14:00 Emma Reynolds (Labour)

It is a great pleasure to serve under your chairmanship, Ms Vaz. The clause makes changes to the main rates of the climate change levy, or CCL, with effect from 1 April 2026. The Government are increasing the main rates of CCL on gas, electricity and solid fuels by the retail prices index to maintain the incentive for businesses and the public sector to be more energy efficient.

Since 2001, the CCL has encouraged businesses and the public sector to be energy efficient by adding a tax on the non-domestic supply of energy. The Government have announced a national mission to make Britain a clean energy superpower and accelerate our journey to net zero, and improvements in energy and resource efficiency will play a significant role in reducing industrial emissions in the 2020s. Delivering on this mission will help to make the UK energy independent, protect billpayers, create good jobs and tackle the climate crisis.

The changes made by the clause will increase CCL rates on gas, electricity and solid fuels by RPI with effect from April next year. Non-domestic energy supply users will see an increase on their CCL bill of around 0.025p per kWh of gas or electricity supplied. The rate on solid fuels will increase by 0.2p per kg. However, participants of the climate change agreement scheme are eligible to pay reduced CCL rates in return for meeting negotiated energy-efficiency and carbon targets. The CCA scheme enables energy-intensive industries to receive discounts of up to 92% on their CCL bill. The new six-year scheme, announced on 16 October, will provide an estimated £1.9 billion of relief to 2,600 businesses in 53 industrial sectors over its lifetime. Overall, we expect a reduction in greenhouse gas emissions as a result of the clause compared with freezing the rates.

In conclusion, the changes made by the clause will help to incentivise businesses to improve their energy efficiency, thereby progressing the Government’s climate objectives, which are vital for the UK’s long-term economic prosperity and energy security. I commend the clause to the Committee.

As the Minister said, the clause amends the main rates of the climate change levy from April 2026, in line with RPI, for electricity, gas and other taxable commodities, while continuing to freeze the rate for LPG. We will not oppose the measures in the clause.

I was pleased to see the Government confirm their plans to extend the climate change agreement scheme at the Budget. The scheme allows energy-intensive industries to claim a discount on the climate change levy, subject to taking steps towards increasing their energy efficiency and reducing emissions. At autumn statement 2023, we announced a new six-year CAA scheme, and I am genuinely pleased that the Government have chosen to reaffirm our announcement and take that forward, following consultation.

However, as the Minister may expect, I want to raise an issue with her. It has been raised at oral questions, so will not be a surprise to her. There have been several reports in recent weeks about the UK chemicals industry that are directly relevant to climate change and the CCA scheme, as the Minister will know better than me. Sir Jim Ratcliffe has warned that the UK chemicals industry is at risk of “extinction”. His firm, INEOS, closed its synthetic ethanol plant at Grangemouth this month, which will result in the loss of many jobs. That was the last remaining synthetic ethanol plant in the country. Given the ongoing concerns, I would be grateful if the Minister could provide an update on what consideration has been given to the UK chemicals industry in calibrating these policies.

The shadow Minister asked me about the UK chemicals industry. As he said, it is a very valuable sector of our economy. It is obviously included in the climate change agreement scheme, which exists to ensure that businesses for which energy makes up a larger proportion of their operating costs, and that are at higher risk of carbon leakage, are supported to make changes to their processes to reduce their energy intensity. The example he provided is concerning, but we have introduced measures to help such industries to cope with the fact that they are energy intensive. I hope that answers his question. I do not know whether the Chancellor has met representatives of the sector, but I am happy to write to him on that.

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14:45 James Wild (Conservative)

The Government are committed to reaching net zero by 2050. As we make progress to decarbonise, we must ensure that the effect of our efforts is not undermined by carbon leakage. I am sure that hon. Members know this, but for the benefit of the Committee, let me define carbon leakage: it is the movement of production and its associated emissions from one country to another to avoid higher decarbonisation efforts and costs. The best solution to carbon leakage risk would be international co-ordination on decarbonisation and carbon pricing. However, many countries do not yet have domestic carbon pricing mechanisms. Consequently, introducing the UK CBAM will reduce the risk of carbon leakage by placing a carbon price on carbon-intensive goods imported into the UK from 2027.

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