to business, on the one hand, it says:

“our working assumption is that all costs are incurred to business, with no indirect impacts to households.”

In the very next paragraph, it says:

“we estimate that cost-pass through for most sectors could feasibly be at 80-90%”.

Both those things cannot be true, can they?

[Chris McDonald]

What can be true is that there are both costs and savings for industry, particularly the savings for industry associated with being a member of the UK carbon border adjustment mechanism, which will come into force in 12 months. If we link the UK and the EU ETS, that will enable UK industry to trade freely within the EU, as it has done in the past.

[Steve Barclay]

Will the Minister give way again?

[Chris McDonald]

No, no—I have dealt with that.

The hon. and learned Member for North Antrim asked me about the issue in Northern Ireland, which is a separate electricity zone. Electricity generators in Northern Ireland have not historically received a free allocation, and in future, the free allocation rules on electricity generation will apply in the same way for the UK and EU operators, assuming that there is linkage.

I will return to the point about industry that was made by the shadow Secretary of State, among others. Clearly, the drive is to incentivise investment in industry, and that is precisely what the policy does; that is precisely the mechanism of the carbon price. It is a fallacy to assume that the investment in industry will result in less efficient or more expensive industrial products. That is certainly not the case for the steel industry, where investing in green technology results in lower production costs. The Government’s policy framework gives industrial companies a clear investment framework.

--- Later in debate ---

[Chris McDonald]

I feel I have detained the Committee for too long, so if the right hon. Member will excuse me, it would be a good idea to draw the debate—and we have had a good debate—to a close.

The statutory instrument will give certainty to the industry around benchmarks and free allocations. The free allocations reduction is specifically for those sectors that are part of the carbon border adjustment mechanism, so some other sectors will not be affected. The legislation needs to be in place for applicants to apply for their free allocations for the period to April 2026. The statutory instrument will implement the proposed improvements to the scheme.

[Steve Barclay]

rose—

[Chris McDonald]

These changes have the support of the four Governments of the UK. That consensus on advancing carbon pricing policy adds to the strength of the UK ETS. I therefore commend the draft order to the Committee.

Question put.