Chamber and committees

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.

I am happy to leave it as it is.

Motion agreed to.

I agree with your assessment. We are setting out a five-year carbon budget for the reason that we have given, which is that it takes into account fluctuations across the five-year process. Having single-year targets would completely take away from that approach and the nuances around it, which the CCC has given the advice on.

NDCs are set by the UK Government, and there is still the notional 68 per cent for the whole UK with regard to emissions. Therefore, amendments 15 and 16 would cloud the clarity that a five-year carbon budget provides. In effect, they would mean having two different systems at the same time.

I appreciate the intention behind amendment 62, which Mark Ruskell lodged, on the broader point of ensuring that the Climate Change Committee is resourced. That was raised in the committee’s stage 1 report. Of course, the CCC is a vital partner and the Government is committed to ensuring that it has the resources and information that it needs.

However, I must emphasise that the Climate Change Committee is jointly funded by the four nations of the UK, and there are funding arrangements and mechanisms in place that make that work. Amendment 62 would make only the Scottish Government legally responsible for plugging any shortfall—however that arose—in relation to one aspect of the committee’s functions. Making one partner legally responsible for funding a narrow aspect of a body’s work is not how the arrangement works, and nor is it how it should work. I urge the committee to reject amendment 62, because the funding and capacity of the Climate Change Committee are a matter of joint deliberation between the four Governments across the UK.

Amendments 64, 49 and 50, in the name of Brian Whittle, seek to prevent the Scottish Government and this Parliament from deciding that various functions under the Climate Change (Scotland) Act 2009 should be carried out by a body other than the UK Climate Change Committee or a successor body set up by the UK Government. The Scottish Government has no intention of anyone other than the UK Climate Change Committee carrying out such functions. However, when it passed the bill that became the Climate Change (Scotland) Act 2009, Parliament decided to provide a mechanism for another body to be appointed, should it ever be deemed appropriate. That included allowing for a specific Scottish climate change committee to be set up, and Parliament reaffirmed that decision in the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019.

There was no discussion at stage 1 of this bill about reversing those decisions of the Parliament, and I see no reason why the committee should be called to do that today. That question was not posed in the committee’s evidence-taking process.

We will not support amendments 15 and 16, because they would set annual targets for 2030 and 2040. The Climate Change Committee has already made it clear that carbon budgets are preferable to a system of single-year targets. That is the approach that all other Governments across the UK take. I cannot support the amendments, because retaining single-year targets alongside carbon budgets would do the opposite of providing the clarity that is needed at this important juncture.

The Government supports amendments 56 and 21, but it cannot support amendment 18. I have already said that I want to work with Patrick Harvie on the substance of amendment 17, and I am pleased that he is willing not to press it. I recognise the point that he has made and I support the idea that we set out our approach to assessing the emissions that are associated with capital projects, but the amendment as written does not sufficiently define what a “major capital project” is. I think that we can work together ahead of stage 3—indeed, I hope that we can do so—and get something that everyone is comfortable with by that time.

Mark Ruskell’s amendment 18 and Sarah Boyack’s amendment 56 cover similar ground with regard to the breakdown of climate change plans. Sarah Boyack came to me to set out her intention and the approach that she wanted to take, and she worked with the Government to get the wording of her amendment to a place where we are happy to support it. Before I finish my remarks on amendment 56, I note that it better reflects the intentions of quite a few members who came and told me what they wanted to see in the bill. I urge members to support it over amendment 18, because I agree with Sarah Boyack’s approach.

On amendment 21, which relates to the best-practice approach—

It is perhaps for Ms Boyack to speak to her amendment, but what we like about it is that it accepts the principle of your amendment while allowing for policies to be grouped where necessary, which will provide more transparency. The intention is very similar to that of your amendment, Mr Ruskell, but we like the idea of the groupings, which is why we have worked with Sarah Boyack on that. I am sure that she would want to explain why she has taken that approach, but I hope that Mr Ruskell can see that, by voting for Sarah Boyack’s amendment, he will really get what he wants in the bill.

I have come to the end of my remarks, convener. I am happy to support amendment 21.