Here are the climate-related sections of speeches by MPs during the Commons debate Draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022.
18:00 The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
That the Committee has considered the draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022.
The UK emissions trading scheme—the UK ETS—was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme to encourage cost-effective emissions reductions that will contribute to the UK’s emissions reduction targets and net zero goal. The scheme replaced the UK’s participation in the EU emissions trading system—the EU ETS—and the 2020 order applied EU ETS rules on the monitoring, reporting and verification of emissions, with modifications to ensure that they work for the UK ETS.
The 2020 order was subsequently amended by the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 to include provisions for the free allocation of emissions allowances and to create the UK ETS registry. Regulations under the Finance Act 2020 established the rules for auctioning allowances and mechanisms to support market stability. The UK ETS launched on 1 January 2021, and the first auction successfully completed on 19 May. The scheme has been running well since its launch, but there is a need to continue to improve its operation.
Further amendments have been made by the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2021, which is subject to the negative procedure and comes into force on 7 February 2022. In broad terms, the 2021 order makes various technical and operational amendments to the UK ETS across a number of scheme aspects, including providing for installations in the hospital and small emitter opt-out scheme to be able to increase their emissions targets, and for installations in both opt-out schemes that return to the main scheme to benefit from free allocation.
[Source]
18:08 Dr Alan Whitehead (Southampton, Test) (Lab)
Since the 2020 order, from which this amendment order derives, the EU has adopted in principle a proposal for a new carbon border adjustment mechanism. That mechanism would deal with the consequences of carbon leakage—that is, where the EU’s carbon taxes and carbon trading arrangements mean that third countries have a considerable trade advantage, because they can import goods without such arrangements attached and bring them within the EU’s borders. As far as I know, the UK has not yet taken any action on considering or implementing a carbon border adjustment mechanism. If the EU proceeds with such a mechanism, as seems likely, the UK will be in an even worse position than it is now when it comes to carbon leakage. We will be external to a carbon adjustment mechanism, so we will have punitive elements against us. At the same time, people will be able to import goods into the UK, safe in the knowledge that they are not subject to the same sorts of arrangements.
[Source]
18:16 Sarah Champion (Labour)
The rationale behind the UK emissions trading scheme and its predecessor, the EU ETS, was to encourage investment in decarbonising by charging industrial emitters of CO 2 for the pollution they were causing. The system placed a legal requirement on polluters to purchase CO 2 or carbon allowances from the state and surrender them to match the quantum of emissions emitted by an industrial installation on an annual basis, with strict penalties for non-compliance or failure to surrender allowances. It was designed to reduce the availability of CO 2 allowances over time, thereby pushing CO 2 allowance prices up, as decarbonisation technology developed and became an investable alternative to paying for emission allowances.
[Source]
18:22 Sarah Champion (Labour)
As a result, Beatson Clark, like many other essential UK businesses, has seen its carbon compliance costs triple. It cannot reduce its emissions further without significant investment in energy infrastructure. Even if the infrastructure were in place, the cost of alternative energy would be prohibitive. It is therefore in a Catch-22; it wishes to further decarbonise, but there is no commercially viable method of doing so. It feels that it is trapped, leaving the purchase of allowances simply as a tax on business. It also has concerns that some of the increase in the CO 2 allowance is being driven by speculators.
[Source]
18:33 Greg Hands
By putting a price on carbon emissions, the UK ETS incentivises market participants to find the most cost-effective solutions to decarbonising. We understand, of course, that there is a risk of carbon leakage, which we mentioned just a moment ago in relation to the EU’s approach. The UK ETS authority, which is the four Governments in the United Kingdom together, will consult in the coming months on the trajectory of the scheme’s cap, particularly to keep it aligned to our net zero obligation. As part of that consultation, we intend to review our free allocation in the UK ETS, for which we will start a call for evidence in the spring. Energy prices, policy and taxes are all things that we keep under constant review—particularly taxes—so I can assure the hon. Lady that we already have a total review.
[Source]
18:35 Greg Hands
That the Committee has considered the draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022.
[Source]