Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026

Motion to Approve

That the draft Order laid before the House on 13 January be approved.

My Lords, I thank the House for its consideration of this draft order, which was laid before the House on 13 January.

The UK Emissions Trading Scheme was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions reduction targets and net-zero goal. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses.

The scheme is run by the UK ETS Authority, a joint body comprising the UK Government and the devolved Governments acting together. A cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme, and the cap is reduced over time so that total emissions must fall. Under the UK ETS, operators participating in the scheme are required to monitor, report on and surrender allowances in respect of their greenhouse gas emissions. The scope of the UK ETS is being expanded to maritime activities as part of the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It is an effective lever to reduce emissions and delivers on a key commitment in the UK’s maritime decarbonisation strategy. We expect this to help overcome key barriers to maritime decarbonisation by incentivising low-carbon fuels and fuel-efficient technologies and operating practices. Last week, the Government also brought forward £271 million of funding to help industry with the changes to vessels, fuelling and infrastructure required for maritime decarbonisation.

This statutory instrument makes amendments to the legislation that gives effect to the UK ETS. It expands the scheme’s scope to include coverage of carbon dioxide, methane and nitrous oxide from domestic voyages and in-port activities in the UK, effective from 1 July 2026. The instrument amends the legislation to require maritime operators to participate in the scheme, and to allow them to bid at auction for UK allowances. It will apply to ships of 5,000 gross tonnage and above, but a small number of exemptions apply, such as for government ships, including military and law enforcement ships, and ferries operating services to Scotland’s islands and peninsulas. Ferries serving Rathlin Island and the Isles of Scilly are out of scope of the instrument as they are below the 5,000 gross tonnage threshold. We consulted on the potential inclusion of Crown dependencies and overseas territories in the recent international maritime consultation, but they are not in scope of this instrument, which expands the scheme to domestic maritime emissions only.

The provisions set out in the instrument require the maritime operator of a ship, either its registered owner or the company responsible for its compliance with the International Safety Management Code, to obtain an emissions monitoring plan. This plan will document the processes used to ascertain its ships’ emissions. For each scheme year, maritime operators will then be expected to monitor, independently verify and report their maritime emissions to the relevant regulator, and surrender an equivalent level of allowances. The instrument also introduces the concept of “surrender deductions”, reducing by 50% the number of allowances for surrender in respect of voyages between Great Britain and Northern Ireland, to deliver equivalence in carbon-pricing coverage on routes across the Irish Sea. Operators will be assigned to a UK ETS regulator based on the location of their registered office or place of residence. This is the same approach that applies to aircraft operators.

Moved by

Leave out all the words after “that” and insert “this House declines to approve the draft Order laid before the House on 13 January because while the Scottish Islands are protected from the Order, Northern Ireland, which is already marginalised from the rest of the UK through the imposition of the Windsor Framework, is denied the same protection; and because in a context where no viable fuel alternatives exist the only impact of the Order will be to increase bureaucratic burdens on business and impose additional costs on those living in parts of the UK that depend on maritime transport”.

I thank the Minister for his remarks and for his kindness in reaching out to me asking for a meeting when I tabled the amendment. Without wanting to in any way ruin his career prospects, I suggest to noble Lords that if this particular Minister had been in charge, this SI would not be going forward—it would be being dropped at this stage while we await future negotiations over any linkage between the EU ETS and the UK ETS.

As noble Lords will know, I have tabled several regret and fatal amendments over the past number of years, all to draw attention to the way in which the Windsor Framework has affected businesses and people in Northern Ireland. But this is a very different SI: it has absolutely nothing to do with the Windsor Framework and the protocol, although it does compound the further isolating of Northern Ireland from the rest of the country. This SI is a deliberate and calculated attack by His Majesty’s Government on business and consumers in Northern Ireland by introducing what is effectively a new maritime carbon tax, while not recognising Northern Ireland’s total reliance on maritime transport. The consequence will be that businesses and households will be disproportionately affected by it.

Noble Lords need to understand why this matters so much to Northern Ireland. It matters because we are uniquely dependent on maritime connectivity: 90% of goods entering or leaving Northern Ireland move by sea. Ferry services are absolutely vital. They are not a choice; they are an absolute must, as a route to the market in GB. These routes are vital for—to give some examples we all know about—agri-food exports, manufacturing parts, supermarket and retail distribution, supplies for construction and, of course, passenger movement.

It is important that noble Lords realise that this is going to increase the cost of travel for families who wish to come from Northern Ireland to GB or GB to Northern Ireland. In the midst of a cost-of-living crisis—many in Northern Ireland rely on oil, the price of which we are seeing spiralling at the moment—this is just not the right time to introduce something such as this for Northern Ireland people. For many, especially from lower-income families, Stena Line ferries to Birkenhead or Cairnryan offer a cheaper way to travel than the ever-increasing cost of flying from Northern Ireland, as those of us from Northern Ireland see the prices increase each week.

As a result of this SI, any increase in maritime operating costs will flow directly through the entire Northern Ireland economy. Initial estimates suggest that compliance could increase freight costs by around £15 per trailer. If we look at the thousands of freight movements each week, there will be a roughly 6% increase in average freight costs. Those costs will simply not remain with shipping operators; they will ultimately be passed on via higher export costs for Northern Ireland businesses—including our haulage firms, which have been doing a brilliant job—increased supply chain costs and higher prices for consumers.

In order to understand why these regulations are particularly toxic and misjudged, we must appreciate two critical facts. First, we must remember that these regulations are supposedly being introduced to help us reach our net-zero targets. Introducing a tax on less carbon-neutral fuels makes sense if it results in a switch to more carbon-neutral fuels, but these regulations do not have that effect. There are no commercially viable alternative fuels to begin with, and in order to use electrically powered shipping, there would first need to be developed major electricity charging capacity in our ports, which currently does not exist.

In this context, these regulations will actually undermine net zero by allowing that to be used as a means of simply increasing taxes, when doing so will have no positive environmental consequences. The revenue raised is going into general taxation. So, the only thing these regulations will do is increase the cost of travelling by sea. It is a tax on UK citizens who depend on sea travel to access the greater part of their country—as if we have not suffered enough as a result of the Windsor Framework.

Secondly, what makes these regulations indefensible is that they completely exempt Scotland from having to pay the tax. What possible justification can there be for exempting Scotland but not Northern Ireland? These regulations, in effect, discriminate against the people of Northern Ireland, saying that while the people of Scotland are worthy of protection from the cost of this new carbon tax, the people of Northern Ireland are not.

There is an obvious logical difficulty that arises from this arrangement. Given that part of Scotland can access the rest of the UK by land, while 100% of Northern Ireland can access the rest of the UK only by sea and air, common sense would argue that if there one part of the country to exempt from the tax, it is Northern Ireland, not Scotland.

I congratulate the Scottish Administration, who campaigned to be exempt; I am glad that they have been exempted. I had my DNA tested recently, and I am actually 74% Scottish, so I suppose I have to declare an interest. The Scotland Office obviously stood up for its people in Scotland, unlike the Northern Ireland Office.

Moreover, the mistreatment of Northern Ireland by these regulations has to be seen in the context of the existing disbenefits of the Windsor Framework. The regulations are blatantly discriminatory and completely unsustainable—they show the Government at their worst. When the point is made that there are 37 Labour MPs in Scotland and none in Northern Ireland, people will draw their own conclusions. I remind noble Lords that the Labour Party does not even let people vote for MPs in Northern Ireland. It takes their money and gives them membership, but it will not put up candidates. That is another discrimination by that party.

The noble Baroness referenced the good work of the Scotland Office in lobbying to ensure that Scotland was exempted. Does she agree that this stands in sharp contrast to the Northern Ireland Office, which was instead lobbying parties in Northern Ireland to back this order and ensure that it was implemented?

The noble Lord almost pre-empts what I was about to say, so I thank him. As if this is not enough to give politics a bad name, the events of last week, I am afraid, leave a nasty taste in the mouth. The Northern Ireland Assembly’s DAERA scrutiny committee met last Thursday and heard from Stena Line, the key ferry company linking GB to NI, and the UK Chamber of Shipping. All parties there, bar the Alliance, expressed concerns. The Minister is an Alliance member, of course. The committee was ready to reject the order but was told that there was a Northern Ireland-specific impact assessment around, and agreed to postpone its decision until Monday this week so that members could read the impact assessment. On Monday, the committee met again and was presented with no NI impact assessment because no such impact assessment existed. Officials suggested that the impact on Northern Ireland was already assessed but, again, this is not true.

The Frontier Economics study often cited was commissioned in 2023 by Whitehall departments, not the NI department. It mentions Northern Ireland a few times but provides no quantified estimates of the impacts on Northern Ireland’s consumers or business. It also spends a lot of time emphasising cruise liner shipping, which is not even covered, and barely touches on freight routes. The Government have acknowledged that Northern Ireland is more exposed to cost transmission through maritime freight but surely then there should have been a dedicated economic impact assessment carried out. Did the Secretary of State for Northern Ireland ever even discuss it with Secretary of State Miliband to point out the unfairness? Sometimes we almost question the role and purpose of the Northern Ireland Office. The impact assessment statement was just a ruse to prevent a vote last Thursday that would have gone the wrong way, and to buy the Government time.

Over the weekend, Northern Ireland officials lobbied MLAs very hard. Even the Secretary of State was engaged in texting and maybe even telephoning party leaders with the argument that had never been mentioned in the other place when this was discussed, saying that the entire EU reset would be threatened if the Assembly blocked the SI. The people of Northern Ireland expect their Secretary of State to at the very least put forward the arguments as to why they should not be subject to discriminatory treatment, leading to higher fares. It is clear that Northern Ireland does not have a Northern Ireland Office that works for the people of Northern Ireland the way in which the Scotland Office does.

My Lords, I should inform the House that, if this amendment is agreed to, I will be unable to call the amendment in the name of the noble Lord, Lord Moynihan, by reason of pre-emption.