Written question WQ88703

The UK Government has recently consulted on carbon leakage mitigations, including product standards and carbon border adjustment mechanisms (CBAMs). Due to the significant links with the UK Emissions Trading Scheme (UK ETS) and its free allocation policy, the UK Government has committed to work closely with the UK ETS Authority (formed of Welsh Government, UK Government, Scottish Government, and Northern Ireland Executive) to ensure the policies are cohesive. The Welsh Government fully intends to hold the UK Government to this commitment. In support of this objective, whilst I have raised the issue of CBAM with the UK Government previously, I will do so again.

Free allowances provide a key policy tool within the UK ETS to mitigate the risk for industry participants of carbon leakage - those who are trade exposed and therefore risk relocating to a country without the same level of climate ambitions. As part of the UK ETS Authority’s Government Response to the “Developing the UK ETS” consultation, we have committed to guarantee current levels of free allowances for industry participants until 2026. During the intervening period we will review the allocation methodology to ensure free allowances are being targeted at those most at risk of carbon leakage. This will ensure we continue to support industries at risk of carbon leakage, such as the steel sector, until any further carbon leakage policies such as a CBAM are introduced.