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

To ask the Secretary of State for Business, Energy and Industrial Strategy, what steps his Department is taking to ensure issues relating to Emissions Trading System free allowances do not adversely impact decarbonisation projects.

The UK is committed to protecting industry from carbon leakage as our economy decarbonises. Therefore, a proportion of allowances under the UK ETS, worth several billion pounds a year at current prices, are allocated for free to businesses at risk of carbon leakage.

The Government is conducting a review into free allocation policy. The review will be conducted in two phases. The first is looking at aligning the share of free allocation under the industry cap, with proposed changes to the overall UK ETS cap. Proposals on this are included in the “Developing the UK Emissions Trading Scheme (UK ETS)” consultation, published on 25 March 2022 which will run until 17 June.

The second phase of the review will focus on better targeting free allocations for those with a greater risk of carbon leakage, whilst also taking into consideration the availability and affordability of decarbonisation technologies.