16:05 Ben Lake (Plaid Cymru)

It is a pleasure to serve under your chairmanship, Sir Edward. I commend the co-operative approach taken by the UK and devolved Governments in establishing the emissions trading scheme and in agreeing a common framework that treats each nation as an equal partner in our climate efforts. The scheme has brought coherence to one element of our combined efforts to achieve net zero.

“The elephant in the room is that offsets are fundamentally not about mitigating climate change, or even about removing past emissions, but about enabling future emissions, about protecting economic growth and corporate profits.”

In order to meet our climate targets, we must not only reduce overall emissions but adopt carbon-negative strategies. The most economical and natural of those is tree planting. I hope to expand on that point today and in doing so make a case for more closely linking the UK emissions trading scheme with a separate and voluntary carbon offset market. Both schemes encourage businesses to reduce overall emissions. They are currently unconnected in policy; they run parallel to each other. I accept the technical and policy challenges associated with directly incorporating carbon offsetting into the UK ETS, but I believe that an association between the two schemes, if established, would bring rigour, scrutiny and additional resources to the offsetting process.

Those costs increasingly pose an existential challenge to Welsh farmers and rural communities and are inimical to efficient land use and a just transition. To echo the National Farmers Union, we urgently need to ensure a system that makes carbon offsetting mean the right tree in the right place. The Government, by acting as a broker and data-backed co-ordinator, can help to ensure appropriate land use for carbon offsetting, support the sufficient scale of planting and empower local farmers and rural communities to make a carbon-negative effort for themselves.

Wales’s forests are a natural economic and national asset at the very heart of our decarbonisation efforts. The lungs of our nation, our forests sequester approximately 1.84 million tonnes of carbon dioxide equivalent annually, while pollution removal by woodland was estimated to have an ecosystem value of more than £385 million back in 2015. Our forests are also essential for our environment and biodiversity. Indeed, of the 542 listed species of principal importance to the Welsh Government, 210 rely wholly or partly on woodland habitats.

Will my hon. Friend acknowledge the crucial importance of restoring Wales’s peatlands, given that their climate change mitigation potential is 3,000 tonnes of carbon a year, equivalent to 5% of Wales’s transport carbon emissions? I am sure he will also take the opportunity to welcome the peat restoration projects led by parc cenedlaethol Eryri, the Snowdonia national park.

The “Woodlands for Wales” strategy suggests increasing tree planting to at least 2,000 hectares per year from 2020. The Climate Change Committee, recognising the challenge of reaching net zero, has been even more ambitious, recommending an increase to woodland cover in Wales from present levels to 24%. That would mean planting 43,000 hectares of new trees by 2030 and 180,000 hectares by 2050.

Set against that backdrop, Welsh farming finds itself at a perilous juncture, buffeted on the one hand by increased trade barriers with our largest market and uncertainty over future income support, and on the other by increasing pressure on land use. Welsh land, like all land, is of course a finite resource. If climate goals are to be met in a sustainable and fair manner, solutions cannot be imposed on rural communities. Instead, solutions can and should be implemented in conjunction with rural communities, and in a way that protects them from any damaging consequences. That is especially important when it comes to Welsh forestry and carbon sequestration. If we are to achieve the desired objective of reducing carbon emissions and promoting biodiversity, rural communities must be at the heart of implementation. Welsh farmers play a vital but often overlooked role in the climate equation, with over 109,000 hectares of woodland—just over a third of the total woodland in Wales—located on Welsh farms. To fulfil the stated tree-planting objectives, therefore, we need to understand the implications for the farming and food and drinks sectors, which rely on this agricultural land—land that is also essential to the wellbeing of the rural economy.

Although such measures may seem parochial, they are fundamental to ensuring that we actually deliver a transition that is just as well as sustainable. We must work with farmers, who manage over 80% of land in Wales, to deliver a forested future that is critical to the overall success of our decarbonisation efforts. The alternative, in which big business can buy land, plant trees without any reference to local biodiversity and the optimum use of different parcels of land, all the while continuing with their polluting, business-as-usual practices, is unacceptable. Greenwashing, as the Minister will know, is an ever-present danger, but in this instance it would devastate Wales’s rural communities, culture and economy.

I hope that the Minister will address concerns that the ETS is not moving fast enough nor fundamentally reducing emissions. I also hope that she will agree that local groups and farmers should be supported to play an important part in the carbon offset market and in so doing lead the transition to net zero. We must not allow large corporations to buy farms, put rural communities out of home and land, and weaken local food production for the sake of greenwashed business as usual. More specifically, I would welcome any thoughts that the Minister might have on integrating carbon offsetting into the wider UK ETS framework to ensure that we have effective regulation of the market, the promotion of sustainable practices and the rewarding of responsible practitioners.

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16:15 The Minister for Business, Energy and Clean Growth (Anne-Marie Trevelyan)

I congratulate the hon. Member for Ceredigion (Ben Lake) on securing this really important debate on the operation of the UK ETS in Wales. The four Administrations of the UK have worked together over months and years to establish what will be the world’s first net zero carbon cap and trade market and a crucial step towards achieving the UK’s target for net zero carbon emissions by 2050. We have drawn on our years of experience and global leadership in carbon pricing, going all the way back to the original UK ETS in 2002, to ensure that the new scheme has the flexibility and ambition to deliver for the whole of the UK. We share the combined objectives of driving permanent emission reductions across the UK while protecting the competitiveness of our businesses, be they steelworks in south Wales, ceramics producers in central England or whisky distilleries in Scotland. The UK ETS authority—the UK Government and the three devolved Administrations —continue to make good progress in the operational delivery of the UK ETS in our respective nations.

The UK ETS authority has already jointly committed to exploring a number of areas where we could go further and faster, and together we plan to set out our aspirations to continue to lead the world on carbon pricing. The overall cap for UK ETS is an obvious place to start, and we will be moving together quickly to consult on a consistent net zero trajectory for the cap, drawing on the advice from our statutory advisers, the Climate Change Committee. We will also be reviewing free allocation, which is a key measure to protect our industries, to prevent the offshoring of emissions—I think we all agree that that slightly defeats the point—and to ensure that the system is fair and equitable across the UK and its constituent nations, while maintaining the level of ambition that we really need to be able to get to net zero.

Together, we will tackle the case for expanding carbon pricing across the economy while encouraging innovation in emerging decarbonisation technologies. The hon. Gentleman’s challenge of connecting forestry with the ETS is one that we will indeed look at. We have committed to explore expanding the UK ETS to other sectors—two thirds of emissions are currently uncovered—including thinking about how the UK ETS can incentivise the deployment of greenhouse gas removal technologies, be they nature-based, as he identified, or indeed engineered not by nature. We shall enhance the effectiveness of the UK ETS, particularly for aviation, while recognising our international obligation in that sector.

A key objective of the UK ETS is to protect the competitiveness of UK industry, so as well as the free allocation of allowances to sectors at risk of carbon leakage, which is the offshoring of production and emissions, we are providing a package of measures to help businesses to decarbonise. On 17 March, the Government published the UK’s first-ever net zero strategy for industry. The document is the first strategy published by a major economy, and it sets out how industry can decarbonise in line with net zero while remaining competitive and without pushing emissions abroad. The strategy sets the expectation that emissions in industry will fall by around two thirds by 2035 and at least 90% by 2050 compared with 2018 levels, in order for us to achieve net zero. We have challenges ahead and we need to find the best, most effective and most impactful solutions.

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