Chamber and committees

ESS would not necessarily be investigating such a case—it would be looking at systemic issues that might have led to that case. You said in your description of that hypothetical situation that a case or an incident might point to systemic issues in respect of a public body not complying with environmental law. ESS can, of course, look into that.

Again, that is all very hypothetical. We have processes and procedures in place that are tied up in environmental law, and there are certain procedures that public bodies have to comply with. To give an example off the top of my head, with regard to consents for developments there is a process that is informed by regulations, some of which sit at United Kingdom level and some of which sit with the Scottish Parliament. Obviously, those regulations would need to change to enable what you are talking about. The issue is being actively looked at as potential developments change—in fact, there is a consultation going on at the moment on consents for energy. There is a constant review. The process that I just mentioned involves a joint consultation between the Scottish Government and the UK Government, because a lot of the regulations exist in the UK space. Whether a process is adequate at any given moment can change.

I will not go into the detail of specific court cases but, obviously, decisions that are made in courts could prompt Governments to consider their processes.

Absolutely.

None is expected at all.

My understanding is that all the emissions that the oil and gas industry produces are measured. They have to do that by law.

Yes and no—it is listening in part. There were warnings from the oil and gas sector that a lot of people would pull out of the North Sea if certain fiscal penalties were put in place around tax, but that did not come to pass in the budget.

However, the extension of producer liability—EPL—has had an impact. For example, we have seen Apache deciding to pull out of the North Sea as a result. Those are existing fields, not new ones. That takes us into the energy space in general. There is still demand in the UK for natural gas, which we still use in the majority of heating. The oil and gas sector still employs 58,000 people, so anything that has a precarious drop-off point because of the fiscal regime is problematic.

As I said, we need a just transition. We know for sure that the amount of oil and gas available in the UK continental shelf is reducing, but we need a managed transition. Any cliff edge in production will mean that we have to import more gas from elsewhere to meet demand and will also lead to a cliff edge for workers. ScotWind has not been built out yet and we do not yet have the jobs to replace those that will be lost. We will have those jobs in the future if we manage the transition well, and the fiscal regime for oil and gas is an important part of that.

I do not have them in front of me, but we can ask for them. They would probably be held centrally by the UK Government; we can certainly look into that.

Good morning to you, convener, and to the rest of the committee. I am pleased to give evidence supporting the draft instrument to amend the Greenhouse Gas Emissions Trading Scheme Order 2020.

The emissions trading scheme authority, formed by the four UK nations, is implementing changes to strengthen the ETS’s climate ambition. In June last year, the authority published a response to the consultation on developing the UK ETS. It included the following commitments, which are being implemented through the instrument: amending the cap trajectory so that it is better aligned with net zero targets; covering additional emissions in the upstream oil and gas sector; and improving the penalties process, on which we delivered an additional consultation earlier this year.

On the new cap trajectory, in 2023, the authority committed to reduce the ETS cap by 30 per cent by 1 January 2024. That amendment needed approval by the four UK legislatures. Northern Ireland did not have a sitting Assembly at the time, so the authority used powers reserved to His Majesty’s Treasury as a temporary measure to amend the number of allowances to be auctioned from 2024. That ensured that the number of allowances in the market was aligned with the agreed 30 per cent cap reduction. Ms McAllan sent a letter in July 2023 explaining that decision.

Now that Northern Ireland has a functioning Assembly, we are looking to amend the cap through the Climate Change Act 2008, which gives the committee the opportunity to scrutinise the new net zero cap-aligned trajectory. We are also amending the industry cap, which limits the number of free allocations and creates a flexible share on the back of the changes to the cap trajectory.

The instrument also expands the ETS to cover emissions from CO₂ venting in the upstream oil and gas sector. CO₂ venting—releasing emissions through pipes or vents—was not previously included as an ETS-regulated activity. In contrast, the flaring of CO₂—burning the gases before releasing them into the atmosphere—is an ETS-regulated activity. The inclusion of venting in the ETS aims to remove any perverse incentives for operators to vent gas containing CO₂ that, if flared, would be exposed to the ETS carbon price.

We are also extending to Northern Ireland legislative changes that were implemented in Scotland, England and Wales during 2023 to ensure that the ETS is consistent across the whole of the UK.

Finally, the instrument will introduce two penalties and amend existing penalties to improve the consistency, proportionality and fairness of the penalty process. I am happy to answer any questions.

It would be difficult to quantify the cost at the moment. However, basically, not having a carbon capture and storage scheme available in Scotland will have an impact on emitters.