Energy and clean growth minister Claire Perry has been pressed to elaborate further on the government’s plans for carbon pricing once the UK has left the European Union.
The chair of the House of Lords EU Energy and Environment subcommittee said there are a number of “outstanding questions and concerns” following her appearance before the body last month.
During the course of the hearing, Perry confirmed the government’s intention to create a new carbon market linked to the EU Emissions Trading System (ETS) if the UK leaves the trading bloc with a withdrawal agreement in place.
But in a subsequent letter to the minister, Lord Teverson said Perry had failed to answer whether the government would be satisfied with the arrangements negotiated by Switzerland as part of an agreement to tie its own carbon market to the EU ETS.
“Would you be content with the balance of policy influence and constraints represented by the current EU-Switzerland arrangement, or will you be seeking a greater role in shaping the EU ETS if it is linked to a domestic scheme?”, he asked.
“Are there any constraints on Switzerland arising from their emissions trading scheme link that you would find unacceptable in a UK context?”
Perry had given assurances that if a link with the EU ETS could not be negotiated, a UK-only scheme would still be viable, citing the examples of standalone carbon markets in South Korea and New Zealand.
However, Lord Teverson said Perry’s confidence was not shared by the committee’s previous witnesses. He quoted Phil MacDonald, acting manager of the climate change thinktank Sandbag, who warned: “If the cap was tight enough to have a meaningful effect on bringing down carbon emissions with a small market, you might move into an area where the price was very volatile”.
He therefore urged the government to seek wider advice on the matter as part of its consultation exercise.
Lord Teverson said the committee had also failed to receive a “clear answer” from Perry or her officials on whether the UK would continue participate in the EU ETS for “some or all” of the four phase of the scheme if the transition period for leaving the EU is extended beyond the start date in 2020.
He noted that the draft withdrawal agreement does not exempt the UK from taking part and asked the minister to provide a clarification.
Perry was additionally challenged on plans to introduce a new carbon tax if the UK leaves the EU without a deal. While Lord Teverson accepted this is not the government’s preferred option, he raised concerns that the proposal is “not being fully developed” on this basis: “The tax may need to take effect from 29 March, so it is vital that the assessment behind it and plans for implementation are robust and on track”.
He questioned if the government would consider updating the level of the proposed tax – set at £16 per tonne in October – more than once a year, and if any measures would be put in place to prevent decisions being driven by political considerations.
Perry was given ten working days to respond to the letter dated 13 March.