Diolch, Llywydd. I'm very pleased to be able to contribute to today's debate on behalf of the Climate Change, Environment and Rural Affairs Committee. The committee has considered the draft Order in the context of its wider work on the UK emissions trading scheme common framework. Our work on the common framework will not be completed until much later this term when all the relevant agreements are in place. While I would not wish to pre-empt the committee's conclusion, several important issues have emerged, which are worth drawing to the attention of Members of the Senedd to help inform today's debate.

The EU emissions trading scheme is a key tool for reducing greenhouse gas emissions and a cornerstone of Wales's policy to tackle climate change. In order for Wales to realise its climate change ambitions for the post-Brexit era, a credible, workable replacement for the UK's participation in the EU ETS is crucial. Before turning to the detail of the UK scheme, I'd like to express our disappointment that Members of the Senedd are being asked to approve the draft Order, which establishes the UK ETS, without having had an opportunity to consider the provisional framework agreement. It's this agreement that will set out the governance arrangements in relation to the UK ETS, including processes for future decision making and dispute resolution. We understand that the timing of the publication of this provisional framework agreement is outside the control of the Welsh Government. However, we expect the Welsh Government to seek to ensure that, in future, Members of the Senedd are not asked to approve or agree legislative elements of common frameworks without having had a sight of all the associated framework documents.

Moving on to the UK ETS established by the draft Order, the UK ETS closely mirrors the design of the current EU scheme. According to the Minister, this is to minimise any barriers or perceived barriers to a linking agreement with the EU. This appears to be a sensible approach, given the expressed preference of governments for a EU-UK linked scheme. At the same time, it has led to criticism that the UK scheme lacks ambition and is a lost opportunity to establish a new post-Brexit system that demonstrates that the UK is a world leader in emission reduction. 

I'll focus my comments on the key provisions included in the draft Order that are of most interest to the committee: the scope of the scheme and the cap—the total level of emissions permitted. The scope of the UK scheme will match that of the EU scheme, both in terms of sectors and greenhouse gases covered. This will ensure the schemes are linkable, but it is unclear how this will impact on the effectiveness of a UK stand-alone scheme. There are approximately 11,000 participants in the EU scheme; this will decrease to about a 1,000 in a stand-alone scheme. Broadly speaking, the wider the market, the more successful the scheme. We heard that without an increase in scope, there is a danger that a UK stand-alone scheme may be volatile. If a linking agreement is not achieved, it will be necessary to look again at the scheme's scope, sooner rather than later. The four Governments have committed to considering the option of expanding the scope, but, realistically, any potential expansion of the scheme's scope may be years away.

Moving on to the emissions cap, the initial or interim cap will be set at 5 per cent less than the UK's notional share of the EU ETS. This cap, like the Minister pointed out, is tighter and therefore more ambitious than it would have been under the EU scheme. In the UK CCC's letter to the four Governments dated March 2020, it said that the Governments' interim proposals for the scheme are inconsistent with the UK's net zero ambition, specifically in relation to the high level of allowed emissions under the proposed cap. It goes on to say that adopting the proposed trading scheme risks sending a damaging signal internationally, and if the cap is set too high, it risks undermining the scheme as a trading scheme. Yet, the Governments have not heeded this warning in finalising their proposals. Instead, they have committed to reviewing the cap in light of the UK CCC's advice on future carbon targets due next month. But with no prospect of revising the cap until at least January 2023, the scheme will be operating at a suboptimal level in its early years. Lord Deben, chair of the UK CCC impressed on us as a committee the importance of getting it right and getting it right from the beginning. We remain to be convinced that the scheme established by the draft Order will do this.

Llywydd, we are drawing attention to these issues in the full knowledge that today's vote is a 'take it or leave it' decision. Our report on the UK ETS common framework will set out our views on the scheme, as established by the draft Order, and any improvement we believe needs to be made, going forward. Finally, although we're being asked to approve the draft Order before us today, whether the UK scheme will actually come to fruition remains to be seen. It is deeply regrettable that, with only a few weeks away from the end of the implementation period, the UK Government has yet to clarify whether, if a linking agreement cannot be reached, its preference would be for a stand-alone UK scheme or reserved carbon emission tax. The UK Government may, as yet, take unilateral action to introduce a reserved tax. I would not wish to open up today's debate on the rights or wrongs of such a decision. However, if such a decision is taken, the draft Order before us, once made, will become redundant. Minister, if that is the case, can you clarify whether the Senedd will have a role in repealing this Order? Diolch, Llywydd.