Question to the Department for Energy Security & Net Zero:

To ask His Majesty's Government what assessment they have made of the annual cost of compliance with the UK Emissions Trading Scheme to (1) British Steel, and (2) the UK steel industry as a whole; and what projections they have made of those costs for each year to 2030, taking account of changes to free allowances.

Under the UK Emissions Trading Scheme (UK ETS), annual compliance costs for individual sites are determined by their reportable emissions and the price of UK ETS allowances, which is determined by the market. The Government, as part of the UK ETS Authority, is a convenor of the market and therefore not able to comment on current prices or price movements.

The UK ETS Authority provides free UK ETS allowances to sectors such as steel to mitigate the risk of carbon leakage, over 2021-2025 the sector received free allocation covering 95% of the sector’s annual emissions. Out to 2030, the steel sector will continue to be eligible to receive free allowances, however these will be gradually reduced from 2027 once the UK Carbon Border Adjustment Mechanism (UK CBAM) comes into force and replaces free allowances as the primary carbon leakage mitigation.

As regards British Steel, the Government has recently appointed a Chair and Board that will develop proposals to secure a commercially and environmentally sustainable future for the business. The introduction of the UK CBAM and reduction of UK ETS free allowances will be taken into account during the development of the plan.