Debate contribution: Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Debate contribution by Mr Andrew Muir on 16 February 2026.

MLA

Mr Andrew Muir

Party at the time

Alliance Party

Date

16 February 2026

Type

Debate contribution (made as a minister)

Business

Executive Committee Business

Heading

Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Assembly identifier

Official Report component 5391111

Read the official Assembly record

Text

I beg to move

Thank you, Madam Principal Deputy Speaker. I am grateful for the opportunity to bring the motion forward. I do not propose to cover in detail the background and operation of the UK emissions trading scheme (ETS). I am, however, happy to address any clarification questions that Members may have. Members, and, in particular, members of the Committee for Agriculture, Environment and Rural Affairs, have engaged positively with my Department on the emissions trading scheme. There is good understanding across the Chamber of the importance of that UK-wide decarbonisation scheme to our climate targets and those of the UK Government. The proposals that are contained in the draft Order, which make changes to the free allocation element of the scheme, were subject to extensive engagement with stakeholders through two joint UK-wide consultations on a review of free allocation methodology and distribution in the UK ETS. The free allocation of UK ETS allowances is the main policy instrument through which carbon leakage risk is currently addressed in the UK. The free provision allowances to operators that are considered to be at risk of carbon leakage reduces their carbon price exposure to lessen the risk of offshoring production. Alongside my counterparts in England, Wales and Scotland, I agreed to the content and subsequent publication on 26 November 2025 of the UK ETS authority response to those consultations, which included commitments to make three technical changes to UK ETS free allocation policy. The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026 was laid under the draft affirmative resolution procedure before both Houses of Parliament on 16 December 2025 and before the Scottish Parliament, the Welsh Senedd and the Northern Ireland Assembly on 17 December 2025 under the Climate Change Act 2008, which requires that the Order be laid in draft and debated in each legislature where it is to have effect. So far, the draft Order has been debated and approved by the Welsh Senedd and the Houses of Parliament. If the draft Order is approved by the House, it will make the following three changes to the calculation of free allocation for the 2027-2030 allocation period. The first is an adjustment to account for COVID-19 impact. ETS installations' historical activity and emissions levels during a defined baseline period are a key component of the free allocation entitlement calculation. To account for the disruption that was caused by the COVID-19 pandemic, the draft Order will allow participants the option to exclude activity data for the year 2020, or 2020 plus 2021, as potentially reduced levels of activity during those years of COVID disruption could result in baseline data reports being unrepresentative of normal activity, potentially unfairly affecting free allocation entitlement. That approach aims to ensure a fair representation of typical activity levels for the 2027-2030 allocation period. The second change relates to the benchmarks used in the free allocation calculation. Benchmarks are set at an average of the top 10% most efficient operators in each industrial sector, with operators closer to those benchmarks receiving a higher proportion of free allowances. Efficiency is measured on the basis of emissions generated per unit of product, with lower emissions per unit indicating higher efficiency. That ensures that free allocation continues to reward and incentivise decarbonisation efforts. The UK ETS benchmark values have been aligned with EU values since the implementation of the scheme in 2021. This instrument retains current benchmark values for the 2027 scheme year and provides for the adoption of updated EU benchmark values for the 2028-2030 scheme years, once those values are available. The decision across the UK to retain alignment with EU benchmarks has been considered in the context of the UK and EU's announcement that they will work towards linking their respective emissions trading schemes. I welcome that. Maintaining alignment with the EU approach should avoid the creation of competitive distortions between the schemes and increase consistency in decarbonisation incentives. The approach has been welcomed by business and industry here. The third amendment allows for the phased reduction of free allocation for sectors covered by the UK carbon border adjustment mechanism (CBAM). From January 2027, CBAM will be introduced, and it will eventually replace ETS free allocation as the main carbon leakage mitigation tool for the sectors in scope, with the gradual phase-out of free allocation coinciding with the UK CBAM introduction. A carbon border adjustment mechanism works on the principle of placing a carbon price on imports of goods from certain sectors, with the aim of creating a level playing field by ensuring that imported goods face the same carbon price as those produced domestically. The CBAM should, therefore, ensure that highly traded carbon-intensive products that are imported from overseas face a carbon price comparable to that which is payable for products produced in the UK and that UK decarbonisation efforts lead to a true reduction in global emissions, rather than simply displacing carbon emissions overseas. The draft Order enables the reduction of free allocation annually during the period 2027-2030 for UK ETS operators covered by the UK CBAM. This approach will ensure a gradual transition for UK industries from free allocation to the UK CBAM as the primary carbon leakage mitigation measure. Those are the main elements of the Order. It will make three technical changes to the UK ETS free allocation regulations that relate to historical activity data, an update to sector-specific benchmarks and the introduction of the phased reduction of free allocation for sectors that overlap with UK CBAM. The amendments are necessary to ensure the continued effectiveness of the scheme and will help to ensure that the scheme continues to play its part in incentivising greenhouse gas emission reduction in Northern Ireland and across the UK by ensuring that free allocation is targeted to the sectors most at risk of carbon leakage. Accordingly, I commend the Order to the House.

977 words. Text as published by the Northern Ireland Assembly.

Assessment

Not flagged

Jev’s structured answers

Assessed 21 October 2026 at 14:53 UTC by jev-1.13.0 (requested as typesafe/jev) under rubric 2026.10-r9, methodology 1.9.

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