My Lords, since this draft SI was laid before the House on 9 September, a minor correction has been made to the Explanatory Note to highlight that the scheme is intended to end in March 2041.
The UK is the first major economy in the world to set a legally binding target to achieve net zero greenhouse gas emissions by 2050. Between 1990 and 2019, our emissions have decreased by 44%, which is the fastest reduction in the G7, and we are continuing to advance sustainability through the Government’s Ten Point Plan for a Green Industrial Revolution, the net-zero strategy and, most relevant to this policy, the heat and buildings strategy.
Currently, the heating of our homes, businesses and industry is responsible for 21% of the UK’s greenhouse gas emissions. The decarbonisation of heat is recognised as one of the biggest challenges in meeting our climate targets, requiring virtually all heat and buildings to be decarbonised. Increasing the proportion of green gas in the grid is a practical, established and cost-effective way of reducing carbon emissions and contributing to the UK’s net-zero target, lowering carbon emissions from both domestic and industrial gas boiler use.
The green gas support scheme is a Great Britain-wide tariff-based scheme supporting new biomethane plants injecting biomethane produced by anaerobic digestion into the mains gas grid. It is expected to contribute 3.7 million tonnes of CO equivalent of carbon savings over carbon budgets 4 and 5, and 8.2 million tonnes of CO equivalent of carbon savings over its total lifetime.
This is equivalent to taking approximately 3.6 million cars off the road for a year. The green gas support scheme is expected to help support high quality jobs in the renewable energy sector at a time when economic recovery is, of course, so important. It is anticipated that, when taking into account both direct and indirect jobs, the green gas support scheme could support up to 1,600 jobs per year during the construction phase of plants and up to 1,000 jobs once plants are fully operational.
Our analysis suggests that over two-thirds of existing biomethane plants are in fact located in rural areas, with 80% of all GB plants located in areas with a lower than average gross value added. We expect plants supported by the scheme to follow similar trends and therefore contribute to the Government’s levelling-up agenda. The Government believe that it is appropriate for gas consumers to pay towards decarbonising the gas grid, and therefore we have taken the decision to fund the green gas support scheme through a levy. The levy will be the sole funding source for the green gas support scheme and will be applied to all licensed fuel gas suppliers.
Of course, the Government acknowledge the impact of rising gas prices on consumer energy bills, and we are implementing stringent budget control measures to ensure that the costs of the levy are as low as possible and cannot rise unexpectedly. The cost to an annual gas bill will be relatively low, starting at around £2.50 per year, and it will peak at around £4.70 per year in 2028 for an average gas bill, assuming that we make a transition to a volumetric levy.
During peak years of production, biomethane plants incentivised by the green gas support scheme will produce enough green gas to heat around 200,000 homes, which would otherwise have been heated by natural gas.
While we are launching with a per-meter point levy that provides a high certainty of costs to both suppliers and consumers, the Government recognise the benefits of a volumetric levy that aligns costs more closely to gas consumption. We have committed to transition to a volumetric levy as soon as possible, subject to overcoming the feasibility issues, which include the impact on energy-intensive industries and other important UK businesses.
In conclusion, the scheme established by this statutory instrument will support ongoing investment in the biomethane industry and enable the development of new production plants for the injection of biomethane into the gas grid. In supporting this investment in new anaerobic digestion capacity, we expect to support more jobs, growth and innovation in the biomethane industry, while delivering important carbon savings, which are a vital part of meeting our overall net zero targets. I therefore commend these draft regulations to the House.