Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, whether the Government has made an assessment of the potential merits of introducing a carbon fee and dividend as part of its plans to achieve net zero emissions by 2050.

A carbon fee and dividend is an alternative form of carbon pricing policy. The UK already prices carbon emissions. This was previously through participation in the EU Emissions Trading System, and from January 2021 is via a UK Emissions Trading Scheme (UK ETS) as announced in the Energy White Paper. This demonstrates our ongoing commitment to carbon pricing as a tool to reduce emissions in line with our ambitious net zero target.

Whilst we recognise the benefits of a carbon fee and dividend system, we believe that our UK ETS is better placed to support businesses to decarbonise at least cost. The UK ETS initially covers around one third of UK greenhouse gas emissions, and applies to the power sector, heavy industry, domestic aviation and flights from the UK to the European Economic Area. We will consult in the next 9 months on how to align the cap with the appropriate net zero trajectory, and we are also committed to exploring expanding the UK ETS to the two thirds of emissions currently not covered by carbon pricing, and will set out our aspirations to continue to lead the world on carbon pricing in the run up to COP26.