Contribution
My Lords, it is a pleasure to follow the noble Lord, Lord Jackson of Peterborough, who had more of a maritime emphasis, particularly in his questions. I acknowledge the strong contribution made by my noble friend Lord Greenway. The reality is that the SI before the House is not suitable in its current form. I will talk particularly from a maritime aspect.
Many of the leading international and, indeed, local ship owners in the industry are committed to net zero by 2050. The UK Chamber of Shipping called for the global shipping industry to reach net-zero emissions by 2050—prior, in fact, to the UK Government and the IMO. The industry has consistently supported the effective mechanisms to cut emissions. Across the sector, owners have invested in new technologies and pioneering innovation such as new hybrid vessels, and invested to enable shore power connections to meet commitments and lead the drive towards net zero. But the SI inflicts significant new expenses on the ship owner and operator, without the Government committing to invest the substantial sums raised in net-zero-related investment, as has been agreed by the EU.
An obvious potential use for the funds might be in shore power. Significant investments have already been made by ferry operators and cruise ship owners in ships that are already fitted to link up to shore power, with obvious benefit to the environment and the atmosphere. But, as we have heard from the noble Lords, Lord Berkeley and Lord Ashcombe, there is very little installed power in the UK. These significant costs on the owner are expected to curtail the scope for further investment on the ships side in measures and equipment that will reduce emissions.
Let us be very clear: there is an immediate impact on costs. The Government’s own impact assessment calculated, as we heard, the administration cost of the scheme at £179 million, far exceeding the estimated abatement investment of £22 million, implying that, for every £1 spent on decarbonisation, £8 is spent on admin and bureaucracy. Does this sound like good business sense?
The additional costs will impact on businesses and communities. We should not forget that these businesses and communities are located on islands or along the coast, which are already recognised, typically, as economically disadvantaged. Surely, the Government do not wish to further disadvantage these communities. Estimates show that, without exemption, annual fuel costs may increase by up to 25% to 30%. The EU ETS has increased intra-EU maritime and transport costs by around £1 billion annually, with ticket price impacts estimated at up to 15%. Similar outcomes are expected under the UK ETS.
We know that the challenges faced by the Scottish islands have been recognised, and they are excluded from the scheme; and I certainly support the view that the Isles of Scilly, in the case of a larger ship, and the Isle of Wight should also be excluded.
Introducing new monitoring requirements alongside responsible emissions from 2026 adds administrative burden, compliance burdens and risk, and working capital costs. At the same time, vessels cannot yet access alternative fuels, onshore power or adequate grid capacity to reduce emissions, none of which exists in meaningful degree in UK ports today. Without a clear commitment on the part of the Government to recycle the revenue from maritime, the UK ETS will simply divert capital from decarbonisation investment in vital infrastructure, shore power and alternative fuels—and, as has been noted, it may very well just disappear into government coffers.
The industry wants rule introduction to follow that of the EU in, for example, timelines, enforcement mechanisms and data systems, to avoid divergence that could hinder linkage. The recommendation of the industry is for a phased implementation for the necessary data reporting, like the EU did and the UK has, in fact, already done for the waste incineration industry. Phased introduction in allowances to surrender, which start at 40% obligation in the first year and are 70% in year two, rising to 100% in year three, would also be a suitable introductory system.