Rural and Environment
Scotland’s ability to exercise climate powers under threat
Climate Change Secretary Roseanna Cunningham has called on the UK Government to respect the will of the Scottish Parliament and commit to a UK Emissions Trading Scheme (ETS).
The proposed ETS would cover 28% of Scotland’s emissions and is a vital tool to respond to the global climate emergency, ensuring that energy-intensive industries and the power sector will be properly incentivised to decarbonise following the end of the Brexit transition period.
In a letter to the Minister of State for Business, Energy and Clean Growth Kwasi Kwarteng and the Exchequer Secretary to the Treasury, Kemi Badenoch, Ms Cunningham expresses her increasing alarm at the lack of progress being made to ensure the UK ETS scheme will be in place by 1 January 2021.
All four administrations agreed in June to implement the UK ETS scheme, in place of the existing EU ETS, and legislation has been passed by legislatures in Scotland, Wales and Northern Ireland to ensure it will be ready in time. But with less than two months before a new regime needs to be in place the UK Government has refused to rule out instead implementing a Carbon Emissions Tax (CET), an alternative system to the UK ETS which would be reserved and provide devolved administrations and legislatures with no control or accountability over the mechanism.
In the letter, Ms Cunningham says:
“It is lamentable that the UK Government would remove the main mechanism for decarbonising 28% of Scotland’s emissions from oversight by either the Scottish Ministers or the Scottish Parliament, in the year when we are hosting COP 26.
“A UK ETS is the most effective tool currently available to reach our common goal of decarbonising the traded sector and achieving our respective statutory net zero targets. And not least as the tool to demonstrate our commitment to international climate action in the year when COP 26 will be held in Glasgow, and where negotiations will focus on rules for global carbon markets under the Paris Agreement.
“The UK Government is already threatening to undermine Common Frameworks with its unnecessary and damaging Internal Market Bill. Any move to unilaterally impose a reserved CET in place of the UK ETS framework would further call into doubt the UK Government’s commitment to the Common Frameworks process.
“I request that the UK Government takes the decision to proceed with a UK ETS, and definitively rules out a CET, before the end of November to allow all stakeholders to prepare for 1 January 2021.”
The Climate Change Secretary commented on the agreement to introduce a UK ETS scheme in June.
An Emission Trading Scheme (ETS) is a cap-and-trade system for greenhouse gas emissions which creates a carbon market with a carbon price that incentivises decarbonisation. The ETS caps the total level of emissions from across the energy intensive industry, the power sector and aviation across the UK. The cap is represented by allowances to emit one tonne of greenhouse gas emission, with the total number of allowances reducing each year. Participants are required to obtain and surrender allowances to cover their annual emissions. Participants can purchase allowances at auction or trade them amongst themselves, which allows the market to find the most cost-effective way to reduce emissions. Industrial sectors considered at risk of carbon leakage (whereby carbon costs would make them uncompetitive prompting industry to relocate outside the country in which the ETS applies) receive a proportion of allowances for free.
The EU ETS has been in operation since 2005, covering Scotland and the rest of the UK, and is the world’s largest carbon market. Following the Brexit referendum, the Scottish Government pressed the UK Government to secure the benefits of continued membership of the EU ETS. Regrettably, the UKG did not take that position and so instead the Cabinet Secretary has pressed for a UK ETS to be established that can be linked to the wider EU market, ensuring continued access to the larger market and a level playing field for businesses between Scotland and their EU counterparts. That is the basis on which the initial legislation to establish the UK ETS has been laid and approved by the Scottish Parliament. A decision by the UK Government to unilaterally replace this agreed legislation with a reserved carbon tax would represent an unacceptable breach of trust and loss of devolved control over 28% of our emissions.