My Lords, I thank my noble friend for that very clear introduction. I recognise his expertise—probably more particularly on the financial side rather than the climate change
side—and I have several questions which I hope he will be able to answer but, if he is unable to bring to bear the relevant expertise, I am quite happy for him to write to me.
I support these regulations; their intention seems quite unexceptional. The Government have established a domestic emissions trading scheme based on our previous expertise and experience in Europe to replace the EU Emissions Trading Scheme—that is the background to this. On Monday, we were discussing accounting obligations placed on the United Kingdom in relation to the existing scheme—or I should perhaps say, in our case, the previously existing scheme—which will of course go on for some time. Although there are remaining accounting obligations, we have clearly left the EU trading system and are now entering into a new system, although some of the furniture of the scheme is clearly familiar from the previous EU scheme.
The approach of the Government, as exemplified by these regulations, is to pursue a domestic ETS rather than a carbon tax, and I applaud that. I welcome the clear emphasis on decarbonisation and towards renewables at the centre of the Government’s policy, and that they are favourable towards nuclear too. As I say, these regulations are part of our domestic emissions trading scheme and are clearly designed to provide a smooth transition for effective carbon pricing in the United Kingdom.
My noble friend said, quite correctly, that the scope of the UK ETS includes presently energy-intensive industries and the power generation and aviation sectors, as it did previously and as the EU scheme does. There is clearly an attraction in that linkage but some respondents in the consultation that we undertook favoured extending the ETS to other sectors, and the Government have indicated that they are not unfavourable to looking at that some time in the future. For example, the Climate Change Committee has suggested agriculture and land use. Could my noble friend indicate the Government’s willingness to look at an expansion of the scheme, and when that will be? What will inform the discussion and the choice some time in the future? Could he also say whether we will want to talk to—I assume we will—our previous EU partners, our partners in Europe and in other countries, and how we will arrive at that decision? That would be most helpful.
The United Kingdom is committed by law to reducing emissions to net zero by 2050 and the UK ETS is clearly vital in that endeavour. Could my noble friend indicate the level of ambition that the United Kingdom will have in setting the cap for allowances for the UK scheme, as opposed to what our ambition would be if constrained by the European scheme? How will we approach that? Will we be more ambitious and, if so, how much more ambitious than within the EU scheme?
I welcome the structure of the first phase of the UK ETS from 2021 to 2030, which matches the EU ETS phase 4 length. Most consultees similarly welcomed that development. Will my noble friend confirm that it is intended that the United Kingdom’s operational approach—I stress “operational approach”—to the ETS will broadly mirror that of the EU scheme, while not precisely, of course? That seems sensible and is the
conclusion that I draw from reading around the scheme, but it would be good to have his say-so and expertise on that.
Lastly, I would welcome confirmation from my noble friend, if he is able to give it, that the United Kingdom intends to be a trail-blazer on this area in general. I do not just mean the ETS. I know that the Prime Minister has great ambition in this area, and we are hosting COP 26, obviously. There is a massive opportunity for the United Kingdom here—not just on COP 26, of course, but looking to the future more widely. I mean not just our doing the right thing internationally, although the United Kingdom rightly prides itself on doing so, but in ensuring that we establish a strong green economy with sustainable jobs and prosperity domestically.
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