Seòmar agus comataidhean

Good morning. Given how complicated the topic can be, I will take the opportunity to make an opening statement, so that I can set things out as simply as I can.

I am pleased to be able to give evidence on the draft affirmative instrument to amend the Greenhouse Gas Emissions Trading Scheme Order 2020. In July, the emissions trading scheme authority, which is formed of the Scottish, UK, Welsh and Northern Irish Governments, published a joint Government response to last year’s consultation. The response contains substantial changes to strengthen the ETS and to better align it with our net zero objectives. We have already brought into law some of the minor decisions that arose from that Government response, via a negative statutory instrument earlier this year. We are now implementing additional—mostly minor—amendments through this affirmative instrument.

The thrust of today’s amendments is to amend the free allocation policies to ensure the correct functioning of the ETS. The committee will remember that free allocations are the allowances that are given for free to operators who are at risk of carbon leakage—that is, the risk of industries moving offshore to jurisdictions with less rigorous carbon policies. Specifically, the instrument would cap the amount of free allocation for the aviation sector. That is being done to amend a current anomaly in the system, whereby data used to allocate free allocations to aircraft operators is inconsistent with current activity levels, resulting in some operators receiving an overallocation of free allowance and creating a competitive distortion.

Today’s provisions, therefore, provide that free allocations will not exceed 100 per cent of the air operator’s verified emissions, and they will be in place until the withdrawal of the aviation free allowance in 2026, which is a separate commitment from the joint response and is, I stress, not being legislated for presently, although I will be happy to keep the committee updated on it.

Two other minor issues are covered in today’s instrument. First, it will introduce an amendment to allow installations with carbon capture and storage to receive free allocations. Again, the issue has arisen as a result of inconsistencies in the legislation whereby it is currently not possible to do that—and, clearly, we see that as lowering the incentive to install carbon capture and storage. As that was never the policy intent, we are changing it.

Secondly—and finally—the instrument contains three technical amendments to the free allocation rules for electricity generation, to more accurately reflect operator activity and to incentivise electricity produced by means of high-efficiency co-generation.

I also want to make a brief point about parliamentary processes. The Senedd and the UK Parliament are running a similar scrutiny process on the matters in today’s order. The Northern Ireland Assembly will do so as soon as it can, but in the meantime the order will apply only to Great Britain. We aim to bring forward in due course the remaining changes to the ETS that are set out in the response, such as expanding the scope of the ETS and phasing out free allocation for aviation.

As I wrote to the committee on 7 July, one of the most significant changes—that of aligning the cap with a net zero trajectory—is currently being taken through the UK Parliament. I would have preferred it to have been taken through the Scottish Parliament in the first instance, but it is a pragmatic, albeit not ideal, response to the fact that there is no sitting Northern Ireland Assembly. As soon as there is one, we will lay the affirmative measures for that provision, and the committee will have the opportunity then to scrutinise it.

That is quite enough by way of opening remarks. My colleagues and I are very happy to take questions.

That is a good question, and we have been looking very closely at the issue. The intention is to phase it out, because it is now the view that aviation is not at risk of carbon leakage. That is a change in view that each of the authority members have come to agreement on.

That said, although we agree on the need to phase it out, I have, like you, been asking the question about impact assessments. One of the things that I have put very starkly to my authority partners is the issue of Highlands and Islands connections. However, we are still developing our approach to the phase-out date, which is not until 2026, and assessing the impact.

As you will see in the response, I have won a concession under which the impact on connections to the Highlands and Islands will be considered and any mitigations that are required will be developed. That is still to be done, but as I have said, it is still a few years hence, and I will very much continue to assess the impact on operators and on people who need to get back and forth to remoter parts of the UK.

We can certainly look into that, convener. As part of our impact assessments for some of those changes—and more so for some of the wider changes—we have looked at Scotland-specific commercial entities. It is sometimes a little difficult to discuss the commercial details, particularly as there are so few such entities in Scotland, but we have some of that data, and we will happily write to you with what we can.

No, there is not, except to ask for the committee’s support. Thank you.

Motion agreed to.

First, I am not sure that I would use the word “abused”. It was basically an accounting issue whereby the free allocation was offered on the basis of out-of-date activity data. It will differ between operators; some will be far below 100 per cent of their verified emissions, and others will be slightly over. I do not know whether Lucy Geoghegan wants to add anything to that, but the general response would be that the situation differs between operators and that it was a case not of abuse but of the data being out of date and needing to be realigned.

If you want to put your question on the record, I can make sure that the written update responds to it.

Absolutely. In response to Mr Doris, I mentioned how all those aspects of an enormous piece of work are being looked at: the cost, the supply chain, the skills involved in the development of the scheme, the impact on the housing market and so on. A huge amount of work is being done on all that just now. We are moving to consultation, so that will be the point at which we will seek views on what is there and anything that the committee or anyone else thinks ought to be there.

Convener, I am not able to speak to that particular line today. I am more than happy to go away and get more information on it, and if my colleague Alison Irvine wants to add anything on specific rail projects, she can do that.

I should say in response to Mr Kerr that we are taking forward the A9 work, part of which is a climate compatibility test. Outcomes of our work are due to be available this summer and then we will run a final consultation. It might be helpful to say to him that there will be developments this summer.

Thank you for the question. At the outset, I stress that, in the context of issues such as HPMAs, I do not discount suggestions or views on what might have worked or might work in the future.

There is evidence that enhanced marine protection is needed—not least because we and the UK are missing 11 out of 15 of the targets for good environmental status. There is also evidence that such protection works. You mentioned the Lamlash bay project, although I appreciate that that is on a smaller scale. There is also evidence from places such as California and New Zealand that having completely protected areas works as regards species abundance, ecosystem recovery, spillover and a whole series of other aspects.

On your point about trial areas, of course, the UK Government has taken that approach. I have two main concerns about it. One is that the changes that we see in marine protected areas happen over a long period of time. I would therefore be concerned that if we rested on a trial area, we would be waiting for a great deal of time to see what the impact would be before we could make the progress that science tells us is needed now.

The other reason for my thinking that it is not the right thing to pursue is that it is a top-down approach. If we had done it like that from the beginning it would have required me to say, “That site, that site and that site have been selected by the Government to become highly protected marine areas.” That process would not have had the community engagement and the socioeconomic assessment that I wanted to have running through it. However, I appreciate that how such matters should be approached involves a question of balance. That is why we did not pursue a pilot.

It falls within Mairi Gougeon’s portfolio, I understand.