14:35 Dr Alan Whitehead (Southampton, Test) (Lab)

However, we need to be clear, among ourselves at least, about what the measure does. It is not the commencement of trading under the new UK ETS arrangement. It is not in any way a measure relating to alignment of the new UK ETS arrangement. It is instead essentially a preparatory measure to enable the UK ETS to operate properly. It clears up a lot of issues about the KP—Kyoto protocol—registry, brings the registry arrangements under the control of the Environment Agency, and regularises the arrangements for membership of that registry for UK companies trading in that protocol area.

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14:46 Anne-Marie Trevelyan

I thank the hon. Member for his, as ever, forensic challenges. He raises some important questions. First, I will clarify one point. The UK Kyoto protocol registry is an international body, while our UK ETS is our domestic trading platform, so they are not incompatible—they are sitting in two different parts of the system. They are housed within the same IT platform in a technical sense, and, as the hon. Member highlights, that has had to be developed in a compressed timeframe. The UK ETS registry has been prioritised, given the large number of businesses using it and the significantly higher value of ETS allowances compared with Kyoto protocol units. I hope that clarifies that point.

The registry has to be connected to the United Nations framework convention on climate change’s international transaction log. Before it is reconnected, it has to pass a number of tests to meet the international standards, which are ongoing at the moment—dare I say, fingers crossed, that we are on track to pass them all? Like every exam, you never quite know, but it is progressing as we would hope. Once the tests have been passed, it will be ready to go live.

The hon. Member raised some questions about UK ETS and how it might join up with other schemes in the future. We have made the UK ETS more ambitious than the EU system that it is replacing. From day one, the cap on emissions allowed within the scheme has been reduced by 5%. We will consult in due course on aligning it with net zero. That gives industry the certainty it needs to be able to invest in low carbon technologies, because that is absolutely what we will continue to do.

The UK ETS will promote cost-effective decarbonisation. It will allow businesses to cut carbon where it is cheapest to do so and, in doing that, it promotes innovation and growth for UK businesses. It will allow us to expand our carbon pricing across the economy in order to encourage innovation and emerging decarbonisation technologies, which will be critical in helping us to meet our net zero challenge.

We have committed to exploring expanding the UK ETS to two thirds of presently uncovered emissions, and will be setting out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26 later this year. This will also include how UK ETS could incentivise the deployment of greenhouse gas removal technologies. I hope that the hon. Member, and others, will be patient with us, but there is much to come.

We recognise the importance of international co-operation on carbon pricing and the role that international carbon markets can and will play as we all try to move internationally to a net zero position. The UK is open to linking the UK ETS internationally in principle. We are considering a range of options but have not reached a decision on where that will land, but I promise to keep the House posted as we progress.

I hope I have provided the necessary assurance for the Committee to approve the statutory instrument before us today. It provides a clear legal basis to operate the new domestic platform to house the UK’s Kyoto protocol registry, which is due to become operational in May. I commend these draft regulations to the Committee.

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