Business, Energy and Industrial Strategy Committee
Oral evidence: UK Emissions Trading System Common Framework, HC 890
Thursday 12 November 2020
Ordered by the House of Commons to be published on 12 November 2020.
Members present: Darren Jones (Chair); Alan Brown; Judith Cummins; Richard Fuller; Ms Nusrat Ghani; Paul Howell; Mark Pawsey; Alexander Stafford; Zarah Sultana.
Witnesses
I: Rt Hon Kwasi Kwarteng MP, Minister for Business, Energy and Clean Growth, BEIS; Charlie Lewis, Deputy Director of Emissions Trading, BEIS.
Witnesses: Rt Hon Kwasi Kwarteng and Charlie Lewis.
Q43 Chair: We now welcome Minister Kwasi Kwarteng and his official, Charlie Lewis, the deputy director for emissions trading at the Department. Good morning, Minister. Thank you for joining us. Sorry that we ran over a little in the first session.
My first questions today will be to ask for some quick-fire updates on key announcements that we are expecting from your brief at the Department. You have lots of really crucial policy areas and we are keen to see when they are going to be coming forward. I am just going to run through a list and if I could get some very short answers, we will then go into some more substantive questioning.
It has been reported that the energy White Paper is potentially being delayed again beyond the end of November. When Mr Sharma was before us before the summer, there was a commitment that it would be delivered by November. I appreciate that the Budget has been moved, but do you have an update on the arrival of the energy White Paper?
Kwasi Kwarteng: My understanding and firm belief is that it will come either at the end of this month or at the beginning of December. It is dependent, to some degree, on the spending review announcements, but it should come in the next few weeks.
Q44 Chair: There is no risk of it being a shorter interim paper subject to the broader Budget.
Kwasi Kwarteng: No. It has been worked on for months.
Q45 Chair: Well, years.
Kwasi Kwarteng: Yes, exactly. If it comes out, it will be a full document.
Q46 Chair: When is the buildings and heat strategy arriving?
Kwasi Kwarteng: That will be dependent on the publication of the energy White Paper and I fully expect that that will be within a month or two of the publication of the White Paper. Of course, Christmas and seasonal holidays will intervene, but we are hoping to see that very shortly after the White Paper.
Q47 Chair: So it is probably into the new calendar year. What about the updated fuel poverty strategy?
Kwasi Kwarteng: That should be coming out before the end of the year. I am hopeful that that will come out soon after the energy White Paper.
Q48 Chair: What about the national infrastructure strategy?
Kwasi Kwarteng: That, as you know, is not a fully BEIS competency. I am hoping that that will come out next year, but there are other Government Departments involved in that.
Q49 Chair: I am told we are waiting for a 10-point plan on the Government’s green industrial revolution. When is that coming?
Kwasi Kwarteng: That, I understand, will be a speech given by the Prime Minister very shortly.
Q50 Chair: We wait in anticipation. Every week, it appears to be delayed, but we will look forward to it. What about the Department’s response to the nuclear regulated asset base consultation?
Kwasi Kwarteng: I am not sure when that will be coming out. I think it will be coming out shortly after the energy White Paper, but I can get back to you on that.
Q51 Chair: We note the debate in the press around Sizewell and nuclear, which we will come to when we get to the energy White Paper. What about the response to the future of the Renewable Heat Incentive consultation?
Kwasi Kwarteng: Again, that is something that I am hopeful will come out very soon. We have had a wide consultation and we should be coming out with that quickly.
Q52 Chair: What about the net zero strategy?
Kwasi Kwarteng: The net zero strategy, as you know, is not a fully BEIS competency. It is something that our friends in the Treasury will be sighted on and I suspect you would probably get a clearer answer if you asked the relevant Treasury Ministers.
Q53 Chair: What about our nationally determined contribution for the Paris agreement?
Kwasi Kwarteng: We have a summit on 12 December, which is, essentially, a celebration and a commemoration of the anniversary of the Paris agreement. We may be making announcements then.
Q54 Chair: I understand that, when you submit the NDC to the UN, you also have to put forward a climate action plan for how you are going to deliver on that NDC. Will that come on the 12th as well?
Kwasi Kwarteng: I cannot guarantee that. There will be a broad, indicative direction but I cannot promise that the route map that you want will come out then as well.
Q55 Chair: Thank you for that. That is a lot to get through between now and January or February, but it is useful to get an update. You may have heard in the first panel that there was a debate about whether Ofgem’s remit should be extended to cover net zero and climate resilience as well as price. Is that something that you agree with?
Kwasi Kwarteng: It is something we are looking at. I am not going to say in this Committee exactly what my view is, because we are considering it at the moment, but clearly the net zero target is the big thing that has happened in the last year. Ofgem’s remit was established 20 years ago, so there is a constructive conversation to be had about how Ofgem can pursue the net zero agenda.
Q56 Chair: To give you comfort, Minister, you are more than welcome to share your views on this Committee. That is why you are here today.
Kwasi Kwarteng: I would be very happy to, but these are not definitive positions. There is a degree of caution and we have to have a full debate about these questions.
Q57 Chair: Moving now to carbon pricing, we are going to get into the details of the emissions trading scheme, the common framework and what comes towards the end of the Brexit transition and into the new year. The common frameworks—the way in which the devolved Administrations and Whitehall work together on a whole range of issues—have been delayed and I, along with a number of Committee Chairs, have raised concerns about that. We were due to have the UK emissions trading scheme common framework already as a Committee, because we are expected to have 21 sitting days to consider it in detail. We are told it is coming at the end of November. That means we will not have time to do that before January. Why has there been a delay?
Kwasi Kwarteng: You will appreciate, as everyone who is looking at this does, that we are in the middle of negotiations with the EU and it would not make sense for us to try to anticipate or pre-empt those negotiations. Of course, the outcome of those negotiations will substantially determine what our carbon pricing position is.
Q58 Chair: You recognise, of course, that the devolved Administrations will be dissolving and going to elections at some point in the new year, in advance of their election period. Do you have any concerns about proper engagement with the devolved Administrations and their ability to do that, given the delay?
Kwasi Kwarteng: From a personal point of view, we have had excellent communications with the devolved Administrations. I have a list of the number of times I have spoken to my counterparts in the DAs. Yes, elections complicate things and, of course, the negotiation is something that we want to conclude as quickly as we can, but it is not in our gift to do that and we cannot push forward any more quickly than the circumstances permit.
Q59 Chair: The devolved Administrations have made it clear to us that they are not particularly pleased with the way in which the position has been chopping and changing in Whitehall. They have been progressing on the basis of an ETS and there has been this discussion of a carbon tax, and now they have run out of time.
Kwasi Kwarteng: I do not agree with that. The positions have not been chopping and changing. They have expressed their frustrations about where we are on this, but it is not right to say that the Government have been chopping and changing on this particular issue.
Q60 Chair: Essentially, it is because it has been linked to the broader Brexit negotiations that the delay has happened.
Kwasi Kwarteng: Of course. If we had a negotiated settlement, there would probably be more clarity, but we have not, as yet, got to that point.
Q61 Mark Pawsey: The new scheme, whatever it is, on emissions trading will come into place on 1 January. That is something like seven weeks’ time. How do you expect businesses to be able to respond?
Kwasi Kwarteng: Whatever the situation is, I think they will be able to respond in time. I also think it will be ready. We have had IT tests and we think the IT is on stream. The other thing one has to appreciate is that, even if it were a UK ETS standalone scheme that would be up and running from 1 January, the companies will not have to register until the second quarter of next year. There is some time, but we are very ready for any eventuality.
Q62 Mark Pawsey: Minister, are you ruling out a carbon emissions tax?
Kwasi Kwarteng: I am not ruling anything out. It was a conditional sentence. I was just saying that, if we do go down the UK ETS route—
Q63 Mark Pawsey: It would be very difficult for businesses to adjust between the existing scheme and our own standalone scheme, and the imposition of a carbon emissions tax, if that were to happen.
Kwasi Kwarteng: I do not think so. If you look at what we are trying to do, we are trying to reduce emissions. In either eventuality, there will be a transition and, in either eventuality, we are ready, whether it is a carbon tax or a UK ETS standalone scheme, to begin on 1 January.
Q64 Mark Pawsey: If we do opt for a standalone UK scheme, is there a risk of divergence from the EU scheme and would it be harder to join the EU scheme at a later date?
Kwasi Kwarteng: I do not think so. If anything, if reducing carbon emissions is what you want—most of us want to see that—the UK ETS standalone scheme is more ambitious. It has a 5% lower cap in terms of the carbon that is being traded, so it is a more ambitious scheme than the EU ETS and there is nothing in it that would prevent us from linking it to the EU ETS at a later date.
Q65 Chair: Why did the Government consult on a carbon emissions tax at quite a late stage?
Kwasi Kwarteng: It was felt that we needed to keep options open. There is a discussion as to whether ETS or carbon tax is an effective way of reducing carbon emissions. In either eventuality, we will be able to do that, and we wanted to keep options open.
Q66 Chair: Was that because there was a concern about the feasibility of, say, a UK standalone ETS, should you not have an agreement with the EU on a linked model?
Kwasi Kwarteng: There has been a debate about that. Personally, I think that we can have a UK ETS standalone scheme, but there is wide discussion about that.
Q67 Chair: What is the Department’s preference?
Kwasi Kwarteng: We have stated that we are happy with a tax. We are also happy with a UK ETS standalone scheme. As you have said, many of the people and businesses you have interviewed like the UK ETS standalone scheme.
Q68 Chair: The Department’s view, if that is correct, that it likes the tax is not welcomed by industry.
Kwasi Kwarteng: I did not say we would like a tax. I said, between the two choices at the moment, we are happy to work with either.
Q69 Chair: You do not like it, but you are happy to work with either. Whose decision is it?
Kwasi Kwarteng: It is a decision within Government. We talk with Treasury colleagues. We talk across Government about this.
Q70 Chair: Sure, but you are in government and you seem to be suggesting that someone else is making this decision.
Kwasi Kwarteng: No, I am saying that we are part of the decision‑making process, but we are not exclusively responsible for it. There are other Departments that are responsible for it and you could ask them, I suppose, what their view is.
Q71 Chair: Sure, but we have called you today because you are the Minister responsible, so your views are important.
Kwasi Kwarteng: Yes, absolutely. All I am saying to you is that there is a wider conversation in government and it is not exclusively the prerogative of BEIS to set the policy in this area.
Q72 Chair: But it is your brief, is it not?
Kwasi Kwarteng: It is my brief, yes.
Q73 Chair: The question that is concerning about going to a tax model is that the ambition for an emissions trading scheme means that, globally, you can partner with other jurisdictions. China is announcing its own, California is looking at it and the European Union has one. In the run up to COP 26, is there not a risk, if we take the route to pursuing a tax, that, essentially, we are taking an isolationist approach to this and that we are not interested in global collaboration on emissions reduction?
Kwasi Kwarteng: I do not think that that is the case at all. We have to take the bigger picture. The whole purpose of this is to reduce carbon emissions and we have done this very successfully over the last 30 years. Our economy has grown by something like three quarters and we have reduced emissions by 43%. People recognise that the UK is a leader in this area and I do not think it would jeopardise our international relations or standing if we were to go for a tax as opposed to an ETS scheme.
Q74 Chair: Presumably, you would agree that, while we have a domestic responsibility to reduce our own carbon emissions, especially as we are chairing COP, we need to find a way in which, globally, we can collaborate efficiently on this. If we pursue a carbon tax, that does not achieve that aim, does it?
Kwasi Kwarteng: As I said, you have to take a wider view. We should all take a wider view of what is going on. The legislation that we introduced with regard to carbon emissions last year—the net zero carbon target—was a world-beating and world-pioneering policy. This has been followed by the Chinese in the last few weeks, who are setting 2060 as their date, the South Koreans and the Japanese. They all look to us. We engage with them regularly and they look to Britain for leadership, so I do not think that our position in regard to international co-operation will be compromised in the way you say if we pursue a carbon tax.
Q75 Chair: I think people might disagree with you. When is this going to be clarified and confirmed? When is the announcement coming that will give people the clarity?
Kwasi Kwarteng: It will come before the transition period is over, but it will be determined in part by how the negotiations conclude. I cannot tell you when those negotiations will finish.
Chair: We hope they finish before the end of the year.
Q76 Alan Brown: Going back to the issue of the devolved Administrations, the Minister, in his letter to the Committee of 29 October, said he would take into account the devolved Administrations’ views on the difference in terms of implementation of an ETS or a CET. Can you confirm what you understand the devolved Administrations’ views to be on the favoured scheme?
Kwasi Kwarteng: It is no secret that they have expressed a view that they would prefer a trading system scheme as opposed to a tax. That is something that they have expressed.
Q77 Alan Brown: The principles in an ETS scheme were agreed by all four Administrations in October 2017. In June of this year, the design of the UK ETS was agreed and it was announced as a joint Government response. Is it correct that that was agreed in June of this year?
Kwasi Kwarteng: Yes.
Q78 Alan Brown: Earlier on, you said to the Chair that there has been no chopping and changing of position. If an ETS was agreed jointly across all four Administrations, why is there still talk of a carbon emission tax?
Kwasi Kwarteng: It is a decision tree. There are two choices: there is the carbon tax and there is the UK ETS scheme. You are quite right that, if we go down the UK ETS scheme, that has been agreed in the way you have suggested, but all I am saying is that the carbon tax has not been removed from the table at this point.
Q79 Alan Brown: The Scottish Government wrote to you on 10 November stating their objection to the imposition of a carbon emissions tax. If you have taken on board the view of the devolved Administrations, you will be able to rule out a carbon emissions tax being imposed on the devolved Administrations.
Kwasi Kwarteng: I do not quite know what clarity you want from me. I have said that everyone knows the position with respect to the trading scheme and the tax. Unfortunately, I cannot say that the tax has been taken off the table, as far as we are concerned, because we are in the middle of negotiations. I cannot really give any more clarity than that.
Q80 Alan Brown: So you would agree that it would be possible to cut right across devolved competencies and impose a tax.
Kwasi Kwarteng: No, I would not put it like that at all. We are all aligned on wanting to reduce carbon emissions. We are all aligned on the net zero carbon target. In fact, the Scottish Government have said that 2045 is their date. I do not see it in the way that you have described.
Q81 Alan Brown: Might it be the case that the Treasury is in favour of the carbon tax and that, if the Treasury imposes its view on BEIS, it cuts right across the devolved settlement, where they have agreed on the merits of an ETS scheme?
Kwasi Kwarteng: I do not agree with that at all. I will just repeat what I have said. I said that there are two options here. We can either go down an ETS route, in which case we have agreed the principles of the UK ETS standalone scheme, or we can go down a carbon tax route, and we have not taken that off the table.
Q82 Alan Brown: Minister, 1 January is looming soon. There is a proposal for an ETS scheme agreed with all the devolved Administrations yet, with 1 January looming, you are saying that you cannot take a carbon tax off the table. Why?
Kwasi Kwarteng: We are in the middle of negotiations and we want to have as wide a range of options as we can. It is commonly recognised that a carbon tax is one way of forcing or encouraging the reduction of carbon emissions.
Q83 Alan Brown: Why do negotiations with the EU rule out a standalone UK ETS?
Kwasi Kwarteng: Alan, I have said repeatedly that we want to keep our options open. You can force me to say, “We should take something out,” and I am saying we are not doing that. Let us see how the negotiations pan out.
Q84 Alan Brown: I understand the Minister is getting frustrated because he thinks I am asking the same question, but I cannot understand why there is an agreement for an ETS system, agreed with the devolved nations, and yet we are saying at this late stage that we cannot rule out something else because of negotiations with the EU.
Kwasi Kwarteng: I have tried to explain that we are trying to keep our options open, and the carbon tax is still in play. You might not like it but I am just saying that that is where we are.
Q85 Alan Brown: It is not just for me not to like it. It is about co-operation with devolved Administrations. The devolved Administrations are saying that they object to a carbon tax being imposed. Surely that cuts across the principle of devolution, not just for the Scottish Government but for the Welsh Assembly and the Northern Ireland Assembly as well.
Kwasi Kwarteng: Their positions are clear and we talk about this a lot, but we also have a position as we are negotiating with EU counterparts.
Q86 Alan Brown: If their position is clear, how do you take that on board with the implementation of the final solution?
Kwasi Kwarteng: We are absolutely taking that on board. As you know, I speak to your counterparts—people like Paul Wheelhouse—a great deal. I have spoken to him twice in the last three weeks and his position is clear. There is a whole range of co-operation that we have on these issues that I am keen to promote, and we have a reasonably good relationship.
Q87 Alan Brown: How do you explain to them that you say you are listening but you will not rule out a carbon tax that they all object to?
Kwasi Kwarteng: Listening does not mean doing everything you are told. Listening means incorporating their views and then reaching a decision, which is also dependent on the fact that we are having negotiations with the EU. We listen all the time and we engage very fully. It does not mean we have to do absolutely everything they say, but at the same time we take on board what they are saying.
Q88 Alan Brown: The key point is not doing what you are told; the key point is abiding with the agreed system. A system was agreed.
Kwasi Kwarteng: We want to have co-operation. We can dance around this and engage with this subject for hours but I have just told you where we are. You have made your objections very clear and I am afraid that, until we get to a negotiation settlement, we will have to agree to disagree on this.
Q89 Alan Brown: As a final comment about the point that it cuts across the devolution settlement if a carbon tax is imposed, do you agree that that does impose something against the will of the devolved Administrations?
Kwasi Kwarteng: I am not agreeing to any of the things you are saying. What I am saying is that we have a very good relationship and we listen very closely to colleagues. We engage closely with colleagues across the devolved Administrations, and we work generally in a spirit of co-operation because we all want to see carbon emissions reduced and we all have a net zero target. I am very happy that all Governments across the UK are agreed on that.
Alan Brown: I look forward to a scheme being implemented that has the agreement of all the devolved Administrations.
Q90 Chair: The frustration here, Minister, is obvious. It is unfortunate that we have got to this point in the year when negotiations had already started with the devolved Administrations and you are not willing to provide any clarity on what is going to happen in a very small number of weeks. You said there that there are two options: a carbon tax or an emissions trading scheme. We have had evidence to say that there might be a third way, where you end up doing a bit of both. You might, for example, say, “We have not made enough progress in the Brexit negotiations. We have timed out. We are going to put in a carbon tax on a transitionary basis but continue to negotiate with the European Union for a UK-EU linked ETS”. Is that a third option that is on the table?
Kwasi Kwarteng: The idea that, on 1 January next year, we are going to stop talking to the EU about energy and carbon emissions is not realistic. Of course, we will always be engaged with EU partners and EU countries on these subjects. It may well be that, if we go down the carbon tax route, we may revert to an ETS or a UK ETS linked scheme in the future. I cannot predict here and now, even before the negotiations have finished, what the nature of those conversations will be in a year or two’s time.
Q91 Chair: You recognise, presumably, that this puts businesses in a very difficult position. They do not know what is happening in a few weeks, let alone next year. The benefit of an ETS, which is why industry is broadly supportive of it, is that you can plan, you can hedge and you can put the business into the safest position to deal with these issues, as well as incentivising decarbonisation, which is what we are all trying to achieve. Are you today able to make a commitment, though, that, if a carbon tax is introduced from 1 January, you will still actively be pursuing a UK-EU linked ETS in the coming months?
Kwasi Kwarteng: We are always going to be engaging in conversations—
Q92 Chair: That is not what I am asking, Minister. I know you will continue to talk with the European Commission. I am asking if there is a commitment to an ongoing negotiation to arrive at a point at which there is a UK-EU linked ETS, or whether you are just going to roll on with the tax for evermore.
Kwasi Kwarteng: I cannot possibly—
Q93 Chair: Who can answer that question?
Kwasi Kwarteng: Do you know who might be able to answer that question? The Chancellor of the Exchequer might be able to answer the question because, if we go down the tax route, that will be a competence of the Treasury.
Q94 Chair: So this is a Treasury decision, not a BEIS decision.
Kwasi Kwarteng: No, it is in concert, but you know as much about Government as anyone here and you know that taxes are, generally, not a BEIS competency but they are a Treasury competency.
Chair: No, but I think this is the problem we are experiencing, Minister, where your Department is not able to make decisions or give clarity, and we are waiting on the Treasury to catch up, which is unfortunate.
Q95 Alexander Stafford: Thank you very much, Minister, for coming. On the ETS—the UK ETS and the EU ETS—are we going to get more clarity about how this is going to work? How confident are you that a link between the UK ETS and the EU ETS can be negotiated?
Kwasi Kwarteng: There is every reason to suppose that we can reach a good degree of co-operation on this. I said earlier in my answers that our standalone ETS will be more ambitious in terms of carbon reductions than the equivalent position if we stayed within the EU ETS. More broadly, I have said that we have shown real leadership on this. I know we are very apt to criticise what we do in this country, but, frankly, the net zero legislation last year was a world-beating piece of legislation. People around the world look to emulate this. We are in a very strong position to show leadership on this.
Q96 Alexander Stafford: It is great that we can be more ambitious but what happens if, let us say, the EU ETS increases in the future to cover other sectors and gets ahead of us? Is there an expectation for Government that we will always be at least the same as, if not better than, the EU?
Kwasi Kwarteng: I would be very surprised if we got to a situation where they had more stringent standards and commitments than we do. Look at the coal industry, for example. We are in a position where we are going to take coal off the power generation grid by 2024. Germany’s equivalent date is 2038. If you look at countries in eastern Europe, which are still very dependent on coal, I would be surprised if the EU as a whole adopted more stringent standards than we do here in the UK.
Q97 Alexander Stafford: If they were to, let us say, could we easily catch up with the EU? Would it be easy to change the UK ETS?
Kwasi Kwarteng: Your hypothetical question is answered by the fact that, today, we are in a more advanced position than they are. If they were to overtake us, we would be in a more than capable position to keep pari passu on an equal level with their standards.
Q98 Alexander Stafford: The EU version of ETS should not be in isolation to the UK version. What influence could we have or will we have over the EU ETS to try to help them make theirs more ambitious? It should not just be about the UK being more ambitious; it should be about the whole world, including the EU, being more ambitious. What sort of pressure can we still put on the EU ETS for them to go further as well?
Kwasi Kwarteng: There are two things that are happening next year that really will put us in a good position to influence people not just in the EU but across the world. The COP 26 presidency is a really exciting proposition. It is something that we can use very effectively to show the leadership that you have described. We also have the presidency of the G7, which is another forum in which we can wield influence and try to win hearts and minds on this issue.
Q99 Alexander Stafford: That is great to hear. Are the Government saying that we are going to use the presidency of COP 26 and the G7 to push forward better and faster climate change action? Is that what the Government are committing to?
Kwasi Kwarteng: That is absolutely right. I could not have put it better.
Q100 Alexander Stafford: Going back to the UK-EU ETS and the negotiations between them, what is the timetable over this? Could you give us some idea of the process?
Kwasi Kwarteng: The timetable of that is going to be driven by the timetable of the negotiations. As you can see, there are a few weeks before the end of the transition period, so we are very hopeful that, in the next three or four weeks, we can reach a conclusion to the negotiations.
Q101 Alexander Stafford: That is all good to hear. You answered most of my questions on the UK-EU ETS. If we move slightly forward to talk more about net zero and what is going on with that, can we be assured that the new carbon pricing scheme is going to be aligned with the net zero target and the sixth carbon budget? The sixth carbon budget is a little bit out of our grasp, so what is the situation?
Kwasi Kwarteng: People on the Committee will know that we need to move more quickly. We need to be more ambitious. I hope that we can have more ambitious NDCs for the UK ahead of COP 26. The sixth carbon budget, as you know, will be coming out very shortly and we will adapt our carbon pricing policy to try to meet those targets.
Q102 Alexander Stafford: We already talked about the EU potentially extending its ETS but, for the UK and our net zero target, are there any plans to extend the carbon pricing schemes to further sectors to support net zero?
Kwasi Kwarteng: These things are always under review. On the one hand, we are trying to work out exactly how the UK ETS standalone works and we are in a good position on that. We can adapt and tweak it in the immediate aftermath of publications and discussions about the carbon budget targets, so there is a degree of flexibility there.
Q103 Alexander Stafford: Are any sectors already in the conversations or in target to extend the scheme towards, even in very initial conversations?
Kwasi Kwarteng: We are always reviewing it. I cannot spell out exactly, chapter and verse, which sectors are going to be brought in and which are going to be excluded, but we are always looking at the scheme and its scope.
Q104 Alexander Stafford: From that, can I take it that you are definitely looking at extending it to other sectors?
Kwasi Kwarteng: We are always looking to evolve the ETS. On the one hand, we have not even started it yet. It would be launched, I suppose, on 1 January. On the other, you are asking, before I have started it, “How are you going to extend it?” It is a slightly premature question.
Q105 Alexander Stafford: I always want to extend the target for it to go further and more quickly, as I am sure you know. On the relationship between this and the carbon pricing scheme, and the decarbonisation targets set by the devolved Administrations, how are we going to align a UK Government one with devolved Administrations’ targets, especially when those may have a more ambitious UK target? I also appreciate that the Scottish elections are coming up next year, as well as other devolved elections. How are we going to do that with a future change of Administrations? How flexible is it going to be?
Kwasi Kwarteng: As I indicated earlier, from my point of view we have fairly good relations, not only with the devolved Administrations as a whole but on a bilateral basis. I speak to Paul Wheelhouse regularly. We discuss issues relating to things like industrial decarbonisation. We have had conversations about the ETS scheme. We can work very closely with him and his colleagues in Scotland as well as with colleagues in Northern Ireland and Wales. It is a good relationship. Can we improve? Obviously, we can. We can have more regular contact and more regular discussions but, on the whole, things are in a reasonable position.
Q106 Alexander Stafford: We want our businesses in the UK to thrive as well, and we want decarbonisation to be an attractive competitive investment opportunity for the industry. How can we achieve that? What plans do we have to make decarbonisation attractive and competitive? After all, after the end of Covid, we need to build back better and go green. How can we make businesses and new sectors invest in decarbonisation, and what are the Government going to do to support our businesses to flourish in this way?
Kwasi Kwarteng: We have achieved a great deal in this space. I said earlier that we have reduced carbon emissions by 43% since 1990 while growing the economy by three quarters. We have shown, in the past and now, that we can increase economic activity while also committing to quite an ambitious programme of decarbonisation. One of the ways we did this particularly was in the offshore wind auction, where we had a very successful auction process that managed to reduce the price of offshore wind from £150 per megawatt hour to £39, which is a huge reduction. That was through the auction process and we are trying to think of new ways, or even to use the same ways, of attracting private capital to invest in these great opportunities of green energy and the green economy.
Q107 Alexander Stafford: Offshore wind has been a huge UK success story and could be an even better success story. Business and industry have quite different issues, such as the cost of power and the like. How can we get them on board? How are the Government planning to get them on board to show them the benefits of decarbonisation from a financial perspective?
Kwasi Kwarteng: You will know that, as the Chair of the Committee pointed out, there is a huge amount of policy work coming out. On the back of that, there will be an implementation period. There will be a period where we want to try to introduce some of these ideas. We want to try to encourage the investment you talk about. As I have said, with the DAs, there is constant engagement, from my part and from officials in my Department, with various industry sectors. They are very engaged with new technologies like hydrogen. They are very engaged with carbon capture. They are very interested in ongoing offshore wind and floating offshore wind. All those industries, as you know, have an extensive supply chain and we engage with people in the supply chain on a fairly regular basis.
Q108 Alexander Stafford: The whole world is going towards low carbon or net zero. How is your Department working with the FCO and the COP 26 unit to discuss how we sell decarbonisation across the world? How are we selling it to make it a business opportunity for the UK?
Kwasi Kwarteng: We are doing a great deal on this. Very interestingly, it was only last week when we announced an investment office. My very good colleague, Lord Grimstone, is heading that and we are attracting capital. We are not only attracting foreign investment to this country, but encouraging exports. I cannot stress enough that the net zero carbon emissions legislation that we passed last year, in 2019, was hugely significant. That was copied, essentially, by China last month, where President Xi’s Government said that they would commit to net zero by 2060.
I can tell you that, when I first came into this job, I was told that it does not matter what we do because China is not on side. I can tell you now that China is on side; Japan is committed to a net zero target by 2050; South Korea has done this, all in the last few weeks. We are doing a good job of selling a message.
Q109 Alexander Stafford: Would you say that decarbonisation is at the heart of all future trade negotiations or is it an also-ran? How important is it when Ministers are sitting around and discussing trade negotiations across the world?
Kwasi Kwarteng: It is not an also-ran. I am not sure whether you were in the Chamber when the Chancellor of the Exchequer made his statement this week, but we have pushed ahead with the first green sovereign bonds, which he announced the UK will issue. He also announced a commitment to TCFDs and holding companies to account in their disclosures on climate change. We are leading in that field as well and this is going to increase in importance. The decarbonisation agenda will increase in importance and not simply be sidelined in the way that you suggested.
Q110 Alexander Stafford: Would any trade deals be stuck or scuppered if a country was not willing to decarbonise or look into this?
Kwasi Kwarteng: All I would say about this is that decarbonisation is not only a key part of our strategy as a Government, but a key part of our international diplomacy. Decarbonisation would be at the centre of any deal that we struck with other countries. I would expect that, but that is, dare I say, a DIT issue. You would probably be better placed asking Elizabeth Truss or others in that Department about that.
Q111 Alexander Stafford: Can I be reassured that you are working with DIT in this aspect?
Kwasi Kwarteng: Of course. When I mentioned Gerry Grimstone, I should have pointed out that he is not only a BEIS Minister. He also sits within the Department for International Trade, so there is a constant dialogue through Gerry and, of course, through officials with that Department.
Q112 Alexander Stafford: What is your view on border carbon adjustments and how will they feature in these conversations and trade deals?
Kwasi Kwarteng: They are quite important. When I say that we have reduced emissions by 43% since 1990, people point out that that does not include imported carbon, and they have a point. That is something we should be looking at. The 43% is an incredible reduction, whichever way you look at it, but there is a case for saying that we should scrutinise more closely the impact of imported carbon on those figures. What you say makes a lot of sense.
Q113 Ms Ghani: I have one question to follow up on the border carbon adjustments. I am not sure whether it falls into your remit, Minister, or whether it is under the Department for International Trade, but border carbon adjustments are quite contentious in how they are treated under world trade agreements. How is that going to impact on our trade deals with other countries? Do you have a two-track system in place to adjust to whatever relationship we have with Europe on 1 January?
Kwasi Kwarteng: One of the issues here is that the EU itself has not decided how it is going to treat the carbon adjustments. Until we have clarity on that, we cannot possibly say what we are going to be doing in respect of carbon from the EU. This is a subject of ongoing conversation.
Q114 Ms Ghani: Does that mean that any trade deals we are signed up to at the moment would be unsigned come 1 January?
Kwasi Kwarteng: No, it does not mean that. It just means that the EU’s position is evolving and that this is an evolving conversation that we are having.
Q115 Chair: One of our frustrations is the siloisation of Departments. We all recognise that, on decarbonisation, this is a cross-departmental effort. BEIS is tasked with leading that cross-departmental effort. How is that going?
Kwasi Kwarteng: It is going very well. If you think that BEIS was created only in 2016, we managed to pass this legislation in terms of the net zero carbon target in 2019, and BEIS has, as you say, a central role in that. There are lots of Government Departments, and the decarbonisation agenda touches nearly all of them. We have a big stake in Defra, and Defra has a big role to play. The Treasury has a role to play. The Ministry of Housing, Communities and Local Government has a role to play. Other Departments are involved in decision making and policy. While it is the lead Department, BEIS has to have a wide degree of consultation and engagement with other Departments across the Government.
Q116 Chair: The Committee on Climate Change did its departmental assessment recently and showed that some Departments performed better than others. Is BEIS really meeting the challenge of providing leadership for the other Departments to get them into shape? I do not know whether it is you, Minister, or whether it is the Secretary of State but there are these cross-departmental committees where these issues are supposed to be discussed. Do you go to those?
Kwasi Kwarteng: Yes, I do. It was very much my feeling, when I took up the job a year and a half ago, that we needed to have a forum. We did not, at that time, as you will remember, have a cross-Cabinet Committee or a climate action implementation group. We did not have any of that, and that was one of the recommendations of the CCC. That was one recommendation that I pushed within the Government and I was very pleased to see that we had our first meetings this year. We have had two or three and I have attended all of them. They have been very constructive and an effective way of bringing people together on this issue.
Q117 Chair: Are minutes and actions published from that or is it just private conversations?
Kwasi Kwarteng: It is documented but it is a Cabinet sub‑Committee, so it is on a Cabinet basis.
Q118 Chair: Originally for the session today, we had intended to invite somebody from the Treasury on the basis that they could then speak to the issue of the carbon tax, which you say today you have not been able to speak to.
Kwasi Kwarteng: I have been, but I have pointed out, as you have just pointed out, that tax, for centuries now, has been a responsibility of the Treasury. You know that.
Q119 Chair: I know that, but your answer is, essentially, “It is the responsibility of the Treasury and that is my answer.” That is not an answer to our questions, which is why, if you would let me finish, we invited somebody from the Treasury to speak to the Treasury’s position, which you have been refusing to do. My understanding is that, whether it was you or your office, you said that you did not want somebody from Treasury coming and that you could answer the questions. If that is the case, why are you not able to able the questions?
Kwasi Kwarteng: I need to restate what I have just said. Tax, as everyone knows, is a Treasury competency. If you are asking questions about taxation, it would make perfect sense for you to ask those questions to Treasury officials and Ministers. I do not know what the position in my office was on that. I assumed that we were going to talk very broadly about these issues.
Q120 Chair: Our intention was to invite someone from the Treasury but your office told us that you felt able to answer the questions.
Kwasi Kwarteng: I cannot say, but you should know, as a parliamentarian of your standing and experience, that tax is an issue for the Treasury. If I were in your position, I probably would have insisted on a Treasury Minister, but I will not tell you how to do your job.
Q121 Chair: I do not need to be patronised, Minister. With respect, if you are putting yourself forward as able to answer these questions, you should answer these questions for our Committee and not continue to refer to other Departments, but I will finish my question on this issue. My next question—
Kwasi Kwarteng: Mr Jones, forgive me.
Chair: Order, Minister. Order.
Kwasi Kwarteng: I am answering your question.
Q122 Chair: When I bring you to order, Minister, you will answer the questions that I give to you, please. This is my Committee, not yours. I am moving on to the next question. My next question is about COP 26 and the role that the Department plays on that issue. What role do you play in collaborations with other countries on the issues where there are global considerations like the issues we have discussed today?
Kwasi Kwarteng: I engage very considerably with colleagues across the world—Energy Ministers, people who are key partners in the fight against climate change and people we speak to on a regular basis. I am involved in that international diplomacy.
Q123 Chair: In terms of the Biden transitionary team, do you have any intention of engaging with them, given they have said they will come back into the Paris agreement?
Kwasi Kwarteng: Yes, we will absolutely engage with the next President and his Administration.
Q124 Chair: My question is whether those conversations have been set up.
Kwasi Kwarteng: We do not know who his nominees will be but I guarantee that, once the replacement of Dan Brouillette is announced, we will be engaging with him. I have said that that is a key priority.
Q125 Paul Howell: After talking about the world stage, I want to bring it back down to the focus on actions and where we are. We all know the importance of the domestic environment in terms of impacts on emissions and the significance of these places, so I want to come down to the green homes grant and to talk about that. I would like you to comment on the number of successful accredited providers that have been enabled so far. We seem to be hearing that as few as one in seven applicants to the scheme are able to find somebody at the moment.
Kwasi Kwarteng: We are ramping up the scheme. As of a few days ago, we had something like 38,000 applications. We have more than 1,100 installers who have the TrustMark, but we are very keen to accelerate that take-up.
Q126 Paul Howell: When they have such difficulty in finding a provider, do you have any opportunity to extend the six-month limit for installations? It seems a bit of a frustration that is in there. As another consideration at the same time as answering the question, the frustration for a number of people is the differential between a primary measure and a secondary improvement: if you do not do a primary, you cannot do a secondary. We all know that, at the domestic level, it is an aggregation of the little things that will make the big difference. Is there really a need for that frustration in the process?
Kwasi Kwarteng: We are looking at the scheme and people are asking questions about how we could perhaps simplify it. That is an ongoing conversation.
Q127 Paul Howell: Do you agree that it would be appropriate, though, to give more latitude in timing, particularly given Covid and the natural reluctance by potential installers to go into people’s properties, and people’s natural reluctance to have people in their properties, at least until we get, hopefully, through the next few months and things come to a better place?
Kwasi Kwarteng: You are right. There is scope for looking at the deadline of the scheme. There are certainly conversations about how the scheme is being impacted or retarded by the Covid situation and by the second lockdown. We will certainly be looking at what the best way is to deliver on the scheme. That is all I can say today.
Q128 Paul Howell: That would be welcome. We have been told that it could take between six and 12 months to set up a watertight scheme, yet the £2 billion fund is supposed to be spent by the end of March, so that would be a very welcome place to go to.
Moving on to vulnerable customers, in addition to energy debt and things like that, which we were talking about earlier in the session, how is the Department working with—again, we are talking cross-department here—in this case, the Department of Health and Social Care, Public Health England and people like that to understand the impacts on more vulnerable customers and what the Government should do to address the issues raised by Citizens Advice etc., and the massive concerns that there are for some of the more vulnerable in our society?
Kwasi Kwarteng: This is a central focus of energy policy. We talked about the green homes grant. You will know that, within the green homes grant, there is provision for a voucher for 100%, up to £10,000, for more vulnerable customers to do the kinds of measures that are encouraged within the green homes grant.
The other thing that we have, which many people know about, is the warm home discount, which knocks £140 off energy bills for people who are vulnerable and under more financial pressure. That is something, again, that we are consulting about extending. We are also engaged in a conversation about how that will look in the period after 2022, when the extension, if it does happen, ends.
Q129 Paul Howell: One of the important issues around this as well is access to the schemes. We have heard comments that people are finding it complex to get into. Is there any agenda to try to make that position easier for people, as I said earlier, in terms of this idea of going for a top-up as opposed to just needing the primary and then the secondary? You cannot just improve what you have on the primary; you have to almost start again. People would welcome some flexibility there.
Kwasi Kwarteng: I would be very happy to engage with you and any other members of the Committee on how we can simplify and give greater access to these schemes for vulnerable customers. We speak to the CBI and I speak to the CBI a lot in relation to these subjects. It is something that I am very keen to hear any advice on or support for. We are always in the market for new ideas on how we can simplify and get more access for the people who need it.
Q130 Paul Howell: I appreciate that. We are all very aware that, to win the climate change battle, it is going to require engagement from everybody. The more flexible the rules in these sorts of situations could be made, the better take-up we are likely to get. I am pleased with the answers that you have given but I hope that it comes through and manifests itself in real change.
Q131 Chair: Minister, you said that there had been 38,000 applications for green homes grant vouchers. How many have been awarded?
Kwasi Kwarteng: I am not sure of the exact number but there has been difficulty in processing those applications. We would definitely want to accelerate the number of applications that have been awarded the requisite funds.
Q132 Chair: There is, presumably, a concern—I think I have this right—that they need to be issued, spent and finished by March. Presumably you will want to extend that deadline, if there have been very few awarded at this stage.
Kwasi Kwarteng: The scheme was launched before the second lockdown. Once the second lockdown happened, that perhaps created added complexity. We are always reviewing the green homes grant and the take-up, as well as trying to accelerate the applications. Who knows whether we will be able to reach the target by the end of March? It is an ongoing conversation, not a hard stop.
Q133 Chair: That is good to hear because we all want this programme to be successful. You said there were about 1,000 installers across the country. This is anecdotal but, in my own constituency, constituents have struggled to find installers who have signed up to deliver work through the grant. I understand there have been some issues about payments not being made until the whole work is finished, so smaller installers are not able to carry the cash flow burden of getting the kit, doing the work and waiting until the very end. Some installers who might do lower‑profit‑margin work, such as loft insulation versus a new fancy boiler, cannot make the numbers add up. Do you have any concerns about capacity for providing these services?
Kwasi Kwarteng: It is something that you have identified, which I have heard anecdotally as well. Ministerial colleagues, particularly those who are in quite sparsely populated constituencies, have raised this as an issue and we are really focused on it. It has improved over the last few weeks, but there is also room for improvement.
Q134 Chair: As a Bristol MP, I am in one of the largest cities in the country and it is still an issue. We wrote to you, Minister, about the consumer complaints process around this. There was some concern from the previous version of this scheme. It is great that we have the TrustMark that suppliers have to sign up to. I was not particularly pleased with the fulsome answer I received about the complaints process. Consumers want to be able to have a free, quick resolution, if there are problems in the delivery of these services that can often have significant consequences for their main asset—their home. Do you have anything further to update on the complaints or the ADR process that might follow?
Kwasi Kwarteng: It is something that I would definitely want to take up with you on a subsequent occasion. We could have more clarity on the redress that consumers can have, if the scheme, for whatever reason, is not delivered in the way that they would like to see.
Chair: That is good to hear.
Q135 Paul Howell: Going back to the green homes grant and the level of take-up, I know from talking to people locally in Durham that some applications they have put in were approved, but when they were put in they were almost undershot in what they wanted, because they wanted to make sure they got an approval from the package and would probably have gone for more if they had realised that the pot was not going to be consumed as quickly. Would you welcome people like that coming back in to try to boost their bid and get money moving in the first area?
Kwasi Kwarteng: There is a certain cap, is there not? The cap, in the first instance, is £5,000 or two thirds of the job. For vulnerable customers, it is up to £10,000.
Q136 Paul Howell: Sorry, Minister, this was a scheme of housing, almost like social housing, so you had a number of people where they had gone for sorting out so many houses and they could have done more units, if you like.
Kwasi Kwarteng: Is this within the green homes grant?
Q137 Paul Howell: I think so.
Kwasi Kwarteng: I would like to hear more details about it. There is an element of the funding that is going to be given on a local, regional level, but I am not sure what exactly you are referring to in terms of this scheme.
Paul Howell: I will back to you separately on it, Minister.
Q138 Ms Ghani: Our commitment to net zero is to be applauded, and the fact that we are leaders in this field is tremendous, but I wondered if the Department had done a cost-benefit analysis on the impact it will have on industries here in the UK to reach net zero and whether they will be passing those costs on to customers. Can you share any of that data with us?
Kwasi Kwarteng: We review a lot of this data, but we do not see it as a cost. There is a huge opportunity in terms of the green economy. We see it as a positive and as something that society as a whole benefits from. There are hard profits and hard jobs that can be driven by this. There are some costs but, on a net basis, we see it as a great, positive thing for the economy.
Q139 Ms Ghani: Can you share any of that data with the Committee?
Kwasi Kwarteng: I am sure there is plenty of data that we would be happy to share.
Chair: Thank you. There being no further questions, I bring this session to an end. Thank you, Minister.