Context
The UK emissions trading scheme has higher carbon allowance costs compared to the EU, leading to heavy industries relocating abroad due to reduced allowances.
Question
Whether he has made a comparative assessment of the adequacy of protection against carbon leakage for energy-intensive industries under the (a) UK emissions trading scheme and (b) EU emissions trading system. Since 2020, UK's scheme resulted in higher costs compared to competitive countries, partly due to net zero policy reducing allowances, leading heavy industries abroad with job losses and strategic industry loss. Will Minister reject 50% allowance reduction planned for 2024 and reform cost containment mechanism?
Answer from Andrew Bowie
We currently provide free allocations worth billions of pounds per year to sectors at risk of carbon leakage, reducing their exposure to the carbon price. The 2021 consultation proposed guaranteeing this level of free allocation until 2026, subject to activity level changes. We will consult no later than the end of 2023 on the methodology for distributing free allowances and explore ways to better target free allocations at those most at risk of carbon leakage.
Not addressed: The Minister did not commit explicitly to rejecting the 50% reduction in allowances planned for 2024.
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