Net Zero, Energy and Transport Committee

Meeting date: Tuesday, February 1, 2022

Official Report 697KB pdf

---

Subordinate Legislation

---

Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022 [Draft]

Item 2 is consideration of the draft Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022. I welcome the Cabinet Secretary for Net Zero, Energy and Transport, Michael Matheson MSP. He is joined by Matthew Costello, head of carbon markets and emissions trading scheme, Scottish Government; and Mariana Cover, policy officer, domestic climate change division, energy and climate change directorate, Scottish Government, who is online. Good morning to all of you, and thank you for joining the meeting.

The draft order is a joint instrument between the four United Kingdom Administrations. It has been laid under the affirmative procedure, which means that the Parliament must approve it before it comes into force. Later in the meeting, we will consider a negative instrument that is linked to the affirmative instrument in policy terms. Following the evidence session, the committee will be invited to consider a motion to approve the instrument under the next item.

I invite the cabinet secretary to make a brief opening statement.

Good morning. I am pleased to give evidence to support the draft affirmative instrument to amend the Greenhouse Gas Emissions Trading Scheme Order 2020.

The UK emissions trading scheme is a key policy for meeting Scotland’s ambitious emissions targets. The scheme is a cap and trade system that is designed to limit overall emissions in the covered sectors and incentivise cost-effective decarbonisation.

When the scheme was established in January 2021, the legislation dealt exclusively with issues essential to its initiation and continued operation. At the time, ministers from the four Governments agreed to defer implementing some technical and operational aspects that were not immediately essential, with the intention of adding further provisions during the first year of operation. That is the purpose of the affirmative instrument and the negative instrument, which were laid simultaneously in Parliament.

To be clear, the provisions in the affirmative instrument are designed to support the continued smooth operation of the UK ETS and to deliver the existing policy intentions rather than to fundamentally change the way in which it functions or applies in Scotland. In broad terms, the instrument aims to clarify the powers of enforcement that are granted to the regulators—the Scottish Environment Protection Agency, in Scotland’s case—and some of the enforcement actions that are available to them. It also extends enforcement powers to the registry administrator—that is, the Environment Agency.

The instrument makes it an offence to intentionally obstruct a regulator in exercising powers of entry; prevents double counting of excess emissions penalties that apply for some operators; and gives the regulator powers to impose civil penalties on operators that fail to return allowances to which they are not entitled.

Finally, although I am unable to go into specifics today, given the on-going discussions with the other Administrations, I am confident that, in the coming months, we will be in a position to publish a joint consultation to explore further policy reforms to the UK ETS as well as the common framework agreement. At that point, I would be more than happy to return to the committee, should it wish me to, in order to discuss the matter in greater detail.

Thank you very much for that statement, cabinet secretary. We will move on to questions from members.

I have a couple of questions. First, is the UK ETS performing as we had hoped that it would? Secondly, there was some discussion a year or two ago about the UK Government introducing a carbon tax. I am not sure whether that idea was ever put to bed, whether it is still under development or whether the UK ETS effectively removes that option from the table.

The UK ETS is performing as it was intended to. There have been discussions between the four nations in recent months to consider whether there ought to be some adjustments to the ETS. The four nations decided not to make any adjustments to the capping levels, given some of the energy price pressures that sectors are experiencing. By and large, the ETS is operating as was intended. Clearly, it will have to change and adapt for the future, and that is the work that the four nations are taking forward. I hope that we will be in a position to consult on that in the months to come.

I am not aware of how far the UK Government has got on the implementation of a carbon tax, which would have implications for the ETS. In the discussions that we have had with the Department for Business, Energy and Industrial Strategy about the future of the ETS, there has been no suggestion at any point that a carbon tax might be brought in that would render the ETS no longer viable. Our discussions with the UK Government have given no indication of the implementation of a tax regime that would replace the existing ETS. The order that we are discussing will align us more closely with the European Union emissions trading scheme.

There are no further questions from members. We move to item 3, which is formal consideration of motion S6M-02605, calling for the Net Zero, Energy and Transport Committee to recommend approval of the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022. I invite the cabinet secretary to speak to and move the motion.

Motion moved,

That the Net Zero, Energy and Transport Committee recommends that the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2022 be approved.—[Michael Matheson]

Motion agreed to.

The committee will report on the outcome of the instrument in due course. I invite the committee to delegate authority to me, as convener, to approve a draft report for publication.

Cabinet secretary, thank you for bringing the motion to the committee.

We will suspend briefly to allow the officials supporting the cabinet secretary for the next item to join us.

09:37 Meeting suspended.  

09:39 On resuming—