The EIUG and MCCG call on BEIS to postpone introducing a Net Zero consistent cap until Government has developed its policies to support industrial decarbonisation further and put in place policies to mitigate the risk of carbon leakage due to direct and indirect emission costs.
Furthermore, BEIS should publish an impact assessment setting out its appraisal of the impact of the proposals and giving stakeholders time to engage with the evidence to inform policies before any decisions are taken. The EIUG and MCCG find it concerning that the Government propose to reduce the number of free allowances for industry without a proper assessment of the risk of carbon leakage for these industries. BEIS’ Research Paper Number 2020/017, backed the analysis it already has for the compensation schemes and HMT’s Net Zero review, should inform such an assessment.
The EIUG and MCCG also suggest that Government should remove the discretion of the UK ETS Authority on whether to intervene or not and make intervention automatic, based on clear and transparent rules, similar to the process to set the annual level of the Renewable Obligation, when the CCM is triggered and replace the current threshold with a mechanism that tracks the European carbon price.