Asked by: Stephen Crabb (Conservative - Preseli Pembrokeshire)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he plans to make an assessment of the potential merits of introducing new measures to help support businesses participating in the emissions trading scheme.
Answered by Gareth Davies - Exchequer Secretary (HM Treasury)
The Government is committed to supporting decarbonisation. That is why it protects sectors included in the Emissions Trading Scheme against carbon leakage by allocating free allowances, with installations vulnerable to carbon leakage receiving up to 100% of their emissions allowances for free based on sector benchmarks.
The Government also delivers compensation for the majority of indirect electricity costs imposed by the ETS and CPS on the UK’s most electricity-intensive businesses, through a compensation scheme, which is worth approximately £120 million a year.
In addition, the Government offers a range of support schemes for industry to decarbonise, such as the Industrial Energy Transformation Fund (IETF), which supports industrial sites with high energy use to transition to a low carbon future. Applications for phase 3 of the Fund, which is worth £185m, were launched in January 2024.
Lastly, at Spring Budget 2023, the Chancellor announced an unprecedented up to £20 billion for the early development of CCUS to help meet the Government’s climate commitments.
Asked by: Stephen Crabb (Conservative - Preseli Pembrokeshire)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he plans to make an assessment of the potential merits of providing relief from the emissions trading scheme to businesses that export products to external markets.
Answered by Gareth Davies - Exchequer Secretary (HM Treasury)
The UK is a world leader on carbon pricing. That is why we have an ambitious carbon pricing system, which ensures that polluters pay for their emissions.
Those businesses are protected from carbon leakage in the form of free allowances under the Emissions Trading Scheme, and from 2027, some UK sectors will be protected from carbon leakage by a UK CBAM. The CBAM is a charge on imports and is unlikely to be a suitable tool to address the carbon leakage risk related to exported goods.
The government will continue to assess the impact of carbon pricing on carbon leakage risk for UK industry, including for businesses that export products abroad.
Asked by: Stephen Crabb (Conservative - Preseli Pembrokeshire)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he plans to undertake a review of the criteria used to determine which industries are included in its carbon border adjustment mechanism proposals.
Answered by Gareth Davies - Exchequer Secretary (HM Treasury)
The government will implement a carbon border adjustment mechanism (CBAM) from 1 January 2027 to ensure that UK decarbonisation efforts lead to a true reduction in global emissions. The CBAM will apply a carbon price to relevant imported goods at risk of carbon leakage from the following sectors: aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron & steel.
In making the decision around the initial sectoral scope of the UK CBAM, the government looked primarily at three factors: inclusion in the UK ETS as the purpose of the CBAM is to ensure a comparable treatment of imported goods and domestic products from a carbon pricing perspective, carbon leakage risk, and feasibility and effectiveness.
The scope of the UK CBAM will be kept under review. Further details on the design and delivery of a UK CBAM, including the precise list of products in scope within the announced sectors, will be the subject of consultation in 2024.