Draft Ozone-Depleting Substances and Fluorinated Greenhouse Gases (Amendments etc.) (EU Exit) Regulations 2019

Thérèse Coffey Excerpts

Tuesday 26th February 2019 General Committees

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dr Thérèse Coffey)]

I beg to move,

That the Committee has considered the draft Ozone-Depleting Substances and Fluorinated Greenhouse Gases (Amendment etc.) (EU Exit) Regulations 2019.

It is a pleasure to serve under your chairmanship, Mr Sharma. The purpose of the instrument is to correct deficiencies in retained EU law so that the United Kingdom can continue controlling the use of ozone-depleting substances and fluorinated greenhouse gases once we leave the European Union. It is one of a number of affirmative statutory instruments to be considered as the UK leaves the EU, as provided for by the result of the 2016 referendum and subsequently agreed by Parliament.

In line with the European Union (Withdrawal) Act 2018, the regulations simply make technical, legal amendments to maintain the effectiveness and continuity of UK legislation that would otherwise be left partially inoperable, so that, following our exit from the EU, the law will continue to function as it does today. I can assure the Committee that these amendments do not represent a change of policy, and nor will they have a significant impact on businesses or the public. We have worked with the devolved Administrations on this instrument, and where its application extends to them, they have given their consent.

The regulations may be somewhat technical but, a bit like a well-known chemical, they do exactly what it says on the tin: they bring over the regulations that are required to ensure that things operate just as they did the day before—no more and no less. If they did any more, I would have broken the ministerial code in signing the transparency statement. So there is no change in policy, and the regulations are simply technical.

Ozone-depleting substances, such as chlorofluorocarbons —often known as CFCs—damage the earth’s ozone layer, increasing the risk of skin cancer and damaging the wider environment. Almost all uses of these chemicals have been phased out under the UN Montreal protocol. EU legislation implements that agreement by restricting ozone-depleting chemicals to certain limited uses where there are no viable alternatives, such as in fire extinguishers on aircraft. It also requires all imports and exports to be licensed to help monitor global compliance.

Fluorinated gases have replaced ozone-depleting substances for many uses, including in refrigerants, aerosol propellants and other industrial processes. They are still powerful greenhouse gases, and, through legislation that we have agreed, we require their use to be phased down. It was only a couple of years ago that the Kigali amendment to the Montreal protocol was agreed and subsequently ratified, with the United Kingdom being the first European Union nation to ratify.

The 2018 Act will retain the EU legislation in UK law after exit day, and most of the provisions will operate without amendment, including requirements to minimise leakages and for technicians handling these substances to be properly trained and certified. However, without changes, some crucial elements would not function. Most importantly, the restriction on the amount of gas that can be sold is currently achieved through quota limits placed on importers and producers. The European Commission directly allocates the quotas to individual producing and importing businesses. The regulations therefore transfer those quota allocation powers to the Secretary of State and the devolved Administrations, establishing a separate UK quota system. Instead of an importer or a producer getting a single quota from the Commission, limiting how much they sell in the EU28 market, they would get two quotas, one from the European Commission for sales on the EU27 market, and one from the Secretary of State for sales on the UK market.

My Department contacted all companies currently supplying the UK to ask how much they placed on the UK market, to determine as accurately as possible the correct quota allocations. That data was cross-referenced with other market information to ensure that the UK supply remains as close as possible to current levels. The UK consumption of hydrofluorocarbons calculated through that process is 11.2%, which closely aligns with the percentage of our population relative to that of the EU, which is 12%. My Department has also recently completed the IT systems needed to operate the UK system, and well over half the businesses currently supplying the UK have already registered on the system to ensure that they can continue operating in the UK.

On the specific changes the instrument makes, regulation 2 omits a redundant reference from the EU legislation in the existing UK enforcement regulations. Regulations 4, 5 and 25 in part 2 and regulations 37, 38 and 56 in part 3 facilitate the transfer of functions to the Secretary of State and the Environment Agency with respect to England and to the devolved authorities with respect to Wales, Scotland and Northern Ireland. A number of the regulations throughout the instrument transfer powers from the Commission to the appropriate UK authorities by amending references to the Commission and the Union. A number of other regulations update cross-references to other legislation that have changed since the EU regulations were drafted.

Regulations 7 and 9 reduce the maximum limit values for the use of certain ozone-depleting substances to reflect the lower usage in the UK relative to the rest of the EU. That is done pro rata, based on the population of the UK relative to that of the EU. Regulations 11 and 20 delete redundant provisions, while regulations 15 and 48 amend dates to reflect the operation of the provisions from the point at which we leave the European Union. Regulation 43 enables training certificates issued in EU member states to continue to be recognised in the UK, to ensure that technicians trained in the EU can continue to work in the UK.

Regulation 48 requires the authorities in one part of the United Kingdom to consult the authorities in other parts before establishing their own F-gas quota system. Regulation 50 enables companies holding EU quota authorisations that are needed to import equipment containing HFCs to exchange those authorisations for a UK version so that they can continue to use them to import to the UK. Regulation 59 allows for the adjustment of HFC quotas should it become clear that, as a result of splitting from the EU quota system, UK supply is below the level it would have been had we not left the European Union.

Finally, we have taken a power through the Environment (Amendment Etc.) (EU Exit) Regulations 2019, which have already been approved, for regulators to charge businesses a fee to cover the cost of operating a UK system. That will cover the estimated £500,000 per annum administrative costs faced by the Environment Agency and is in line with the long-established principle that the polluter, rather than the taxpayer, should pick up the cost of regulating.

Most aspects of the EU regulations fall within devolved competence, so most functions are being transferred to the Secretary of State and Environment Agency with respect to England and to the devolved authorities with respect to Wales, Scotland and Northern Ireland. However, the Devolved Administrations have agreed that, for our exit day preparations, they will remain part of a single, UK-wide system, particularly for the purpose of allocating quotas. That means that, immediately after exit, the Environment Agency will allocate quotas for the whole UK market.

The devolved Administrations have all agreed to this instrument, and discussions are under way on the governance arrangements for the operation of the system and the joint decision-making process. Should any Administration wish to diverge from a UK-wide approach in future, they will need to consult the other Administrations to ensure that preparations on both sides can be made.

As we leave the EU, we are ensuring that we have the necessary regulations in place. That is particularly important in relation to ozone-depleting substances, especially as the regulations currently in law, which we must ensure we fully transpose, will be responsible for delivering one third of the Paris agreement.

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[Dr Coffey]

I am pleased that the hon. Gentleman praises the Montreal protocol. Of course, it was under Margaret Thatcher that the United Kingdom joined it; she was one of the great leaders who recognised the climate change challenge at that time. The hon. Gentleman is right to say that the protocol has been successful. Apart from perhaps the UN convention on desertification, it has been the most successful of all the binding international environmental laws.

I am conscious that, right across the House, we continue to seek more action on this issue. It is important to get the regulations right. The hon. Gentleman is accurate to say that the explanatory memorandum was written in the autumn—technically the winter. The draft statutory instrument was initially laid in December 2018, alongside the explanatory memorandum. There was a drafting exchange with the Joint Committee on Statutory Instruments, and the draft instrument was withdrawn and relaid, but there was no need in my view to update the explanatory memorandum.

The hon. Gentleman asked a series of questions about the 12.4%. It is important that he understands that quotas are not allocated to countries, which is why we do not have definitive knowledge of exactly how much CFCs or HFCs are being used in this country. Quotas are allocated, in effect, to producers, which then sell them to companies here in the UK, or a UK company could sell them to somewhere in, for example, Spain. It will vary based on where it is needed and where the production of different materials may be.

That is why we have done the work we have, and why the European Commission also contacted companies. The Commission has not shared its information with us, but we believe that ours is largely accurate. That is why we have given ourselves, to some extent, an element of flexibility to review the situation. It is not that we wish to have an unduly uneven playing field in the ongoing operability of the functions.

We recognise that the 12.4% is, to some extent, arbitrary. It was decided by the EU at the time, based on usage in the UK. That data is aggregated at EU28 level, so populations and, therefore, the consumption of goods are a reasonably good way for these things to be allocated. That is in line with the regulation that brought all this into effect.

The IT system is ready and open, and businesses are accessing it. It has been financed through Government funding. Future charges will be for the overall regulation system. I do not believe that the guidance will be ready on 1 April, but it will be ready fairly soon, and the Environment Agency will have the budget it needs to do the work it does. It is a case of how we then reclaim those costs.

I do not agree with the hon. Gentleman that we are not prepared for leaving the European Union. He will be aware that the Government’s position is that we want to leave with a deal, and we are still working on that. I do not have the political declaration to hand, but from recollection I do not believe it specifically refers to continuing to have a shared EU quota for F-gases. What we propose, working with the Governments of Scotland, Wales and Northern Ireland, is the right way forward to make sure we have a quota system that works for us.

We are still full members of the Montreal protocol—we never gave up our seat—and we will continue to pay into the Montreal protocol assistance fund to help developing nations around the world accelerate moves towards using less harmful gases in their everyday manufacturing and in things such as air conditioning, refrigeration and so on. On that note, I believe the draft regulations are fit for purpose, and I commend them to the Committee.

Question put and agreed to.