Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026
(1 day, 9 hours ago)
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14:55 - Division on the amendment to the Motion - Ayes: 26 / Noes: 134 - Amendment to the Motion disagreed.
Lord Whitehead
That the draft Order laid before the House on 13 January be approved.
Relevant document: 49th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, I thank the House for its consideration of this draft order, which was laid before the House on 13 January.
The UK Emissions Trading Scheme was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions reduction targets and net-zero goal. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses.
The scheme is run by the UK ETS Authority, a joint body comprising the UK Government and the devolved Governments acting together. A cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme, and the cap is reduced over time so that total emissions must fall. Under the UK ETS, operators participating in the scheme are required to monitor, report on and surrender allowances in respect of their greenhouse gas emissions. The scope of the UK ETS is being expanded to maritime activities as part of the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It is an effective lever to reduce emissions and delivers on a key commitment in the UK’s maritime decarbonisation strategy. We expect this to help overcome key barriers to maritime decarbonisation by incentivising low-carbon fuels and fuel-efficient technologies and operating practices. Last week, the Government also brought forward £271 million of funding to help industry with the changes to vessels, fuelling and infrastructure required for maritime decarbonisation.
This statutory instrument makes amendments to the legislation that gives effect to the UK ETS. It expands the scheme’s scope to include coverage of carbon dioxide, methane and nitrous oxide from domestic voyages and in-port activities in the UK, effective from 1 July 2026. The instrument amends the legislation to require maritime operators to participate in the scheme, and to allow them to bid at auction for UK allowances. It will apply to ships of 5,000 gross tonnage and above, but a small number of exemptions apply, such as for government ships, including military and law enforcement ships, and ferries operating services to Scotland’s islands and peninsulas. Ferries serving Rathlin Island and the Isles of Scilly are out of scope of the instrument as they are below the 5,000 gross tonnage threshold. We consulted on the potential inclusion of Crown dependencies and overseas territories in the recent international maritime consultation, but they are not in scope of this instrument, which expands the scheme to domestic maritime emissions only.
The provisions set out in the instrument require the maritime operator of a ship, either its registered owner or the company responsible for its compliance with the International Safety Management Code, to obtain an emissions monitoring plan. This plan will document the processes used to ascertain its ships’ emissions. For each scheme year, maritime operators will then be expected to monitor, independently verify and report their maritime emissions to the relevant regulator, and surrender an equivalent level of allowances. The instrument also introduces the concept of “surrender deductions”, reducing by 50% the number of allowances for surrender in respect of voyages between Great Britain and Northern Ireland, to deliver equivalence in carbon-pricing coverage on routes across the Irish Sea. Operators will be assigned to a UK ETS regulator based on the location of their registered office or place of residence. This is the same approach that applies to aircraft operators.
One emissions monitoring plan will cover all the ships for which the maritime operator is responsible, and emissions must be monitored using one of the four methods prescribed in the instrument. Maritime operators will be required to report emissions from all ships for which they are responsible through an annual emissions report, which must be submitted to the regulator on or before 31 March in the year following the scheme year to which it relates. Maritime operators have an obligation to verify their annual emissions report. The verification must be carried out by an impartial and accredited verifier, independent from the maritime operator. If satisfied, the verifier will draft a verification report, which will be submitted to the regulator alongside the annual emissions report.
Maritime operators will also be required to surrender a level of allowances equivalent to their emissions by 30 April in the year following the scheme year. However, the instrument introduces the concept of a “double surrender”, whereby the date by which allowances must be surrendered in relation to the first scheme year—2026—is 30 April 2028 and not 30 April 2027, as would otherwise be the case.
Neither the UK carbon border adjustment mechanism, CBAM, nor its EU equivalent applies to maritime emissions, and this instrument does not introduce any CBAM obligations for maritime operators.
These changes follow comprehensive engagement and consultation with stakeholders. The UK and devolved Governments carried out a consultation in 2022 which was concerned with the development of the UK ETS, including whether to include maritime activities in the scheme. A second consultation ran between 28 November 2024 and 23 January 2025 and sought views on the details of how maritime would be incorporated into the ETS from 2026. The relevant responses to this consultation were summarised in the interim and main authority responses, published in July and November 2025 respectively.
I recognise the fatal and non-fatal amendments tabled by the noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, for our discussion today. I wish to ensure that noble Lords in attendance today are aware that this legislation was approved by the Northern Ireland Assembly two days ago. This is of particular importance, as the amendments tabled identify potential issues with respect to Northern Ireland. I hope that this provides the noble Baroness and the noble Lord with some reassurance as to their concerns. Noble Lords will be aware that this instrument needs to be approved by all the UK legislatures. That has now been the case with the approval of this instrument by the Northern Ireland Assembly.
Further, I urge noble Lords to consider the importance of this legislation for our wider relationship with Europe, in particular in enabling a link with the EU ETS, which includes these emissions and will provide for a mutual exemption from CBAM. This exemption will protect UK businesses from charges on £7 billion-worth of goods and services. Linkage of our emissions trading systems, combined with the sanitary and phytosanitary—SPS—measures, is set to add nearly £9 billion to the UK economy by 2040. I strongly urge my fellow noble Lords to consider these benefits, and the costs they would be placing on UK businesses today should they vote in favour of the amendments tabled by the noble Baroness and noble Lord.
In conclusion, the expansion of the UK ETS to cover maritime activities will support its role as a fundamental pillar of the UK’s climate policy. It plays a key part in the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It also delivers on a key commitment within our maritime decarbonisation strategy. I beg to move.
Amendment to the Motion
Baroness Hoey
Leave out all the words after “that” and insert “this House declines to approve the draft Order laid before the House on 13 January because while the Scottish Islands are protected from the Order, Northern Ireland, which is already marginalised from the rest of the UK through the imposition of the Windsor Framework, is denied the same protection; and because in a context where no viable fuel alternatives exist the only impact of the Order will be to increase bureaucratic burdens on business and impose additional costs on those living in parts of the UK that depend on maritime transport”.
Baroness Hoey (Non-Afl)
I thank the Minister for his remarks and for his kindness in reaching out to me asking for a meeting when I tabled the amendment. Without wanting to in any way ruin his career prospects, I suggest to noble Lords that if this particular Minister had been in charge, this SI would not be going forward—it would be being dropped at this stage while we await future negotiations over any linkage between the EU ETS and the UK ETS.
As noble Lords will know, I have tabled several regret and fatal amendments over the past number of years, all to draw attention to the way in which the Windsor Framework has affected businesses and people in Northern Ireland. But this is a very different SI: it has absolutely nothing to do with the Windsor Framework and the protocol, although it does compound the further isolating of Northern Ireland from the rest of the country. This SI is a deliberate and calculated attack by His Majesty’s Government on business and consumers in Northern Ireland by introducing what is effectively a new maritime carbon tax, while not recognising Northern Ireland’s total reliance on maritime transport. The consequence will be that businesses and households will be disproportionately affected by it.
Noble Lords need to understand why this matters so much to Northern Ireland. It matters because we are uniquely dependent on maritime connectivity: 90% of goods entering or leaving Northern Ireland move by sea. Ferry services are absolutely vital. They are not a choice; they are an absolute must, as a route to the market in GB. These routes are vital for—to give some examples we all know about—agri-food exports, manufacturing parts, supermarket and retail distribution, supplies for construction and, of course, passenger movement.
Lord Weir of Ballyholme (DUP)
The noble Baroness referenced the good work of the Scotland Office in lobbying to ensure that Scotland was exempted. Does she agree that this stands in sharp contrast to the Northern Ireland Office, which was instead lobbying parties in Northern Ireland to back this order and ensure that it was implemented?
Baroness Hoey (Non-Afl)
The noble Lord almost pre-empts what I was about to say, so I thank him. As if this is not enough to give politics a bad name, the events of last week, I am afraid, leave a nasty taste in the mouth. The Northern Ireland Assembly’s DAERA scrutiny committee met last Thursday and heard from Stena Line, the key ferry company linking GB to NI, and the UK Chamber of Shipping. All parties there, bar the Alliance, expressed concerns. The Minister is an Alliance member, of course. The committee was ready to reject the order but was told that there was a Northern Ireland-specific impact assessment around, and agreed to postpone its decision until Monday this week so that members could read the impact assessment. On Monday, the committee met again and was presented with no NI impact assessment because no such impact assessment existed. Officials suggested that the impact on Northern Ireland was already assessed but, again, this is not true.
The Frontier Economics study often cited was commissioned in 2023 by Whitehall departments, not the NI department. It mentions Northern Ireland a few times but provides no quantified estimates of the impacts on Northern Ireland’s consumers or business. It also spends a lot of time emphasising cruise liner shipping, which is not even covered, and barely touches on freight routes. The Government have acknowledged that Northern Ireland is more exposed to cost transmission through maritime freight but surely then there should have been a dedicated economic impact assessment carried out. Did the Secretary of State for Northern Ireland ever even discuss it with Secretary of State Miliband to point out the unfairness? Sometimes we almost question the role and purpose of the Northern Ireland Office. The impact assessment statement was just a ruse to prevent a vote last Thursday that would have gone the wrong way, and to buy the Government time.
Over the weekend, Northern Ireland officials lobbied MLAs very hard. Even the Secretary of State was engaged in texting and maybe even telephoning party leaders with the argument that had never been mentioned in the other place when this was discussed, saying that the entire EU reset would be threatened if the Assembly blocked the SI. The people of Northern Ireland expect their Secretary of State to at the very least put forward the arguments as to why they should not be subject to discriminatory treatment, leading to higher fares. It is clear that Northern Ireland does not have a Northern Ireland Office that works for the people of Northern Ireland the way in which the Scotland Office does.
The committee voted by five votes to four to approve the SI. One MLA, Michelle McIlveen, described these events in the following terms in the Assembly. She stated:
“What happened was, frankly, disgraceful. Last-minute pressure was placed on parties by UKG. A new dimension associated with CBAM and impact on EU negotiations was introduced. No facts, detail or proper briefing, just smoke and mirrors. That is not the way that we should do our politics, and interference at such a late stage is highly suspicious”.
The EU reset argument is nonsense. It played on the suggestion that if this order is not passed, that would be the end of any discussion on maritime greenhouse gases. In truth, however, as noble Lords know, regulations are pulled fairly regularly to make corrections and replaced a few days later with a new set of corrected regulations with “(No.2)” added at the end. The order that we are discussing is blatantly discriminatory and I call on the Government to commit at the very least to withdraw it and table a draft (No.2) order, which can have the same wording as the current order but applies the same exemption to Northern Ireland or Scotland. I appreciate that there may be noble Lords who wish to mention some other areas of the United Kingdom that have not been exempted.
Stena Line and the UK Chamber of Shipping have asked for reasonable adjustments: a 12-month delay to allow them to prepare, a Northern Ireland-specific economic assessment, a phased introduction period, and revenues raised to be targeted towards maritime decarbonisation. All those seem eminently sensible to me, as I hope they do to other noble Lords. I support the regret amendment from the noble Lord, Lord Moynihan, but I feel very strongly that we are fed up with regretting things—regret does not change anything. That is why, unless we get a very strong response from the Minister—although I appreciate that he is not making these decisions—I believe that, for the sake of the people of Northern Ireland and for the sake of decency and fairness, I will be forced to push this to a vote.
I will mention something that came up in the other House. The honourable Member for North Antrim and the honourable Member for South Antrim both spoke against this and the Conservative Members voted against it in Committee, but of course with the huge Labour majority it went through the House. The 50% reduction was raised, which Northern Ireland is of course getting. The Minister there responded by saying:
“I wanted to clear up a couple of points … The 50% reduction that applies to Northern Ireland is there to create parity between vessels that operate between Great Britain and Northern Ireland and those that operate between Great Britain and the Republic of Ireland”.—[Official Report, Commons, Second Delegated Legislation Committee, 3/2/26; col. 13.]
Of course, the Republic of Ireland is under the EU’s 50% reduction. The honourable Member for North Antrim responded:
“The Minister is telling the Committee that parity with the Republic of Ireland is more important to him than parity with the rest of the United Kingdom”.—[Official Report, Commons, Second Delegated Legislation Committee, 3/2/26; col. 14.]
That tells us something. I beg to move.
The Deputy Speaker (Lord Geddes) (Con)
My Lords, I should inform the House that, if this amendment is agreed to, I will be unable to call the amendment in the name of the noble Lord, Lord Moynihan, by reason of pre-emption.
Lord Moynihan (Con)
My Lords, I am grateful to the Minister for introducing this SI, to which I have tabled a regret amendment. I also echo all the comments made by the noble Baroness, Lady Hoey, on the role of the Minister. I will speak both to my regret amendment and to the noble Baroness’s fatal amendment.
There are two important issues regarding this SI, which places a carbon tax on the ferries that service principally Northern Ireland but also the Isle of Wight. First, as this House knows, the arguments for a statutory instrument must be identical in both Houses of Parliament and, in this case, in Northern Ireland, Scotland and Wales as well. They are expected to be consistent in substance and fact. Neither has been applied on this occasion, as was evidenced in the debate in Northern Ireland this week.
My concerns are twofold. The first is procedural: frankly, there has been a total lack of respect for the House of Commons and the Northern Ireland Assembly. The second is political: this is nothing more than a carbon tax on those who rely, for their livelihoods and travel, on the ferries captured by this legislation. Unlike the European scheme, it is not hypothecated with revenues invested in decarbonisation. Instead, as has been pointed out, it is the Treasury that pockets the proceeds, with no benefit to the environment, nor, most importantly, to the people of Northern Ireland. It is just another carbon tax to make Northern Ireland in particular less competitive than like-for-like companies in GB.
On 13 January this year, the SI was introduced in both Houses. On 3 February, it passed the House of Commons without reference at any point to the implications of the EU CBAM. However, when debated on 3 February, the good news in another place was that this SI had nothing to do with the EU CBAM. If it had, it would have read differently, and the impact assessment would have shown a range of options outlining what would happen to the emissions trading system under the EU CBAM.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
I note that, according to paragraph 4.42 of the Companion, the usual advisory speaking times still apply. It is 20 minutes for openers and winders and 15 minutes for everyone else. That includes the noble Lord and the noble Baroness, Lady Hoey.
Earl Russell (LD)
My Lords, I will respond to this SI and the regret amendment in the name of the noble Lord, Lord Moynihan. My noble friend Lady Suttie will respond to the specific points raised in the fatal amendment tabled by the noble Baroness, Lady Hoey.
This order extends the UK trading scheme to cover emissions from carbon dioxide, methane and nitrous oxide from domestic maritime activities for vessels over 5,000 gross tonnage, including in-port emissions, from 1 July 2026. It implements decisions of the UK ETS authority, agreed by all four Governments of the United Kingdom, and has already passed by a substantial majority in the other place. It is part of our broader strategy to decarbonise all sectors of the UK economy and to meet our legally binding 2050 net-zero targets.
To be clear, we support the order and we will not vote in favour of either the regret amendment or the other amendment. We believe, though, that the SI needs to meet three tests: it needs to have environmental integrity, economic fairness and practical deliverability. It must also support the UK’s wider trading interests, including our growing relationship with the European Union. The Liberal Democrats start from a clear point of principle: carbon must be properly priced and the polluter must pay. The UK ETS is a flagship decarbonisation instrument, a cap and trade system that sets a declining cap on total emissions and auctions allowances, each representing one tonne of CO2 equivalent. Tightening that cap over time sends a clear signal to businesses about what they must reduce and by when.
Emissions trading is, in our view, the most effective way to cut total emissions at the lowest cost. It enables the market to identify and invest in the cheapest abatement options, rather than relying solely on prescriptive regulation, and that reduces carbon leakage. Extending the logic to domestic maritime completes a missing piece in the system that already covers power, heavy industry and aviation. Maritime emissions matter. They are a significant and growing source of CO2 emissions. A key barrier to their reduction is that fuel prices do not adequately reflect the environmental costs and therefore reduce incentives for change. Including domestic maritime in the ETS helps to remove the barriers, putting a clear technology-neutral price on emissions from voyages and time spent at berth.
The Government’s impact assessment estimates a central net reduction of around 645,000 tonnes of CO2 equivalent, delivering greenhouse gas savings valued on the central estimate of around £155 million and around £179 million in air quality benefits. Overall, the measure has a positive net social value on the Government’s central estimate of £132 million. That is a measurable gain for people and planet. Consultation material suggests that vessels over 5,000 gross tonnes account for two-fifths of domestic maritime emissions. Is the Minister confident that the scope and the threshold align with our overall carbon budgets?
Our climate policy must also be fair. Costs must not fall disproportionately on those who are least able to bear them. The Government’s impact assessment suggests limited consumer impact: typically 1% for most goods and around 2% for some—
Baroness Butler-Sloss (CB)
I am grateful to the noble Earl, Lord Russell. Can I ask him two things, from a state of ignorance? First, why is Scotland being omitted and Northern Ireland put in? Secondly, we seem to be dealing with an issue on CBAM that was not referred to in the House of Commons. It seems extraordinary that we should be looking at it from a different perspective from the House of Commons.
Earl Russell (LD)
I welcome the noble and learned Baroness’s intervention. The Scotland issue relates to devolved legislation and legislation that Scotland has passed. The issue in relation to the CBAM is in relation to—
Earl Russell (LD)
There is a reduction in place in Northern Ireland. There is not specific legislation around that.
Lord Weir of Ballyholme (DUP)
The noble Lord gave one of his key considerations as a test of economic fairness. Perhaps he could explain to the House how it is economically fair to have an 100% exemption for Scotland but 50% for Northern Ireland. How is that fair?
Earl Russell (LD)
It is not for me to respond to what is a question for the Minister. The Government’s impact assessment estimates central abatement investment of around £22 million, with administrative costs of £179 million over the period. The allowance-purchase cost is largely a transfer to the Exchequer and devolved Administrations, with many operators being non-UK based. Carbon pricing must therefore be matched with a credible transition plan. Without that, this becomes not a nudge for transition but could simply be a tax. However, the Government have announced £448 million for the UK Shipping Office for Reducing Emissions—UK SHORE—between 2026 and 2030, the largest public investment yet in commercial maritime.
Phase 2 will support larger projects through the Clean Maritime Demonstration competition and the Zero Emissions Vessels and Infrastructure competition. That is the industrial policy that must sit alongside carbon pricing. At the same time, the measure is expected, on the Government’s central estimate, to generate around £1.9 billion in allowance-sale revenue: around £95 million a year. Will the Minister confirm that a material share of ETS maritime revenues will be reinvested in maritime decarbonisation, including cleaner vessels, shore power, alternative fuels, and support for local transition in coastal and island communities, rather than simply disappearing? Will the Minister commit to publishing annually how much is raised from maritime ETS and how much is invested in maritime decarbonisation?
The cruise industry is an important and growing part of our economy, calling at some 50 UK ports and making over 2,500 calls a year, supporting tens of thousands of jobs and adding billions to the UK-wide economy. The industry’s concern on ETS is that revenues are not being visibly recycled into cleaner fuels and infrastructure specific to their industry. We only have a handful of onshore connections for cruise liners at the moment, so will the Minister tell us what investment will be made as a result of this scheme to bring shore power, and on what timetable for the cruise industry?
The Government and the UK ETS have done substantial preparatory work, including consultations, a digital monitoring platform and voluntary onboarding since November 2025, ahead of the July 2026 start. The Government’s impact assessment estimates an average administrative cost of around £5,700 per operator per year. This may be modest, but it has real implications for real firms. We recognise that this should reduce over time.
We welcome the formal review at the end of 2028 to assess emissions outcomes, administrative burdens and any needed adjustments to scope or thresholds. We have a number of specific concerns about any plans to expand the scope to international voyages. My noble friend will address the specific issues relating to Northern Ireland aspects. We believe the right approach is to keep these provisions under review and match carbon pricing with practical support, not to abandon maritime decarbonisation. Extending the UK ETS to domestic maritime emissions also helps keep our scheme aligned with greater integration with the EU. In turn, a genuinely linked system will help strengthen our trading relationship.
The fatal and regret Motions both reflect genuine anxieties about costs, competitiveness, and the union, but neither justifies rejecting this order. The suggestion that there is no alternative is not borne out by the evidence. Improved operating practices, routing efficiency and gradual fuel switching all represent viable abatement pathways.
Near-zero emission fuels remain expensive and infrastructure is incomplete. But that is exactly why revenue recycling and UK SHORE matter. The right course is to pair a robust carbon price with predictable investment that keeps the maritime sector on its net-zero path, while keeping the UK economy competitive. To call this measure simply a tax misunderstands how the ETS works. It is designed to minimise the cost of meeting our climate goals, to give business flexibility and to limit carbon leakage: this is a practical measure. It becomes a tax only if the Government pocket the proceeds and fail to reinvest them. Revenue is a byproduct: the purpose is to cap and reduce emissions over time. We are supportive of the extension of emissions trading to domestic maritime. Done well, emissions trading drives real reductions, supports innovation and underpins our net-zero transition.
Lord Dodds of Duncairn (DUP)
I am grateful to the Minister for introducing the statutory instrument in the way that he did, to the noble Baroness, Lady Hoey, for introducing her fatal Motion, and to the noble Lord, Lord Moynihan, for introducing the regret Motion. It is very important that we in this Chamber debate these issues: this matter got 47 minutes in the other place. Often, matters that affect Northern Irish consumers and businesses in a very direct and detrimental way do not get any time at all in the other place. It is therefore all the more important that your Lordships have the opportunity to debate these matters.
The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have powerfully set out what happened in relation to the Northern Ireland Assembly’s consideration of this matter. This Government are supposed to be pro growth; they are supposed to have the cost of living at the heart of their consideration, and indeed they say that they are pro union and are committed to this through various command papers and policy statements. Thank goodness we are not debating the Windsor Framework edifice today, but it always needs to be taken into consideration, because it was certainly a matter for the Secretary of State when he was interacting with party leaders on this particular issue. This statutory instrument runs counter to all these priorities of the Government, yet they proceed with it nevertheless.
The noble Lord, Lord Moynihan, and the noble Baroness, Lady Hoey, referenced the intense lobbying on the part of His Majesty’s Government, at Secretary of State and ministerial level, to parties in Northern Ireland when it became clear that they were deeply concerned about the effects on Northern Ireland. The introduction of the CBAM argument led Ms Finnegan, the Sinn Féin MLA, to say just this week in the Assembly debate:
“While the challenges facing businesses as part of the changes remain, doing nothing is simply not an option. Failure to implement the ETS would result in the costs being incurred through the carbon border adjustment mechanism”.
That proves that this argument changed minds. This was the deciding argument for Sinn Féin. Interestingly enough, it was Sinn Féin, and the SDLP and the Alliance Party, who succumbed to the arguments of the UK Government. It was an interesting turn of events that those parties succumbed to that type of argument. But that is mainly to do with their total allegiance to anything that advances the cause of the EU, even above the interests of their own constituents, as has been evidenced in many debates in the Northern Ireland Assembly.
I also raise the fact that not only was the CBAM argument introduced at a very late stage but, in messages to party leaders, and certainly my party leader, the issue of the SPS agreement and the EU reset negotiations was also raised, and it was explicitly said that this would be put at risk if this SI was not passed by the Northern Ireland Assembly. These are very serious matters. Raising issues such as these as threats and blackmail, at the last minute and without any proper consideration, as the noble Lord, Lord Moynihan, pointed out in the other place, or indeed when the matter first came before the Northern Ireland Assembly, is totally unacceptable.
It is an outrage that these matters should be considered in this way, especially when we consider what is at stake for Northern Ireland, because this is a discriminatory measure. It is a measure that disproportionately affects Northern Ireland, as has been said. I am not going to repeat all the arguments that have been set out on the economic detriment to Northern Ireland—they have been powerfully set out already—but given our dependence upon maritime transport, it is absolutely clear that this is going to have a knock-on, detrimental effect on businesses, on consumers and on every aspect of life in Northern Ireland.
Baroness Foster of Aghadrumsee (Non-Afl)
Does the noble Lord have any information as to whether the Government have considered this scheme under the United Kingdom Internal Market Act 2020, given that we are told that the exemptions for the Western Isles come from a duty under, I think, the Scotland Act? Surely, the discrimination that is evident here is contrary to that UK internal market Act.
Lord Dodds of Duncairn (DUP)
I thank the noble Baroness, who raises a very important point, because when the Safeguarding the Union Command Paper was published, and was heavily sold in order to get the restoration of the Assembly and the Executive and so on, great emphasis was put upon this guarantee in the United Kingdom Internal Market Act that this would ensure Northern Ireland would not be put at any detriment by the introduction of new measures and so on. So, I echo what the noble Baroness has said and ask the Minister to address that specific piece of legislation, which is meant to protect Northern Ireland as part of the UK internal market. The sad reality, of course, is that that is overridden. Not to pre-empt the Minister’s answer, but I suggest he will probably say that it is overridden by the superior obligation to the EU under Section 7A of the European Union (Withdrawal) Act 2018. That is the real answer, even if he does not say it, and until we address that point we will not get any satisfactory resolution to the problems that we have.
I have a number of questions for the Minister. On the issue of the Scottish exemption, he really needs to come forward and explain, on this issue of economic unfairness, what the rationale is for excluding Northern Ireland. What is the rationale for comparing Northern Ireland with the Irish Republic in saying that a 50% reduction is satisfactory, given that this is what applies on trade between the Irish Republic and Great Britain, when Northern Ireland businesses are in competition with their British counterparts on the mainland? This is the comparison that needs to be made. Traders, consumers and businesses in the rest of the United Kingdom do not have to concern themselves so much—hardly at all, most of them—with any maritime transport issues, but Northern Ireland is utterly dependent upon that, so the issue of why the Scottish islands are exempt and Northern Ireland is not needs to be addressed.
There is an issue about where the money is going from this. There is no reference to the fact that this money will be used in any particular way. It is important that the Minister clarifies how the revenue is going to be used to help in relation to decarbonisation, if at all. I want to ask the Minister about the time to prepare, since the order was published on 13 January. It seems to me that there is an inordinate rush to get this through. What is the reason for that? Would one solution not be to give more time for consultation before this is brought into full implementation?
I want to ask about the maritime decarbonisation fund, with £271 million in funding to support shipping and coastal communities. Will Northern Ireland have access to that fund? I want to ask about state aid provisions in this regard, because under the Windsor Framework we are under the EU state aid regime, not the UK state aid regime. Is there any impediment to access to that fund for operators in Northern Ireland as a result of those state aid obligations? I would like a clear answer, because there seems to be some confusion on the issue and it would be helpful if the Minister would spell it out.
This is a very important debate. It raises a number of issues, not only substantive ones to do with the economy and trade. Those are important, but it has exposed a wider issue about the political process, which has been very helpfully and skilfully brought to light by both the noble Lord, Lord Moynihan, and noble Baroness, Lady Hoey, in introducing their Motions. It will do damage to the political process in Northern Ireland. This type of manoeuvring by the Northern Ireland Office is extremely unhelpful to the Assembly set-up, which is fragile and difficult enough.
It seems that the NIO engages with the Assembly only on its terms and when it is in its advantage to push its particular arguments. It does not seem to operate as a voice for Northern Ireland within the Cabinet or Whitehall machinery, and that really needs to be looked at. We were promised that there would be an engagement unit set up between the Cabinet Office and the Northern Ireland Executive under the Safeguarding the Union Command Paper. What has happened to that? It seems that the NIO picks and chooses whatever it wishes to raise as issues but does so to implement its view of what should happen, rather than advancing the cause of Northern Ireland within the Whitehall set-up.
Lord Berkeley (Lab)
My Lords, I am grateful to my noble friend for introducing this draft order and the many noble Lords who have expressed concern. The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have both set out their concerns, which I share because I live in the Isles of Scilly. Although the Minister briefly mentioned the Isle of Wight, the comments made about the difficulty of getting to and from, and living in, the islands—I include Northern Ireland in that—are well known. We have been fighting the Government for years to try and get some benefit for the Isles of Scilly and Isle of Wight, in some kind of support for transport—which is ships, of course. Although the Scottish Government were clever in sticking with what they have, we have so far failed.
Some noble Lords may say, “Well, you’re talking about little baby ferries”—those that go across to the islands I mentioned—whereas this order is at the moment limited to 5,000 tonnes. That is true, and none of the ships that go to the Isles of Scilly, except cruise ships, weigh more than that. However, we are also told by many, and I am sure it is true, that when the European Union reviews all these related regulations it will wish to reduce the limit from 5,000 tonnes to much less, so that could affect the freight and passenger ships to the Isle of Wight and the Isles of Scilly. Let us be clear that, at the moment, the costs of services to these islands are very high. The cost of freight to the Isles of Scilly probably means that it comes out at about four times what you would be paying on the mainland for a bag of cement or a tin of baked beans. It is very serious.
The second issue I have with this draft regulation is the timing, as my noble colleague has just mentioned. The timing is quite serious if we are to come up with some alternative means of propulsion. It is fine to say that they can all be electric, and electric ships exist—but not everywhere. In parallel to electric ships, you need a lot of power to ports, but, at the moment, we seem to have a shortage of power. We have had many debates here about the high-power demands for AI, railways, buses and everything else like that. To say that ports must have enough power available to service all the ships that are going to come in in two or three months is cloud-cuckoo-land. We are talking just about ferries—nice though it is to talk about ferries to Ireland. Cruise ships have also been mentioned, as have general cargo and container ships. All kinds of different craft that could reach the 5,000 tonnes or less in the future need to know what the future limits are going to be and to assess what they will do in terms of rebuilding, refitting, or whatever.
I conclude by asking my noble friend the Minister what information has been given to the industry about the need for and the availability of shore power. I also ask him whether he thinks it would be a good idea to ring-fence some of the shore power availability to some of the bigger ports, and whether there is enough generating capacity. I hope my noble friend will be able to tell me that.
I support other noble Lords who suggest that this regulation should be delayed until we have much better proof of alignment with the EU and are given a much longer-term feed-in notice so that the industry, be it ports, shipping lines or anyone else, can adapt and avoid being fined, because that is not what we want for this business. I hope also that we can continue to have a good debate and get some exemptions for Northern Ireland, which I fully support, and for the Isles of Scilly and the Isle of Wight.
Lord Ashcombe (Con)
My Lords, we have heard from the noble Baroness, Lady Hoey, my noble friend Lord Moynihan and from other noble Lords regarding the situation facing Northern Ireland’s ferry services and the shenanigans that are certainly coming to light today. Having been raised in the Republic of Ireland, I well remember our reliance on maritime trade to keep the country supplied. I therefore appreciate the pressures described today and suspect those pressures have only intensified in the current era.
I want to turn my attention to a rather smaller stretch of water, near my home in the New Forest; namely, the ferry routes to the Isle of Wight from Portsmouth, Southampton and Lymington. I have used all three of these depending on whether my journey takes me to the east of the island, to Cowes, or to the west. The distances involved may be only four to 12 miles, depending on the route, but what truly matters is that there is no alternative means of travelling to or from the island. The Government seem to have forgotten—or, dare I say, ignored—the Isle of Wight.
As a result, the Isle of Wight will face immediate and disproportionate impacts from the proposed extension to the emissions trading system to domestic maritime vessels of 5,000 gross tonnes and above. The Government’s final-stage impact assessment argues:
“Expanding the UK ETS to include domestic maritime emissions is critical for maintaining regulatory alignment with the EU ETS … Without coverage, UK operators could gain a competitive advantage over EU counterparts, creating market distortions and increasing the risk of carbon leakage”.
There are no foreign vessels trading between the south coast of England and the Isle of Wight, nor between the mainland and the Scottish islands. It is therefore difficult to see how exempting UK domestic island services would in any way undermine the relationship with the EU.
The Isle of Wight has a population of about 142,000—higher in summer as tourism swells the numbers. The island is wholly dependent on its ferries for passenger travel, as well as for the movement of freight, being fuel, food and essential goods, and exporting fresh produce. These services are part of the island’s critical national infrastructure.
Lord Greenway (CB)
My Lords, following on from the noble Lord who has just spoken, it is my understanding that the new ferry on the Isle of Wight service which he mentioned has considerable battery capacity. During her voyages, those batteries can be charged, allowing her to operate without shore power when she is in port. She is an advanced ship, one of the first in this country.
The noble Lord has very well covered the Isle of Wight scene. Given the Government’s slavish following of the EU, I find it strange that the EU can derogate ferry services to islands until 2030 but we are not doing the same. Why not? It would save a lot of the problems we are discussing today. It would also give ferry companies more time to invest more in decarbonising their vessels.
I am not going to mention Northern Ireland, because I think that it has been covered very well. I would just like to say a few words about the emissions trading scheme, which seems rather a vague thing. Nobody ever mentions it; we do not hear anything about it. I only learned yesterday that there have been some problems with it—some malpractices, one might say. I do not know whether the Minister is aware of that, but it is something that we should take into consideration.
Traditionally, maritime regulation has come from the International Maritime Organization, based across the river. People think that shipping has not taken much notice of reducing emissions, but huge strides have been made and millions, in fact billions, of pounds have been spent. The main container operators are hedging their bets because there is no silver bullet to replace the internal combustion engine, so they are producing hybrid vessels that can run on normal diesel fuel, liquefied natural gas or methanol. Companies are also looking at ammonia. In the smaller fields, especially Norway, which has been very advanced in this area, there are electric ferries and hydrogen ferries. In order to cut down their emissions, the shipping companies are looking at all ways of reducing fuel use, even going back to wind—modern computerised sails, 100 feet high, can help to reduce fuel costs considerably with the right conditions.
Likewise—this is the only mention of Northern Ireland that I will make—somebody might have noticed a ship with something that looks like an old-fashioned factory chimney sticking up in the air. A German invention of the 1920s called the Flettner rotor has been resurrected. It is a rotating cylinder that has high pressure on one side and low pressure on the other and produces force to drive something. Bulk carriers up to 400,000 tonnes can have five of these things. At over 100 feet high, they can fold down when the vessel is working in port. They are coming into increasing use. The maritime industry has not been standing still. I heartily agree with the comments that the funds—call it a tax, if you like—gained from this system should be ploughed back into the industry and not disappear into the maws of the Treasury.
As regards shore power, which the noble Lord, Lord Berkeley, mentioned, we certainly have three ports that have it—Aberdeen, Portsmouth and Southampton—and the Government have been assisting with the UK SHORE unit, which has considerable funds available. A scheme has been put into operation in Portsmouth. The Government put in £20 million and I think that the local authority put in another £5 million. What happened? The two French ferries that use the port will not use it. Why? Because the cost of electricity is too high in this country. If that is not shooting yourself in the foot, I do not know what is. Certainly, there are many other ports looking into this. Take Dover-Calais, one of the major ferry routes in this country. Calais has already committed to funding three berths by 2030 and Dover is looking to form a partnership to try to do something similar. But I think Dover, as a trust port, has a problem in that it has to have an Act of Parliament to be able to deal with electricity.
Cruise ships have been mentioned. There are two berths in Southampton, but only one can be used at a time because of lack of capacity in the grid. The real problem, as I see it, is that we have to increase capacity in the grid. The Minister might be able to tell us that some things are beginning to take place, but I would have thought that, before investing billions in offshore wind, it would have been more sensible to have upgraded the grid, which would have avoided a lot of these problems.
This could well be the last time that I address your Lordships, as I shall be leaving shortly, so I would like to add my regret on another matter. I have been talking on maritime matters for over 50 years in this House. When I came in, we had a very sizeable merchant fleet and a sizeable Navy. What do we have today? In terms of trading vessels, we are number 31 or 32 in the world. That is a great regret and an utter disgrace.
Lord Weir of Ballyholme (DUP)
My Lords, it is an honour and a privilege to follow the noble Lord in what may be his valedictory speech. It is perhaps a little disappointing that it was on this SI, which seems to have been based on false premises. A range of factors that were not available in the other place were introduced only at a late stage. Also, it has been sold on the grounds of the consent of the devolved institutions. Where consent is obtained through duress and blackmail, as we have heard detailed today, how genuine is it?
It is clear that this SI will be deeply detrimental to the ferry companies. Even at this late stage, they have not been given all the technical information that they need to implement it in full. They have been given a six-month window to introduce and implement it, when even the EU gave a three-year period for introduction and implementation for a similar scheme.
The SI is deeply disproportionate. Domestic ferries account for around 1% of the UK’s carbon footprint and, as outlined by the noble Baroness, Lady Hoey, and others, we are not even in a position to take action immediately to counteract that 1%. But this clearly goes beyond the implications for ferry companies. There are implications for passengers, haulage companies and companies in Northern Ireland and the Isle of Wight—and companies in Great Britain looking to send their goods there—because, inevitably, the only way this can be dealt with is to pass those costs on to the consumer and the companies concerned.
As the noble Baroness, Lady Hoey, highlighted, Northern Ireland relies on 90% of its goods coming in and out by ferry. That is not simply a convenient choice; it is a necessity. Let me give an example from my own life—I think the term in vogue today is “lived experience”. In the last two years, I have on two occasions had to get my electric wheelchair sent back to the manufacturer for adjustments. It happened once in London and once in Belfast. In London, I could get the wheelchair to the manufacturer in Birmingham; I could have arranged for it to be picked up or got a car to take it there. As it happens, I brought it there by train. In Northern Ireland, there was no such alternative. The only opportunity that I had was to ship it by freight to Birmingham. I suppose that I could have tried driving it there, but I would have got a little wet in the meantime. The reality is that that is the level of dependence we have.
This could not come at a worse time. Because of the conflict in the Middle East, we are faced with rising fuel and transport costs and a clear knock-on effect on the cost of living, with inflation set to increase. To be fair to the Government, they will say that those are all factors outside their control. But this measure is a self-inflicted wound on top of all those factors, which will impact different parts of this United Kingdom disproportionately. We are sometimes, somewhat erroneously, referred to as an island nation. That is not accurate. We are a nation of islands. There is rightly an exemption of 100% for the Scottish islands, but to have only a 50% exemption for Northern Ireland and similar problems for the Isle of Wight is not treating all parts of the United Kingdom fairly.
I had a number of questions, nearly all of which were covered by my noble friend Lord Dodds, but I will add one. There is widespread concern that there has not been much specific assessment of the economic impact on Northern Ireland. Will the Government give a commitment today that when they review the trading scheme in 2028 there will be a Northern Ireland-specific economic impact assessment? Many of us fear this will add to an already difficult situation for many companies and many consumers in Northern Ireland. The Government must face up to that.
Baroness Bennett of Manor Castle (GP)
My Lords, I offer the Green Party’s support for this statutory instrument and oppose the regret and fatal amendments. I will add some extra points to this debate that have not yet been made. We must look at this in the context of global shipping, which, back in 2018, represented around 2.9% of global emissions caused by human activities and is projected to rise by up to 130% by 2050, which, essentially, would blow our climate restrictions out of the water, to use an appropriate metaphor.
In July 2023, the International Maritime Organization committed to new targets for greenhouse gas reductions and was going to adopt a basket of measures globally last year. Since then, as in many areas, we have seen President Trump put a spanner in the works. That makes it even more important for the UK to hold the line and set the standard in being, as we so often hear people saying, a world leader. If we take steps to get the fossil fuels out of these vessels and adopt alternatives then this will be world-leading. These are steps that will address the cost of living. I refer noble Lords to the report out this week from the Climate Change Committee. It noted that delivering net-zero targets will cost less than a single oil shock across the economy. Relying on fossil fuels is an extremely expensive, risky economic choice, as well as all the other issues.
There has been a fair bit about the Isle of Wight, but I want to build on what the noble Earl, Lord Russell, and the noble Lord, Lord Ashcombe, said. I had extensive comments, but they have said quite a bit of what I was going to say. The key point to add is that this is expected to add £1 to £2 extra to a ticket. We have grossly expensive transport options for the people on the Isle of Wight and a grossly unreliable transport system. We need huge improvements and huge changes. I speak as someone who goes to the Isle of Wight quite regularly.
Today, there are no wheelchairs, prams or bikes permitted on the FastCat due to a technical issue. The Fishbourne to Portsmouth car ferry sailings have been cancelled due to a combination of forecast wind conditions and the “St Clare” ferry running on three out of four engines due to a propeller issue. There are big problems with the Isle of Wight’s transport provision, but this is tiny in the scale of the broader problems that desperately need to be addressed.
It is worth noting what can be achieved and what is possible. On 10 March, the “Baltic Whale” took part in its first commercial voyage from Scandlines, which aims to operate without direct emissions by 2040. On the Rødby to Puttgarden route, the freight ferry makes the 10-mile crossing in 45 minutes. It has a charge time at each harbour of 12 minutes. Other countries are making huge advances. Interestingly, the “Baltic Whale” makes far less noise, which is of huge benefit to the natural environment, to the wildlife in the Baltic Sea and to human life.
I go back to the Air Quality Expert Group’s 2017 report, Impacts of Shipping on UK Air Quality, as not much has changed. It noted that shipping makes “significant contributions” to emissions of nitrogen oxide and sulphur dioxide, as well as PM2.5 and PM10—particulate matter. That includes emissions of black carbon and carbon dioxide. All those have major impacts on public health. If we get away from fossil fuels, we will make important steps to improve public health.
Finally, I have a direct question to put to the Minister, where I will stop supporting the Government and ask a challenging question. Everything I have just said—and what this SI does—is contradicted by the UK cruise growth plan, which aims to increase the amount of cruise ships. I draw here on a very useful briefing from Transport & Environment from the end of last year. Cruise ships are already having a huge impact on air quality in ports and can be responsible for up to 96% of toxic sulphur oxide pollution at the busiest terminals. That is particularly an issue at Southampton. It is also a very big issue in Belfast. How can the Minister justify taking steps here that are both public health measures and climate measures while the Government are in other ways promoting more pollution and more health damage?
Lord Rogan (UUP)
My Lords, in common with my noble friends and Ulster Unionist Party colleagues at the Stormont Assembly, I cannot support this legislation, which is detrimental to Northern Ireland, given the Province’s huge reliance on sea transport. We note that ferry services for the Scottish islands are exempt from this provision. Perhaps if Ministers were chasing votes in Northern Ireland in May, as they are for elections in Scotland, the exemption might have been extended across the Irish Sea as well. The Irish Sea is nothing less than an economic lifeline for the Province, with around 90% of its trade and passenger movements coming via ferries and shipping routes.
I have raised the issue of the lack of competitiveness in air services between Northern Ireland and Great Britain on numerous occasions in this House. Flying to and from Belfast on domestic routes has become incredibly expensive. Given the ongoing events in the Middle East, prices will likely rise still further. Unlike most other parts of the United Kingdom, the use of sea transportation is therefore not optional for many people and businesses in Northern Ireland.
I fully appreciate the Government’s aspiration to advance decarbonisation through the use of alternative fuels. However, if the world has learned nothing else over the past two weeks it is that there will be a continued reliance on fossil fuels for the foreseeable future in the UK and elsewhere, whether we like it or not. As such, the consequence of this order is the creation of what can only be described as a carbon tax in Northern Ireland, which would not have to be borne in anything like the same degree by the rest of the United Kingdom.
Of course, this comes as the Province continues to struggle with the seemingly ever-growing burden of costs on its people following the imposition of the Irish Sea border. The previous Conservative Government claimed to have removed it by dreaming up the Windsor Framework. It did not work. In opposition, the Labour Party pledged to improve matters if it came to power. It has not. Indeed, we have yet more costs being slapped on the Province through the order to keep Brussels happy, because the EU sets the rules in Northern Ireland now, not our supposedly sovereign UK Government.
If this order was for any purpose other than pleasing Brussels, the Government could and should have chosen to direct its proceeds into the Northern Ireland economy, perhaps with an emphasis on supporting our shipping industry and its transition to alternative means of propulsion, but they have not done so. Instead, we have yet another example of Whitehall taking the simplest option, with all the damaging implications it will have for that part of the United Kingdom, about which it knows little and, I feel, cares even less.
Lord Redwood (Con)
I agree with the contributions from Northern Ireland. This order is discriminatory against Northern Ireland in favour of Scotland, and it will do considerable damage to consumers and business in Northern Ireland.
I also welcome the remarks of my noble friend Lord Moynihan, who told us that we are engaged in a much wider debate on this rather narrow instrument now that the Government are saying that this is an important part of the United Kingdom’s participation in a carbon border adjustment mechanism—or carbon tariff—and, through the ETS at European level, in a carbon taxation scheme, which is even dearer than the United Kingdom one we have inflicted on ourselves. I urge the Government to think again. This has carried very badly in every part of the United Kingdom, represented here, that will be affected by it.
However, it is part of a much bigger error that government policy is creating. Over the last decade, the United Kingdom has been a world leader in reducing its CO2 output and has been dutiful to a fault to treaty obligations that actually relate to more distant years. As a result, we have seen a catastrophic deindustrialisation, which has gathered huge pace and momentum in the last two years with the intensification of the net-zero policies this Government have welcomed and introduced. To extend part of this system to the maritime sector would cause further damage.
Many years ago, I had the privilege to lead a big international industrial group. In those days, the group had its headquarters and most of its main factories in England. We were proud of that. We struggled to compete, but we did compete. Where we had a problem, we remedied the problem. We needed to raise our capital efficiency, so we had to spend money and investment on better plant. We needed to train our staff and use our staff better so that it was a better organisation. We stayed in the market, and we stayed producing. For example, we were responsible for a large part of the ceramic tile industry in the Potteries, with its very distinguished tradition of innovation—and domination, at times—in that very important market.
While I was there, we managed to make the investments and stay competitive enough, although the Italians were very good. I watched with sadness and shame as my successors gave up the battle through no fault of their own. At our current energy prices, we are so far away from being able to do even something relatively simple in industrial terms, such as making good industrial tile for all the homes with bathrooms and kitchens that need it. That is replicated sector by sector now.
We have heard the Green case, feeble as it is, briefly sketched today in this short debate. My response to that is that practically every policy initiative this country has taken to reduce its own CO2 has contributed to an increase in world CO2. Why on earth is that good for the environment, let alone good for our economy? We will not get our own gas out of the ground, and so we import LNG, which generates three or four times as much CO2 in the process than using our own. It is crazy, and we must stop doing this.
We need to have better-paid jobs and more investment in the United Kingdom. We need to rebuild our maritime industry. We heard from a very well-informed noble Lord, who told us that over his lifetime, supporting what was once a great industry, we have seen it almost disappear and vanish. This great maritime nation cannot now carry its own goods, because it did not create the right tax and regulatory conditions to sustain shipping in this country.
I urge the Government to think again. This is a small part of a big crisis. This is undermining our capacity to do well and make the things we need in this country. Dear energy is a killer. This is part of a package of measures that lumbers us with energy so dear we cannot make things for ourselves.
Lord McCrea of Magherafelt and Cookstown (DUP)
My Lords, it is a pleasure to follow the noble Lord, Lord Redwood. I give my wholehearted support to the fatal amendment in the name of the noble Baroness, Lady Hoey. In her amendment, the noble Baroness poses a concerning question: how did the Government feel justified to introduce special protections for the Scottish island groups but not even to pause to consider special protections for Northern Ireland, which is more structurally dependent on sea transport?
The question was asked to the noble Earl on the Liberal Democrat Benches, who said that his remarks would be based on a point of principle. It seems that the noble Earl has one principle in his pocket for Scotland and then moves to his other pocket to take out another principle for Northern Ireland. When he was asked specifically to justify it, he said it was not for him to answer for the Government. He was asked not about the Government’s position but about how he would justify it, because he supports this SI. He was asked specifically to justify his support for it, but he failed to do so.
Lord Bew (CB)
My Lords, I support the intervention of my noble and learned friend Lady Butler-Sloss on the question of Scotland and the Scottish intervention. I do so because it makes me profoundly uneasy. When I was reading the explanatory comments from the Government for this new SI, the emphasis is on the Northern Ireland protocol of 2020. The Windsor Framework is designed to correct quite explicitly the disproportionate destabilisation of,
“Northern Ireland’s place in the United Kingdom internal market”.
One of the ways in which it does so is clear in paragraph 51. It says it insists on,
“Northern Ireland’s central place in the UK market, on an equal footing with counterparts in England, Scotland and Wales.”
Scotland is specifically mentioned there.
As my noble and learned friend Lady Butler-Sloss points out, this SI simply does not give treatment “on an equal footing” with Scotland. I know that Charles de Gaulle gave a famous and cynical statement about treaties: that they lasted as long as pretty young girls and roses. I have always assumed that this was not the view of this Government and that they are committed to international law. There is a real problem with what they are doing with this SI. It is not compatible with the central commitment in paragraph 51 of the Windsor Framework.
My second point is broader, and has already been touched on by the noble Lord, Lord Dodds. The fact is that the institutions in Northern Ireland are not in as stable a condition as they should be. When the Government talk in the Explanatory Notes about the actual impact of this SI on individuals in Northern Ireland being small, I absolutely accept that. The trouble is that the number of these SIs is mounting and every few weeks, we are back in this Chamber. By the time it comes to the next Assembly elections, there will be those politicians in Northern Ireland who will have momentum to say, “Look at this list of statutory instruments. Look at these things that have moved away from the Windsor Framework.” Those who have listened to this debate will realise that the Windsor Framework is not enormously popular within the unionist population in Northern Ireland. But that having been said, it was part of the means by which the institutions were returned, so what is at stake here?
Above all else, in the broader sense, it is the survival of the institutions of the Good Friday agreement. The Government, I am sure, are absolutely determined to see the survival of those institutions—a great Labour achievement. However, they will not be assisted in this task if they proceed to take solemn commitments in the Windsor Framework that they supported strongly in opposition, and just say, “That doesn’t matter. We could have a Scottish exemption now. We can forget the commitment in paragraph 51 that there would be no such thing.” The stability of the institutions of Northern Ireland in the longer term require the Government to rethink on this matter.
Lord Empey (UUP)
My Lords, I feel a bit sorry for the Minister because he introduced what appears to be a bland SI and now finds himself in the midst of a debate covering a whole range of other issues, but I am afraid that I am going to add to his discomfiture. In his powerful address earlier, the noble Lord, Lord Moynihan, mentioned—as have others, including the noble Baroness, Lady Hoey—the difference in treatment relating to what the other place was aware of, and what we and the devolved institutions are aware of.
It might be useful to kick off by telling the House precisely what information was given to the parties in Northern Ireland by the Northern Ireland Office. It said: “I am getting in touch with you about the Assembly debate on the maritime emissions trading scheme legislation scheduled for 10 March. I hope very much that the Ulster Unionist Party will be supporting it. It is really important, and not getting the SI through would have significant adverse consequences for Northern Ireland’s economy. If we do not link, and all the other devolved Governments have agreed to pass this legislation already, the UK would risk losing CBAM exemption, exposing £7 billion of UK exports to EU CBAM, i.e. businesses would have to pay the CBAM which we are trying to get exemption from in our negotiations with the EU. The cost of this, if we are not successful, would be far greater than the impact of the maritime emissions charge. Northern Ireland would be uniquely exposed. There could also be knock-on consequences for the SPS negotiations. SPS and ETS linkage would be worth nearly £9 billion to the UK economy by 2040”. The Minister referred to that. It continued: “This would benefit Northern Ireland directly through trade and a level playing field with the EU. The costs of purchasing allowances for GB-NI voyages in the ETS is only around £10 million to £15 million per annum and the impact on consumer prices will be low. I would be very happy to discuss”, et cetera.
That information was put through over the couple of days before the Assembly debated and people may not be aware that, had the parties fully appreciated the realities, a petition of concern could have been launched which would have prevented the Assembly passing the legislation, but parties were influenced by information that was submitted to them that is false. I therefore believe the parties in Northern Ireland were deceived, which is a big issue in and of itself.
Let us move back to the realities here on this order. It is often said that if you look after the pennies, the pounds take care of themselves. In the document on the greenhouse gas emissions scheme and its analysis, estimates of the impact on consumers are at the back. It says:
“the overall impact is estimated to be small”.
I make the point that I have sat in your Lordships’ Northern Ireland Scrutiny Committee and its predecessor for five years. We get a series of EMs through from Brussels and often the relevant government departments in Whitehall say that the impact is estimated to be small. If you add all these impacts together, it is not small; it is significant.
The document goes further. It says:
“Consumers in Northern Ireland may be more exposed to any cost pass-through, due to their relatively higher reliance on goods moved via domestic maritime than GB consumers, though the overall impact is … expected to be minor”.
For me, this is the clincher:
“The exact impact is difficult to quantify, given the lack of data about the contents of containers travelling between Great Britain and Northern Ireland”.
That is nonsense. Every article that is in a container must be specified under the Windsor Framework. We know exactly what is in every container and, in fact, every container can be opened. Pallets can be taken out and, if the inspectors are not satisfied, it can be held at the ports. We already have to provide the European Union with the details of the contents of every container, yet the Government are saying in their own document
“given the lack of data about the contents of containers travelling between Great Britain and Northern Ireland”.
That is fundamentally wrong.
Lord Jackson of Peterborough (Con)
My Lords, I strongly support the amendment in the name of the noble Baroness, Lady Hoey, and congratulate her on her indefatigability and persistence on these issues, although that is usually on the basis of debating the Windsor Framework, which we are not doing today. I commend my noble friend Lord Redwood on his tour de force speech, and the forensic interpretation outlined by my noble friend on the Front Bench Lord Moynihan. I have a rule of thumb: if I agree with the noble Lord, Lord Empey, I am on the right track. It may be that I am cynical, but he is right to draw out the issue of constitutional propriety and whether central government has shown proper respect for the devolved Administrations, particularly the Northern Ireland Assembly and the Northern Ireland Executive, on this occasion.
We all remember that at the time of Brexit, a senior official called Martin Selmayr stated that the two imperatives for the EU after Brexit were that Brexit should be as painful as possible for the United Kingdom, and that the European Union should never have a competitive disadvantage vis-à-vis the economy and commerce of the United Kingdom. Therefore, as a student and fan of true crime, I see all these pieces of the jigsaw puzzle coming together, because I have to repeat the question raised by the noble Lord, Lord Dodds: why the rush? Why are we in a position where what has been told to individual Members of Parliament by Ministers in the other place is different from issues that were raised in the Northern Ireland Assembly and its committees?
I read the deliberations of the committee in the Northern Ireland Assembly, as well as the Delegated Legislation Committee that met last month. The fact is that this is a pernicious carbon tax, and it does not present that sector with an opportunity to adapt in a timely way. It has a disproportionate impact on Northern Ireland, as we have heard: on supply chains, on inflation, on food prices and on transport costs. There is obviously an unfairness between the way that the Scottish island ferries have been treated and Northern Ireland. I challenge the Minister, once again—and going back to the comments from the noble Lord, Lord Dodds of Duncairn—as to what is the rationale for the different treatment between Scotland and Northern Ireland. Incidentally, Scotland does not get off scot free: as I understand, 145 gas and oil supply and support vessels will also be caught by this order. If the oil and gas industry has not already been clobbered almost into oblivion by the abysmal policies of this Government, and the zealotry of the Secretary of State in seeking to destroy that industry and reduce the employment prospects in Aberdeenshire and other places, this will be another nail in the coffin.
I must ask whether this is linked to wider negotiations with the European Union, in terms of the timescale and timeframe, because that is an important question about the propriety or otherwise of these proposals. At the moment, there is no evidence of likely behavioural change as we run up to the implementation of the order in July this year. As we have heard, the revenue that will accrue from this carbon tax, imposed disproportionately on Northern Ireland but across the sector, is non-hypothecated. As we know, His Majesty’s Treasury is always keen to see an income stream but not to disburse that back to a hypothecated source of the income.
I finish with some questions for the Minister. When will the Government produce clear, technical guidance on the scheme? What support will be provided to the industry to source alternative fuels in a timely and cost-effective way? What analysis has been done by His Majesty’s Government as to the availability of appropriate sector infrastructure to enable the maritime industry to transition to a low-carbon or net-zero regime? What estimate has been made of the costs of compliance annually, particularly the administrative costs, such as producing risk assessments? What impact will there be on the 145 oil and gas support vessels supporting operations in the North Sea? Why have His Majesty’s Government not included measures in the order to support retrofitting, or alternative quayside power supplies at ports, to facilitate the use of alternative modes of propulsion? That issue was raised very astutely by the noble Lord, Lord Berkeley. What discussions has he had, along with his ministerial colleagues, with the EU interlocutors on the timescale of this order, on securing the legal effect of it, and how might this impact on negotiations following the UK-EU common understanding in May 2025?
The Minister needs to listen to the widespread disquiet across this House and the consensus that this order is inappropriate to be laid at the moment. There are too many issues which are unresolved and too many questions still to be answered about the impact on Northern Ireland and the wider economy. I have to say to the Minister that he needs to pause the order and tell our friends in the EU that our pre-eminent priority is British interests, not the arbitrary timetable imposed by the European Union.
Lord Mountevans (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Jackson of Peterborough, who had more of a maritime emphasis, particularly in his questions. I acknowledge the strong contribution made by my noble friend Lord Greenway. The reality is that the SI before the House is not suitable in its current form. I will talk particularly from a maritime aspect.
Many of the leading international and, indeed, local ship owners in the industry are committed to net zero by 2050. The UK Chamber of Shipping called for the global shipping industry to reach net-zero emissions by 2050—prior, in fact, to the UK Government and the IMO. The industry has consistently supported the effective mechanisms to cut emissions. Across the sector, owners have invested in new technologies and pioneering innovation such as new hybrid vessels, and invested to enable shore power connections to meet commitments and lead the drive towards net zero. But the SI inflicts significant new expenses on the ship owner and operator, without the Government committing to invest the substantial sums raised in net-zero-related investment, as has been agreed by the EU.
An obvious potential use for the funds might be in shore power. Significant investments have already been made by ferry operators and cruise ship owners in ships that are already fitted to link up to shore power, with obvious benefit to the environment and the atmosphere. But, as we have heard from the noble Lords, Lord Berkeley and Lord Ashcombe, there is very little installed power in the UK. These significant costs on the owner are expected to curtail the scope for further investment on the ships side in measures and equipment that will reduce emissions.
Let us be very clear: there is an immediate impact on costs. The Government’s own impact assessment calculated, as we heard, the administration cost of the scheme at £179 million, far exceeding the estimated abatement investment of £22 million, implying that, for every £1 spent on decarbonisation, £8 is spent on admin and bureaucracy. Does this sound like good business sense?
The additional costs will impact on businesses and communities. We should not forget that these businesses and communities are located on islands or along the coast, which are already recognised, typically, as economically disadvantaged. Surely, the Government do not wish to further disadvantage these communities. Estimates show that, without exemption, annual fuel costs may increase by up to 25% to 30%. The EU ETS has increased intra-EU maritime and transport costs by around £1 billion annually, with ticket price impacts estimated at up to 15%. Similar outcomes are expected under the UK ETS.
We know that the challenges faced by the Scottish islands have been recognised, and they are excluded from the scheme; and I certainly support the view that the Isles of Scilly, in the case of a larger ship, and the Isle of Wight should also be excluded.
Introducing new monitoring requirements alongside responsible emissions from 2026 adds administrative burden, compliance burdens and risk, and working capital costs. At the same time, vessels cannot yet access alternative fuels, onshore power or adequate grid capacity to reduce emissions, none of which exists in meaningful degree in UK ports today. Without a clear commitment on the part of the Government to recycle the revenue from maritime, the UK ETS will simply divert capital from decarbonisation investment in vital infrastructure, shore power and alternative fuels—and, as has been noted, it may very well just disappear into government coffers.
The industry wants rule introduction to follow that of the EU in, for example, timelines, enforcement mechanisms and data systems, to avoid divergence that could hinder linkage. The recommendation of the industry is for a phased implementation for the necessary data reporting, like the EU did and the UK has, in fact, already done for the waste incineration industry. Phased introduction in allowances to surrender, which start at 40% obligation in the first year and are 70% in year two, rising to 100% in year three, would also be a suitable introductory system.
Baroness Butler-Sloss (CB)
My Lords, I too share the disquiet—without, I have to say, any knowledge of the subject—of most noble Lords who have spoken so far, but I, like others, will be voting so I have three questions for the Minister. First, what was said to the other House? Apparently, the other House was told that CBAM was irrelevant. Today we are told that CBAM is entirely relevant. Is it really appropriate for both Houses to have a statutory instrument put to them on different bases? I find that very unattractive.
Secondly, we are told that misinformation, or false information, has been given to other parts of the United Kingdom. That seems to me a serious allegation, one which the Minister needs to answer. Thirdly—I will not dwell on it, because it has been dwelt on—there is an obvious element of discrimination between Scotland and Northern Ireland. That really needs a sensible, understandable answer.
Baroness Suttie (LD)
My Lords, this has been a characteristically impassioned debate, which is perhaps not surprising given the subjects of EU alignment, devolution and greenhouse gas emissions. It is inevitable that people are going to feel very strongly about this subject. If the noble Lord, Lord Empey, expressed his concern for the Minister in trying to reply to this debate, I would add that it is slightly difficult, as the only Scot who has so far spoken in this debate. In well over two hours, I think I am only the fourth person to vaguely talk in favour of this statutory instrument. I thank the Minister for both his time, when he gave us a briefing, and his introduction to these regulations. I also thank the noble Baroness, Lady Hoey, for tabling this fatal amendment—even though we will not be supporting it—because it is incredibly important that we get the time to debate these matters.
As the noble Lord, Lord Dodds, said, it is incredibly important that this Parliament has a chance to debate these issues, not least because we are going to see an increasing number of them as we approach dynamic alignment with the European Union on ETS, as well as potential agreements on SPS and the electricity market. We have to find a way to allow this Chamber and those at the other end of the building to debate these things properly. I hope that the Government are giving some considerable thought to how effective parliamentary oversight on these matters can and will take place if and when these additional agreements are made later this year.
These regulations, it should be recalled, stem from regulations introduced by the Conservative Government in 2021 and the creation of the UK ETS following our departure from the EU ETS after Brexit. As these issues are devolved, they have had to be decided by the four parts of the United Kingdom. In answer to the noble and learned Baroness, Lady Butler-Sloss, I am the only Scot speaking here today, but it was the Scottish Government who effectively campaigned for the exemption for the Scottish islands. They are not my party, but they obviously campaigned very successfully on this matter. The noble Baroness, Lady Foster, who is no longer in her place, was right when she said that these regulations stem from regulations introduced in the Scottish Parliament in 2018.
It is important to note that these regulations were agreed last month by both the Scottish Parliament and the Welsh Senedd, and this week by the Northern Ireland Assembly, notwithstanding the comments from noble Lords about that process. It was voted for by the Northern Ireland Assembly by 44 votes to 23 this Tuesday. As I said, the noble Baroness, Lady Foster, was quite right. My understanding is that the exemption for Scottish ferries is not a general maritime exemption; it stems from the Islands (Scotland) Act 2018, which was passed by the Scottish Parliament eight years ago to protect specific lifeline services for small, isolated island communities. Clearly, protection for small island communities is very important. Will the Minister confirm that this Scottish exemption for island ferries will form part of the review in 2028? I feel it is important for us to know.
I also thank the Minister for clarifying that ferries to small island communities in Northern Ireland are already exempt from these regulations, as they do not involve vessels of over 5,000 cubic tonnes. As my noble friend Lord Russell clearly set out, we on these Benches strongly support measures to reduce the quantity of greenhouse gases produced by maritime activities, but we none the less believe that these must be accompanied by port upgrades or cleaner fuel infrastructure, as well as by encouraging innovation and economic development in a cleaner maritime sector. I note, in passing, that those who constantly oppose measures to reduce climate change never seem to factor in the cost of non-action. We also support the general principle of aligning as closely as possible with the EU ETS to minimise friction on trade.
It is important to bear in mind, however, the impact that other noble Lords have set out on the economy of Northern Ireland and on the cost of living in these increasingly challenging times for the global economy, not least in terms of energy because of the war in the Gulf. It is also important to allow a full and transparent review of how the scheme works in practice and to correct any unintended consequences once it is introduced later this year. Given that the Government’s own impact assessment states that Northern Ireland
“could face disproportionate administrative burdens”,
it is important that we continue to monitor the situation extremely closely. Can the Minister say whether they intend to give regular reports to this Parliament, as well as to the devolved parliaments, on how the regulations are working in practice once they are introduced? Can he confirm that they will continue to consult closely the maritime sector, businesses and consumer organisations?
As there is currently a distinct lack of viable low-carbon alternatives for many maritime routes serving Northern Ireland, have the Government carried out any analysis regarding the extent to which additional ETS-related costs could be passed on to consumers by shipping operators and retailers? The EU ETS currently covers 50% of emissions from international voyages starting or ending in an EU member state, which, for example, currently includes container ships travelling from GB to the Republic of Ireland. It is therefore welcome that there is a 50% deduction for GB-NI routes, as it provides for a level playing field with Irish ports. However, if and when there is increasing—or indeed eventually full—alignment with the EU ETS, can the Minister say whether he expects this 50% deduction for both the Republic of Ireland and GB-NI routes to be removed? I appreciate that might be a rather complicated question, but I would very much appreciate his answer. Can he also say what measures the Government intend to put in place to avoid a cliff edge following the review of these regulations in 2028?
In conclusion, we support these regulations as we welcome the move towards greater alignment with the EU ETS, and we do not support either the regret amendment or the fatal amendment. None the less, we recognise the need for proportionality as well as strong transitional and review measures. I look forward to hearing the Minister’s reply.
Lord Whitehead (Lab)
I thank noble Lords for their valued, valuable and very wide-ranging contributions to this debate this afternoon. I am, I think, a fairly plain and straightforward person, but I have at times in the debate failed to get to grips with exactly what it is supposed to be about. It is about the decarbonisation of the UK economy, how the emissions trading scheme is probably the most efficient way of ensuring decarbonisation in our economy, and what should and should not be in that emissions trading scheme. We have also heard in the discussion how that trading scheme might be more widely based so that its decarbonisation effect is improved.
A part of that is of course the entry into the ETS of the maritime sector. For those who say that this statutory instrument is very rushed, I might have to go down a brief historical byway and mention that one can trace back this particular SI to a 2022 consultation on whether the maritime sector should be included in the ETS—a consultation under the previous Government, not this Government, I might add. The response to that consultation was a strong indication that, yes, the maritime sector should be in the emissions trading scheme. Since then, there has been a series of consultations with the maritime industry and many other people about exactly how that should be done, what part the maritime industry should play in its own decarbonisation and how it can contribute substantially to the UK overall trading emissions picture. I have to say that the UK maritime industry has done very well in its contribution so far to making that transition as effective as it can be.
Taken in that context, I am a little surprised at the regret amendment that has been tabled, because essentially this is a past Government regretting their own actions. Yes, there is plenty to regret about the previous Government, but to have the previous Government regretting themselves seems to be a step further forward than was previously the case.
Lord Ashcombe (Con)
We have a problem with the Isle of Wight. One of the vessels has done everything that it could possibly do to decarbonise. It has no option to go anywhere else because the power is not there. It is a fully hybrid boat, as the noble Lord, Lord Greenway, pointed out with a great deal more technical ability than I have. These vessels cannot go anywhere else, so this is a straight tax that will end up primarily on the residents of the Isle of Wight.
Lord Whitehead (Lab)
The noble Lord makes a strong point about the power supply to the Isle of Wight. This is also the case with some other ports. Other noble Lords have said this in their interventions, including the noble Lord, Lord Greenway, for whom I have a great deal of respect and admiration, through our long relationship with the Maritime and Ports Group in another place. He speaks with great authority and considerable knowledge and wisdom on this subject.
Shore power and an electrical supply to ports to enable decarbonisation to take place is a serious question. Both the port of Portsmouth and, in parallel, the port of Southampton suffer from particular cable connections from the substations in their area, which could, at a sub-national grid level, provide sufficient shore power and power for the electrical hybrid ships that may visit these ports. That can be effected by what is called a reopener of the arrangements for distributed network operations to ensure that this power can come forward at an early date. This is what Southampton has done. The power is likely to be forthcoming long before the 2037 date that the noble Lord mentioned. If Portsmouth has not done this yet, I would suggest that it does so. The power is there and readily available to get to the ports. It is a question of putting it in early, rather than later, to make sure that this transition can take place. That is part of a wider problem about grids and grid power in the country as a whole, which this Government are addressing urgently to make sure that we have the power to get ourselves across the transition in the way that we want.
Because of the time available, I will have to address some of the issues by writing to a number of Peers. In this debate, I want to emphasise that this is not a conspiracy to do anybody down or to try to isolate particular communities. Nor is it aimed at undermining the economic prosperity of the country. It is a decarbonisation measure that has to happen as part of our general decarbonisation route to net zero. It would be anomalous if the maritime sector were to be excluded from that decarbonisation route and if we were not to take measures, which I have known about for a long while, to make sure that that decarbonisation route is as effective as it can be in how it aligns with the EU ETS and eventually with the CBAM process. At present there is some problem of alignment because the EU CBAM process is proceeding earlier than the UK CBAM process. These need to be aligned in the longer term. As has been mentioned in this debate, the prize for that alignment is a substantial bonus for UK trade—£9 billion or so over a longer period. It would be remiss of this Government if they did not have that largely in view in what they are undertaking as far as this SI is concerned. Indeed, the Government do have this in view.
I can certainly say to noble Lords that the effect of this SI will be seriously reviewed in 2028. It is likely that, should everything come into proper alignment with CBAM and the EU, some of those shorter-term exemptions and changes will come jointly into alignment for the net benefit of everybody, including Northern Ireland, the Republic of Ireland and the UK. That alignment will mean a joint overall benefit all round.
Lord Empey (UUP)
The noble Lord did not address the main point in the debate at all, or the fact that his document says:
“The exact impact is difficult to quantify, given the lack of data about the contents of containers travelling between Great Britain and Northern Ireland”.
That was not mentioned. This is not benign; if it were, there would be 100% reductions and everybody would literally be in the same boat. This will have no practical impact on reducing pollution, because it is an impossibility for the next 15 years.
Lord Whitehead (Lab)
It is not an impossibility for the next 15 years. Getting an accurate picture of trade always involves a range of calculations—you cannot get it exactly right. However, so far the impact of this proposed order has been assessed at below 1% of those costs; the Government do not recognise the figure of 6% put out by some parts of the industry. That is set against the gain that could come from those bodies being in the ETS, the alignment with CBAM in future and so on.
I might add that, although the product of this particular entry into the ETS has not and will not be hypothecated—indeed, no British Government have ever hypothecated anything that has come into their coffers—what we need to judge it by is how much money has already gone out. Just last week, £271 million went out to further support the maritime industry in its transition to a low-carbon basis. The SHORE fund has several hundred million in it, including £18 million that has already gone to Northern Ireland. All of these are paying back the money that is going into the fund in the future, for the benefit of the maritime industry and its transition.
Baroness Hoey (Non-Afl)
My Lords, at the beginning of this debate, when I was being nice to the Minister and thanked him for the meeting he asked for with me, I said that I did not want to spoil his career prospects and that I thought that, if it had been his decision, he might have chosen to withdraw the SI at the beginning. Now, by the end of this debate, perhaps he would have been even more keen to withdraw it.
This has been an extremely good and wide-ranging debate, as the Minister said. It has brought together two or three key issues—I will not go over them again. It is the first time I have had an SI dealing with not only Northern Ireland but other parts of the United Kingdom, and it has been very good to see so many of the Government Benches full. If one benefit of tabling a fatal amendment is to get a lot of Labour Peers to come here and listen, it is probably worth it.
I thank in particular those Peers who do not normally speak on issues related to Northern Ireland. My fatal amendment is very much geared to the inequality of Northern Ireland and the way it is treated differently from Scotland. It was particularly good to hear from the noble Lords, Lord Berkeley and Lord Ashcombe, on the wider aspects of the SI in relation to the Isle of Wight and the Scilly Isles. It was also good to hear from the noble Baroness, Lady Bennett, and the noble Lords, Lord Mountevans and Lord Greenway—I am very sorry if this might well have been his last speech in the House—who brought their genuine experience of shipping.
If there is any lesson to learn today about speeches, it is that we should all, including me, follow the example of the noble and learned Baroness, Lady Butler-Sloss, who, in her two very short interventions, hit the nail right on the head about how this issue has been handled. Despite the meetings on this side, what happened over the past few days in Northern Ireland was a very bad way for government to be working. The way that the Northern Ireland Office has completely ignored the wishes and needs of Northern Ireland, in terms of business opportunities and what will happen with this carbon tax, has been quite deplorable. Worst of all, as has been said by a number of Peers, was the way the statutory instrument was dealt with in the other place: absolutely different information was given right up to the very last minute. The MLAs were cajoled, blackmailed and treated by the Government as if they were pretty stupid and would not understand that they were being told things that were different from what had been said in the other place.
I thank all Members who have spoken. Of course, all the Northern Ireland Members know the issue and how strongly people will feel its effects. The unfairness to part of the United Kingdom, which comes up over and over again in this place, is becoming ridiculous and quite unsustainable if we care about the union and equality between all parts of the union. Having said all that, I really do not want to waste people’s time when they have sat through and listened. I would like to test the opinion of the House.