Fluorinated Greenhouse Gases (Amendment) Regulations 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Fluorinated Greenhouse Gases (Amendment) Regulations 2023.

My Lords, these regulations were laid in draft before this House on 4 September 2023. Fluorinated greenhouse gases, also known as F-gases, are powerful greenhouse gases used mainly in refrigeration and air-conditioning equipment, as well as for other uses such as medical inhalers. The most commonly used F-gases are known as hydrofluorocarbons, or HFCs.

The purpose of this instrument is to correct a technical error in Regulation 517 of 2014, on fluorinated greenhouse gases, known as the F-gas regulation, which is retained EU law. The correction will ensure that annual quotas, which limit the quantity of HFCs that can be placed on the market in Great Britain each year, are calculated as intended. Pursuant to the Windsor Framework, separate EU F-gas legislation and systems apply in Northern Ireland.

For Great Britain, the F-gas regulation has provisions to phase down the amount of HFCs placed on the market for the first time. This is implemented using a quota system. Importers and producers may place on the market only up to the amount of the quota they hold. The regulation sets out a phase-down schedule, with the starting point being 2015. Every three years, the amount of quota issued to businesses is reduced, thereby driving a move to lower carbon options, while giving industry time and flexibility to choose how to transition to them.

The F-gas regulation provides for a 79% reduction of HFCs placed on the market by 2030. We have already reduced HFC levels by 55% since 2015 through quota limits. Annual quota amounts allocated to businesses are calculated based on reference values. Article 16(3) provides for recalculation of the reference values by the appropriate regulator, based on the annual average of HFCs placed on the market by a business from a specified start date.

This statutory instrument corrects a technical error made in previous amending legislation relating to that start date. The start date should have been January 2015 but was erroneously changed to January 2021. If the error is not corrected, it will result in too little quota being issued to businesses. This was not the intended outcome when the F-gas regulation was retained and amended as part of the UK’s exit from the European Union. The intention was to retain the substance of the regulation, including the calculation of reference values and pace of phase-down of HFCs. Issuing too little quota to businesses would cause significant problems for HFC supply into Great Britain, disrupting sectors across the economy and business confidence.

The territorial application of this instrument is England, Wales and Scotland. The Environment Agency performs the functions set out in Article 16 of the F-gas regulation as the appropriate regulator for England and, under directions from Scottish and Welsh Governments, for Scotland and Wales. A GB-wide F-gas regime currently operates under the regulation. There is an F-gas common framework in place through which the UK, Scottish, Welsh and Northern Irish Administrations collaborate, including on the application of the GB-wide F-gas regime. Using the common framework working arrangements, devolved Administrations were engaged throughout the development of this instrument, and agreement between officials on its provisions was reached. I am pleased to say that ministerial consent has been provided by the Welsh and Scottish Governments. The Secondary Legislation Scrutiny Committee considered this instrument and cleared it without reporting it to the House at its meeting on 12 September.

My Lords, I thank the Minister for his introduction to these regulations. At first glance, this seems like a very minor matter, a mistake having been made in the date of implementation of the regulations, 2021 having been substituted for 2015. That technical error does not appear to have been picked up quickly, despite annual quotas for HFCs being set and their importance to a range of essential products, including refrigeration, air conditioning, medical inhalers and fire extinguishers.

HFCs are regulated by quota, which, had the original date of 2021 been adhered to, would have resulted in businesses receiving too little quota. However, levels of HFCs have been reducing since 2015 by 55%, as the Minister has said, so progress is being made towards the 79% reduction required by 2030. I assume that the error was picked up only when the phase-down and three-year recalculation took place. The next recalculation is due in January 2024, and the deadline for its submission is 31 October, so it is a very tight timeline to correct the calculation error.

Although the recalculation does not affect technical operability, not having a consultation is interesting. The businesses that would have been adversely affected had this error not been identified and corrected would, presumably, have suffered at least a disadvantage to their operation, and I would have expected them to have a view on this and to have been consulted. There is also no impact assessment; it has been deemed unnecessary as the instrument corrects a technical error, but that error relates directly to the level of HFCs that can be used in the various products dependent on them.

Should the other place and this Committee refuse to endorse these regulations, there would be an impact on a number of particularly important businesses. However, I understand completely that, at the time of Brexit, the sheer number of SIs passing through Defra was enormous and some errors were unfortunately made. My only surprise was that this one took a while to surface. Nevertheless, I accept the importance of this SI and am content to support it as it stands.

My Lords, I thank the Minister for his overview of the regulations before us. As has been stated, this is an unusually straightforward statutory instrument as it seeks solely to correct a date error in a piece of retained EU law relating to fluorinated greenhouse gases. Therefore, I plan to keep my contribution short.

However, to reiterate the comments of the noble Baroness, Lady Bakewell, it is clear that the technical error, as outlined in Paragraph 6.6 of the Explanatory Memorandum, which changed the baseline date for the annual quota system from 2015 to 2021, would have a detrimental impact on the businesses affected and make compliance challenging. It is also contrary to the policy intent. However, it is concerning that the SI is before us only today, when the deadline for recalculating the underlying reference values is 31 October. In other words, the dataset needs to be calculated next week, yet His Majesty’s Government have put this before us only seven days before the deadline. When was the error identified? Could the department have brought forward the instrument earlier to give assurance and clarity to business? Can the Minister also confirm that this is the last example of this error, and that we should not expect to see any more SIs of a similar nature in the coming weeks?

While I have the Minister’s attention, Paragraph 14.1 of the EM notes that a wider review of the F-gas regulation is under way. Can he update your Lordships’ House on the timelines for the review? I look forward to hearing from the Minister.

I thank noble Lords for their interest in this matter and their contributions to the debate. I reiterate that the amendment made by this instrument relates to the correction of a technical error in the F-gas regulation. The amendment will meet the original intended objective of retaining the substance and phasedown set out in the EU regulation when that regulation was domesticated following our EU exit. This correction will ensure that the Environment Agency recalculates the reference values correctly by the statutory deadline date of 31 October, as noble Lords have pointed out.

On why this has been laid so close to the 31 October deadline, the instrument uses the power in Section 14(2) of the Retained EU Law (Revocation and Reform) Act 2023. The Act received Royal Assent only on 29 June, meaning that there was no time to lay the instrument until now.

The noble Baroness, Lady Bakewell, asked how this technical issue arose. The error occurred when we implemented the amending legislation to retain the EU regulation in UK law during the EU exit. Consequently, the error was identified after that period had passed. We did not consult, although we have consulted industry informally and we are responding to what is demanded by these companies. Devolved Administrations were also engaged throughout the development of this instrument and agreement between officials on this provision has been reached. Ministerial consent has been provided by Wales and Scotland. Wider consultation was not deemed necessary, as the amendments introduced by this instrument relate to technical operability and there is no change in related existing policy.

A full impact assessment has not been prepared for this instrument because there is no impact as a result of its implementation. The instrument corrects a technical error that occurred when direct EU legislation was retained and amended as part of EU exit. The changes that it makes will meet the objective of retaining the substance and phasedown pace of the EU F-gas regulation and there is no change in the related existing policy. I think that noble Lords’ points have been covered and I commend the instrument.