Environment, Climate Change and Land Reform Committee

Meeting date: Tuesday, April 30, 2019

Official Report 702KB pdf

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Subordinate Legislation

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Carbon Accounting Scheme (Scotland) Amendment Regulations 2019 (SSI 2019/121)

Welcome to the Environment, Climate Change and Land Reform Committee’s 13th meeting in 2019. I remind everyone to switch off their mobile phones or to put them in silent mode, because they might affect the broadcasting system.

Under agenda item 1 the committee will take evidence on the Carbon Accounting Scheme (Scotland) Amendment Regulations 2019. I am delighted to welcome Dr Tom Russon, who is the legislation team leader in the Scottish Government’s decarbonisation division, and Andrew Mortimer, who is a statistician in the office of the chief economic adviser. Good morning to you both.

Am I correct in thinking that you will make an opening statement?

I have not been advised to do so, but I am happy to speak briefly to the purpose of the Scottish statutory instrument, if that would be helpful to the committee.

Yes—that would be good. Thank you.

The instrument is one in a fairly long series—I am sure that members remember the previous iterations; I will leave you to decide whether you do so fondly—of Scottish statutory instruments on reporting on annual targets under the Climate Change (Scotland) 2009 Act.

All the emissions reduction targets under the 2009 act are based on emissions that have been adjusted to account for operation in Scotland of the European Union emissions trading system. The adjustment forms part of the statutory reporting requirements on the targets, and the calculation rules by which the adjustment is performed each year need to be set in legislation. That happens through carbon accounting scheme regulations.

The original set of regulations—the Carbon Accounting Scheme (Scotland) Regulations 2010—which were passed shortly after the 2009 act, contained provisions to undertake the adjustment calculations for the annual target years 2010 to 2012, which corresponded to phase 2 of operation of the EU emissions trading system. During phase 3 of the ETS—all the annual target years from 2013 to date—amendment regulations have been required annually in order to introduce a new set of calculation rules for each year’s adjustment calculation. Annual SSIs have been needed because data for the new EU ETS is available only year to year: we cannot pre-empt data and set out all the rules for future years, as would probably have been preferable.

I will highlight one other point, of which I am sure the committee is well aware. A lot of the dates can be quite confusing, because everything is, in effect, happening two years after the event. That is simply to do with the timescales for availability of emissions data. For example, it is expected that the next set of emissions statistics will be published in June and will cover emissions during the calendar year 2017. It just takes that long for the data to become available and be published.

The accounting rules in the SSI that the committee is considering today relate to emissions during the calendar year 2017. In essence, the purpose of the SSI is to allow for full statutory reporting on the 2017 annual target under the 2009 act, once the statistics become available later in the year.

I hope that that is helpful.

It is.

I want to get a handle on what is going on. Do we know how many participants in the ETS there are in Scotland?

Do we even have—I see the witnesses’ body language—an approximate figure? I understand that, broadly speaking, there are certainly no more than 100, and the number may be substantially fewer than that. Could you give us a description in broad terms of who participates, so that we can understand a little bit more what is going on in what is a highly technical area.

09:45  

I am very happy to do the best that I can to answer that question.

We will have to write back to the committee on the exact number of participants: we will be happy to do that. The operation of the EU ETS in Scotland covers fixed installations; I think that Stewart Stevenson’s question relates primarily to them. My best understanding is that about 100 participants is the right first-order approximation but, as I said, we will write back with the exact current figure.

The installations are large ones that emit significant quantities of greenhouse gases. Prime examples are large industrial facilities, such as power stations—although, obviously, there is no longer significant coal-fired power in Scotland. If we want to think about the sectors in “Draft Climate Change Plan—the draft Third Report on Policies and Proposals 2017-2032”, for example, we are primarily talking about heavy industry and parts of the power sector.

Aviation for destinations within the EU is also covered by the EU emissions trading system; operators of those flights also report under the system.

That is kind of what I thought. What effect does the system have on operation of those large industrial facilities? I am sure that my colleague Angus MacDonald will be interested in the Grangemouth refinery, which I am quite confident is one of the 100 or so participants. I am also thinking about aviation, because there is a lot of that. Does the system mean that there are cash outflows, because those businesses have to buy credits? Are other businesses in Scotland net contributors in providing credits that can be bought? In broad terms, who are the parties in the trading that goes on? I am not looking for absolute detail.

As I understand it, the thrust of the question is to do with functional operation of the EU emissions trading system. I say, as a significant disclaimer, that that is not my policy area, but I would be happy to ask colleagues to provide a more detailed written explanation.

Perhaps Andrew Mortimer could talk about auctions and free allowances for installations first. I will then come back to the SSI.

Auctions are run approximately 12 times a year, and data that relates to auctioning of United Kingdom emission allowances under the EU ETS can be picked up on the Intercontinental Exchange. That is one part of the system.

The national implementation measures are another part of the system. Industries that are at significant risk of carbon leakage to outside the EU are, in essence, given a free allowance.

The new entrant reserve is another part of the system. Essentially, that reserve is drawn from as and when a new business or industry comes into being that would qualify for a free allocation of allowances, but does not have one at the time of its set-up, because it has no historical reference data.

My final question might be the most important one. Roughly—again, I am not expecting exactitude—what percentage of our total emissions are covered by what the SSI is trying to do? To be blunt, if the figure is a tiny one to the right of the decimal point, our concerns will be comparatively modest but, if it is 10 or 15 per cent, we might be more interested. It would be helpful to know that.

The percentage is definitely more of the latter magnitude. Again, I will have to confirm the exact percentage, but about 25 per cent of Scotland’s total emissions are currently traded under the EU ETS.

I emphasise that the SSI does nothing in terms of the on-the-ground operation of the emissions trading scheme; it simply reflects the operation of that scheme when it comes to calculation of emissions for reporting on climate targets.

You will probably have a short and straightforward answer, but I would like clarity. We have the Climate Change (Emissions Reduction Targets) (Scotland) Bill—as you know, the stage 1 report has been published. Am I right in thinking that, unless there are amendments, the bill will not make changes to what happens annually and that that will just flow from the 2009 act? Is that correct or are there any implications?

I think that I have understood the question correctly, but please tell me if I have not. The need for the current SSI stems from the fact that the bill’s provisions are not yet agreed, let alone in force. Until such a time as an act is in force, in whatever form Parliament eventually agrees, the 2009 act’s requirements remain in legal force. The SSI flows solely from the 2009 act’s requirements.

In terms of what the bill will mean going forward, if the relevant parts of the bill were to be agreed in the form in which they stand, future climate targets will be set and reported against on the basis of actual emissions from all parts of the economy. That will have a range of consequences, one of which is such SSIs will no longer be needed.

I was not sure about that. That is helpful.

Can you clarify whether we are talking about net emissions in which we take sequestration into account?

I can assure you that that is an area of absolutely notorious complexity, even within the Government. The term “net” is, problematically, used in slightly different ways by different parties. We use it in the same way as the convener is using it, which is to refer to emissions sources minus emissions sinks. In that regard, absolutely nothing will change through the SSI, the bill or anything else that is being discussed at the present time.

In some of its previous advice, the UK Committee on Climate Change has sometimes used the word “net” in the way that, in my opening remarks, I used the term “adjusted”, to refer to emissions net of operation of the emissions trading scheme. Our preferred terminology—obviously, it is a matter of preference—is to refer to that as the distinction between adjusted emissions and actual emissions. In my previous answer, I intended to refer to the actual levels of emissions from heavy industry and the power sector, rather than the pro rata share of EU-wide emissions that is used under the adjustment calculation.

Thank you for clarifying that.

I have a relatively modest and uncomplicated question. I want to know about aviation activities and caps and whether those caps have been exceeded or undershot. I have not read it, but the clerk’s note mentions that

“A paper setting out how the ‘aviation cap’ and the ‘fixed installation cap’ for 2017 have been determined has been published”.

I am afraid I have not seen that. Could you tell us how that has turned out?

I defer to Andrew Mortimer on how the various components of the cap are calculated.

On the initial part of your question on the outturn performance comparisons to the cap, I do not have figures in front of me, but I am happy to write back to the committee with them. All of that information is available through the official statistical bulletins that are published each year.

As with all such calculations, calculation of the aviation cap is consistent with EU practice and UK practice—it follows them. The calculation is based on Scotland’s share of EU aviation emissions in the reference period 2004 to 2006. We replicate in Scotland the approach of the EU target, which is to reduce, in phase 3 of the ETS, aviation emissions by 95 per cent, from 2010 aviation emissions.

My understanding from the aviation industry is that it is on track to meet the targets. Is that correct?

I do not have that information to hand, but I can write with it, if you wish.

Thank you—please do that.

To close this off, it might be useful if I give my description of the ETS to see whether it is reasonable. I understand that, under the ETS, heavy industry is given allowances that relate to its presumed emissions. If a company emits less, the allowances have value, because they can be sold to somebody who has insufficient allowances. The economic value from being able to sell allowances to someone else creates an incentive for those that have allowances not to emit as much as their allowances permit, and there is a disincentive for those that emit more than their allowances permit, because they have to pay out money for that. Is that a fair description of what the whole thing is about? It is about trading the allowances.

I repeat the caveat that the issue is not within my immediate policy expertise, but that sounds like a reasonable description of a cap-and-trade scheme such as the ETS.

How is radiative forcing taken into account in relation to aviation? Is the science on that changing?

That falls outside the scope of the present SSI, but I am happy to do my best to explain how it fits into the wider legislative framework. Section 16 of the 2009 act incorporates a fair share of the emissions from international aviation in the scope of Scotland’s targets. The committee will be aware that Scotland was the first country to do that; we were joined by Wales late last year and, to the best of my knowledge, Scotland and Wales remain the only countries to include international, as well as domestic, aviation emissions in their domestic target frameworks.

Through an entirely separate piece of secondary legislation, which I think was made in 2010 or 2012—I will confirm the year later—section 16 sets up rules for determining a Scottish share of international aviation activity. As part of that, section 16 refers to an aviation multiplier, which is called “the radiative force factor” in the SSI—to the best of my understanding, they are the same thing—to which you referred. That multiplier applies to such emissions to reflect the additional effects of non-CO₂ emissions at altitude.

The 2009 act required ministers to seek advice from the Committee on Climate Change on the appropriate level for the multiplier. In whichever year the SSI to which I referred was made—I believe that it was 2011—the CCC advised that the most appropriate level, on the basis of scientific understanding at the time, was a multiplier of 1, which is in statute. I am certainly not an expert on where scientific understanding of the issue has got to; I am aware that studies have been published that suggest values other than 1, but I am not aware of whether there is a consensus about an alternative value.

Under section 16 of the 2009 act, ministers have the power to introduce further sets of regulations to amend the rules. If they wished to do to so, ministers could seek further advice from the Committee on Climate Change on any aspects of that before they introduced further regulation.

In essence, the SSI is about calculating whether the carbon units from net emissions are credited or debited. That is the narrow focus of the SSI.

The SSI relates solely to the EU ETS adjustment calculation for 2017.

I make the observation, which I hope will be helpful, that when the UK Committee on Climate Change was asked for advice on the radiative forcing multiplier, it was unable at that time to find robust evidence to suggest that the multiplier would be anything other than 1. That was the advice that I received.

I thank the witnesses for their time and for giving such helpful evidence. We will consider the instrument as part the committee’s next agenda item. I suspend the meeting briefly to allow the witnesses to get on with the rest of their day.

10:01 Meeting suspended.  

10:01 On resuming—  

Under item 2, the committee will consider two negative instruments. As no member has any comments to make on the Carbon Accounting Scheme (Scotland) Amendment Regulations 2019, which we have just discussed, does the committee agree not to make any recommendations on the instrument?

Members indicated agreement.

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Loch Carron Marine Conservation Order 2019 (SSI 2019/101)

Do members have any comments to make on the second instrument?

I welcome the permanence that will now be given to the protection of the features in Loch Carron. The interesting thing, from the committee’s papers, is that the instrument will have a very small economic impact—for example, it is suggested that the impact on employment will be less than 0.1 of a person. The instrument is an excellent example of Parliament and Government working together on an important environmental issue.

Very swift action was taken.

I am certainly pleased to see the action that is being taken to allow the recovery of the flame shell beds and to maintain the Loch Carron maerl beds in a favourable condition. It is ironic that the action is being taken as a result of the damage to the Loch Carron flame shell beds that was done just over two years ago. The instrument should send a strong message to fishermen with mobile gear that they need to be extremely careful about which areas they target in the future and that the Scottish Government is watching.

I agree with Mr MacDonald that the instrument sends a strong message. However, we know that there are people who are not listening. The instrument came about because of the illegal dredge of the area, which was discovered by amateur divers.

I have questions about the enforcement measures that the Scottish Government intends to put in place in relation to the marine protected area. It would be useful to write to the Government, seeking clarification on that issue, particularly on the role of electronic vessel monitoring. Clearly, there are times when fishing boats might pass over the MPA, and there is often debate about what activities take place. Are those boats illegally dredging or not? Electronic vessel monitoring, which was agreed by the Parliament, could provide a strong role in enforcement. It would be useful to get clarity on the Government’s wider enforcement measures in relation to MPAs—specifically in relation to this MPA, because the desecration that has taken place in the past cannot be allowed to happen again.

Do members agree that we should write to the Government, seeking clarification of what monitoring and enforcement there will be in relation to the MPA?

Members indicated agreement.

I identify with the comments of the other members who have spoken on the issue. I respect the Scottish Government for taking quick action at the beginning, which has now been built on to make the measures permanent.

To build on Mark Ruskell’s points, when we write to the Government about enforcement, with the committee’s agreement, I would like us also to ask whether the fines for infringements are heavy enough and what happens in terms of the cost of damage. I have a concern about how that is dealt with.

In relation to MPAs, I was interested to see, in the partial business and regulatory impact assessment, that the contribution of an “ecologically coherent MPA network” is greater than the sum of its parts. I highlight that because it is important in considering how we protect our marine environment.

With the agreement of the committee, it would also be helpful if we could ask the Scottish Government another question. The Marine (Scotland) Act 2010 talks about not only protecting, conserving and recovering the marine environment but enhancing it. I would like to know about the degree to which that is being addressed, because I do not see it mentioned in relation to the instrument.

I have one final point for the record, although I do not know whether we need to write about this. The BRIA states:

“It is assumed that, where fishing activity is impacted upon, it ceases altogether as opposed to relocating elsewhere. In reality, some activity is likely to be displaced rather than lost entirely.”

I understand that the BRIA has been done on the basis of that activity being entirely lost rather than displaced, which is not necessarily a good approach. I respect Stewart Stevenson’s point that the economic impact is extremely small in this case, but, as a matter of principle, perhaps an assessment that is based on activity being not entirely lost and likely to be displaced could be considered for the future.

Do you want us to cover that point in the letter to the Government?

I would appreciate it if we could raise the issue. It leads on to a point about future cost benefit analysis. I am not concerned in relation to this particular instrument, but I want to highlight the general point along with the other points that members have made.

Do members agree that we should write a letter covering all the points that have been made?

Members indicated agreement.

Do members agree that we do not want to make any recommendation in relation to the instrument?

Members indicated agreement.

10:08 Meeting suspended.  

10:10 On resuming—