Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021.

My Lords, I beg to move that the regulations, which were laid before the House on 25 February 2021, be approved.

The statutory instrument is laid under the power of Section 8(1) of, and paragraph 21 of Schedule 7 to, the European Union (Withdrawal) Act 2018, to address deficiencies of retained EU law that arose from the withdrawal of the United Kingdom from the European Union. The purpose of this SI is to amend retained EU law related to the UK’s Kyoto Protocol registry to ensure that it will be operable in the UK. The statutory instrument is not introducing any new policy; it is simply ensuring continuity of the UK Kyoto Protocol registry, independent of the EU’s registry system.

As a party to the Kyoto Protocol, an international climate change treaty with which I am sure Members are familiar, the UK has a legal obligation to maintain a Kyoto Protocol registry. This registry enables the UK and UK-based account holders to hold and trade Kyoto units. Kyoto units are each equal to one tonne of carbon dioxide and can be traded on the international carbon market. Kyoto units held by the UK Government are used to demonstrate compliance with our emissions reduction targets under the Kyoto Protocol. Emission reduction commitments under the Kyoto Protocol covered the period from 2008 to December 2020. However, due to the time lag in collecting emissions inventory data, final accounting cannot be completed until several years after December 2020, hence the continued need for a registry. Future registry requirements under the Paris agreement, as the successor to the Kyoto Protocol, are due to be decided at COP 26 in November.

While the UK was a member state, the UK’s Kyoto Protocol registry was housed in the EU’s Consolidated System of European Registries. The UK has now established its own domestic platform to house the UK’s Kyoto Protocol registry, independent of the EU system. This platform is due to be operational in May 2021. The UK Kyoto Protocol registry enables the holding and trading of Kyoto units, just as a bank account does with money.

As an industrialised country with emission reduction targets under the Kyoto Protocol, the UK is allocated a number of units, known as “assigned amount units”. These units are held in the UK Kyoto Protocol registry. When finalising accounting for the Kyoto Protocol commitment period, countries have the option to trade or cancel any surplus units if they have met their emissions reduction targets through domestic action. The registry enables this activity.

Private entities can also open accounts in the registry to hold and trade Kyoto units generated through the clean development mechanism under the Kyoto protocol. The clean development mechanism allows a country with an emissions reduction commitment under the Kyoto protocol to implement an emissions reduction project in developing countries. Such projects can then earn certified emission reduction credits, each equivalent to one tonne of carbon dioxide, which can be counted towards meeting Kyoto targets. This mechanism can enable more cost-effective emissions reductions, and the emissions credits generated can be traded, thereby creating a carbon market.

My Lords, I thank the Minister for these regulations, given that Brexit means that we are no longer party to the EU recording of emissions for Kyoto registry purposes.

I have three questions, two operational and one rather fundamental. First, can the Minister assure the House that this methodology for calculating greenhouse gas emissions will not be changed unilaterally by the UK and that, in terms of trends, we will be compatible with both past reported trends for the UK and the EU system of reporting, as well as simply meeting the requirements of the Kyoto registry?

Secondly, while the figures in this log will not determine what allowances can be traded in the new post- Brexit UK emissions trading scheme, can I assume that they will be compatible with it?

Thirdly, and more strategically, do the Government recognise that the methodology of determining individual nations’ contributions to greenhouse gas emissions, taken on its own, is fundamentally misleading? It reflects reduction within the national emissions’ geographical boundaries, not the national demand generated by that nation’s society and economy, which would produce a very different impact on global emissions. For example, the UK final demand will include demand for imports, in the production of which greenhouse gases will have been emitted in China, say, or on the high seas or in the air, in transporting them to the final user or consumer. The global total will be the same, but the relative contribution of each nation to that total will be radically different, and the implied policy priority for each nation will therefore also be radically different. To put it crudely, if countries such as the UK and the United States, or companies in those countries, in effect offshore or export their dependency on greenhouse gas emissions by shifting production to the Far East, it is our economy, our final user and our supply chains whose behaviour needs to be addressed, rather than, or as well as, those of the Far Eastern nations.

My Lords, as this is an SI, there is obviously little we could do to change it, even if we wanted to, but it makes sense that this SI goes through post Brexit. Its importance is its link to the trading regime. I have always been a sceptic of the trading regime, unlike my noble friend Lord Teverson—we have both been in the House long enough that we were debating this between 2006 and 2009. However, trading has taken place, with differing levels of success. A friend of mine was a carbon trader and I asked him how he made up his mind whether to buy or sell. He said, “It’s very simple. When it’s sunny, I sell, because people want to buy on a sunny day, and when it’s raining, I buy, because people want to sell.” It was as simple as that, and he made quite a lot of money using just that simple methodology, which shows that it had less to do with the actual price of carbon and more with how traders felt about carbon on that particular day.

As we are moving to a registry, I will ask the Minister one thing. We now perhaps have the opportunity to become a little innovative in the way we move forward. Could we not look at a registry not just of carbon dioxide and greenhouse gases but based around methane? Methane constitutes 23% of our emissions and we could do a great deal to focus on it. There is a great deal that we could do internally on the methane marketplace that would have a major effect on climate change, because methane production is not always linked to fossil fuels.

My Lords, I thank my noble friend for his clear exposition of this SI. I am delighted that the Government have been showing strong commitment to addressing climate change, and of course I support the aims of the regulations and the amendment of EU law as it now applies to UK—which is, sadly, required following our departure from the EU. I also support our work to comply with our assignment amount units and targets under the Kyoto Protocol in order to reduce emissions.

In my brief time today, I shall ask my noble friend a few questions. What are the advantages from the extra costs incurred in setting up our own domestic registry, independent of the EU-wide CSEUR software platform, and how much is it expected to cost? Was there any opportunity to remain part of the EU system? Will my noble friend also provide an update on the progress so far and the Government’s confidence level in meeting the May deadline for transferring accounts over to the new UK system and for verifying the information from those accounts when they are transferred from the CSEUR?

This SI also removes obligations from the Environment Agency to comply with EU law. Now it only has to comply with our international climate law obligations. Will this departure from EU rules have any impact on the trade in certain sectors or products? I wonder whether my noble friend could comment on any assessment that may have been made of the implications of departing from the presumably higher EU standards.

Finally, following on from the remarks of the noble Lord, Lord Redesdale, could my noble friend comment on the possibility of bringing together the various different schemes? We have already established our own emissions trading scheme for greenhouse gases, and we are now setting up our own registry for the Kyoto Protocol. Are there plans under consideration to bring together all our climate change obligations so we can monitor them in a comprehensive fashion?

The next speaker on the list, the noble Lord, Lord Berkeley, has withdrawn from the debate, so I call the noble Lord, Lord Bourne of Aberystwyth.

My Lords, it is a great pleasure my good friend the noble Baroness, Lady Altmann, and I thank my noble friend the Minister for setting out so clearly the effect of these regulations.

I support these regulations, which amend retained EU law. We clearly need to do that in order to ensure the continued application of the UK’s Kyoto Protocol obligations, which, as my noble friend said, persisted from 2008 to 2020 but will clearly go on for several years after that. That is the importance of these regulations.

Along with other noble Lords, I am keen to hear from my noble friend that we will carry on in the same way. I think he gave that reassurance, but I hope that that will be carried across in our ambition to COP 26. As he said, there will be a fresh assessment made at COP 26, and I will say something about that in a minute, if I may.

I am also concerned by the hiatus, which my noble friend touched on, between the end of the transition period and the new regulations taking effect in, I think he indicated, June 2021. Clearly there is a gap there. I think I understood him to say that that gap has been catered for and that the 112—I think he said 112—businesses that are potentially affected by this are aware of this, and I hope that they have been given guidance on how that will affect them in the period before our own registry takes proper effect in June 2021. I would welcome that reassurance.

We as the United Kingdom have a historic opportunity with COP 26, and it is incredibly important that we seize it and go forward with at least the ambition that we had in the EU—and I hope beyond it—to show that global Britain really does mean business. I know my noble friend will say that this is a matter for the usual channels, but I hope that he will be able to convey to the usual channels and to other parties the importance of having a meaningful debate in your Lordships’ House well ahead of COP 26 so that we can express our collective ambition so that can be carried forward, because this is of crucial significance not just for our country but for the entire globe.

My Lords, I echo the final question asked by the noble Lord, Lord Whitty, about the true nature of our carbon footprint in the world. I will also point out that global emissions are again set to rise, and that, while the goals of greening our economy and aiming for net zero are admirable, they and the Kyoto regulations, in whatever form we now take them on board in the registry, fall far short of what is needed to tackle climate change.

I am sorry to strike a slightly negative note. However, as Jeremy Warner remarked in last week’s Sunday’s Telegraph,

“unless China and the rest of the developing world are on board, all efforts to reach a net zero world are doomed. It matters not a jot what America and Europe do to reduce their emissions if the rest of the world isn’t doing the same.”

The Kyoto Protocol is 24 years old, but here we are still struggling to curb rising greenhouse gases, both CO₂ and, even more of course, methane, which is 28 times as lethal. We really do need accurate and frank guidance on how to avert world climate catastrophe, which we are just not getting from the Committee on Climate Change and other authorities. This could be the opportunity to get the change needed.

As I said, global emissions are set to rise, after a pause during the pandemic, whereas to reach Paris accord targets they should be falling by at least 7.6% per year. Rising emissions in the big emitting countries, particularly from coal burning and particularly in Asia and Africa, are about to outweigh by far any reductions we can possibly make, so carbon concentrations in the atmosphere are set to continue growing almost unabated.

Coal of course produces about 46% of carbon emissions and, unless the technology for capturing and using carbon from these world sources is vastly improved and cheapened, and applied to all coal burning throughout Africa and Asia, there is not the slightest chance of meeting climate goals, which presumably is what we are about. This is where there should be an all-out concentration of resources and brainpower.

My Lords, in following the noble Lord, Lord Howell of Guildford, I respectfully disagree with his suggestion that any blame for lack of progress lies with the Committee on Climate Change. It is providing the advice that is needed. The failure is with government action, and I agree with the noble Lord on the extraordinarily urgent need for action.

I thank the Minister for his introduction to this statutory instrument. As he outlined, it establishes the new UK registry that is currently in development. As our own Secondary Legislation Scrutiny Committee noted with dry restraint:

“Until then, UK businesses that wish to trade KP units will have to open KP accounts in other countries’ registries.”

Once again, the Government are scrambling, still belatedly filling in basic gaps nearly six years after the Brexit referendum. This is continuity and compliance, as the noble Lord said, with an international agreement signed more than 20 years ago.

However, I will look primarily not backwards but forwards, as the noble Lord, Lord Whitty, did with his important focus on consumption emissions rather than just measuring territorial emissions. This debate comes on a day when both the Guardian and the ENDS Report carry articles from respected international figures expressing concern about the damage done to the UK’s moral authority, as chair of COP 26, by domestic decisions. Christiana Figueres, a key Paris climate talks figure, said:

“There have been recent decisions in the UK that are not aligning with the ambition of the net zero target. It is worrisome. There are raised eyebrows among world leaders watching the UK.”

What we have here is a problem not just with the decisions being made on roadbuilding, coal mines and airport expansion, but with the failure to deliver policies—the kind of slow, snail-like progress that we are seeing here today. Just look at a list of what the Government are supposed to deliver before COP 26: a heat and buildings strategy, a transport decarbonisation plan, a Treasury net-zero review, an England tree strategy, a hydrogen strategy, an industrial decarbonisation strategy, a nature strategy, and a net-zero strategy. Of course, we are still waiting for the crucially important Environment Bill, in the country ranked 189th in the world for its state of nature.

My Lords, I am delighted to follow the noble Baroness. I welcome my noble friend Lord Callanan to his place and I look forward to his views. I also welcome the noble Lord, Lord Teverson, to his position and thank him for his excellent chairmanship of the outgoing EU Sub-Committee on the Environment.

I thank my noble friend Lord Callanan for his clear exposition of the statutory instrument, which I support as it gives a clear legal basis on which the UK register will function. Does he share my concern that there will be a number of months before any trading can take place? Is my understanding correct that these account holders have now left the international register and cannot start trading until June this year? If that is the case, I understand from paragraph 7.3 of the Explanatory Memorandum that his department is encouraging account holders to register with other countries. If that is the case, can he explain what the cost and administrative burden on these account holders will be? Does he accept my concern that this is a burden with which they could well do without? Is it the department’s intention that they continue to register on two registers—the UK’s and another country’s register—or is this meant to be a short-term fix for the five months until our register becomes operational?

Further, is my understanding from A5 in appendix 1 of the Secondary Legislation Scrutiny Committee’s report correct that the account holders have to register for two UK registers, effectively holding a register for the UK emissions trading scheme as well as for this one before us on the ETS allowances? Again, can my noble friend comment on what the cost and administrative burden to these companies will be?

Can my noble friend also assure me and other noble Lords who have asked him about this that we will not lower expectations on reducing greenhouse gas emissions now that we have left the European Union? What will be the mechanism? Will there be a role for the OEP under the Environment Bill in this regard?