Green trade round-up: 'concerning' net zero progress, Emissions Trading Scheme update and EV tariffs

Mon 3 Jul 2023
Posted by: Phillip Adnett
Trade News

Green trade round-up

The IOE&IT’s latest round-up of developments in green trade looks at a recent report on the government’s progress on hitting net zero, an update on the Emissions Trading Scheme and a fresh warning on the tariff ‘cliff edge’ facing electric vehicles.

ETS update

The UK government, alongside the devolved Scottish and Welsh administrations and the the Department of Agriculture, Environment and Rural Affairs for Northern Ireland, have given a joint response in relation to developing the UK Emissions Trading Scheme (ETS).

ETS was initially introduced in 2021 as a replacement for the UK’s participation in the EU’s own version of the scheme. The scheme requires emissions-intensive firms to purchase licences to release CO2.

Responding to a public consultation, the various authorities have announced a number of changes to the policy, including setting a new total ETS cap to be consistent with the UK's net zero plan, phasing out aviation-free allocations, and expanding the scope of the scheme to include domestic maritime and energy from waste incineration.

‘Missed opportunity’ on climate

A recent report has described the government’s progress towards hitting its net zero goals as “worryingly slow”.

The Climate Change Committee’s (CCC) 2023 Progress Report to Parliament welcomed the government’s publication of its Carbon Budget Delivery Plan but said policy development continues to be too slow.

Recommendations from the committee include publishing a land use strategy, appropriate funding for afforestation, a block on airport expansion until a capacity study and emissions plan is in place, and better advice for businesses on carbon offsetting.

The Guardian notes that the CCC highlighted local transport, home heating and solar farms as some of the areas in which progress has stalled.

Phillip Dunne, a Conservative MP and chair of Parliament’s Environmental Audit Committee, described the report as “concerning” and said that it should serve as a “wake-up call for ministers”.

EV tariff warning

The Society of Motor Manufacturers and Traders (SMMT) has warned that Britain’s electric vehicle (EV) sector could fall off a cliff edge unless new rules of origin requirements in the country’s trade deal with the EU are delayed until 2027.

As reported previously by the IOE&IT Daily Update, origin rules contained in the EU-UK Trade and Cooperation Agreement could make it difficult for manufacturers to source parts from abroad.

The warning comes as the British car industry had its best May for production in four years with 79,406 vehicles produced. Nearly 80% of these were exported, including 56% to the EU.

SMMT CEO, Mike Hawes, said growth was at risk from tariffs:

“We need to make sure those [tariffs] aren’t applied or else there is the real potential that the EVs are more expensive and face a tariff whereas petrol diesel don’t.”

Politico reports that EU-UK talks over the ‘cliff edge’ have stalled, despite business and trade secretary Kemi Badenoch pushing for relief for car producers.

EU and New Zealand trade deal

The EU has agreed a free trade agreement (FTA) with New Zealand that the bloc claims is the first to fully integrate its approach to trade and sustainable development.

The FTA includes a dedicated sustainable food systems chapter, a trade and gender equality article, and provisions on trade and fossil fuel subsidies reform. It also liberalises green goods and services at entry into force.

According to the EU, bilateral trade is expected to grow under the agreement by up to 30% with EU annual exports potentially growing by up to €4.5bn.

Funding for energy fuel switch

The government is providing £80m for firms to ditch fossil fuels and adopt cleaner forms of energy.

Food manufacturer Kellogg’s is among 29 successful projects to change its production processes to cut their emissions. It plans to use a £3m investment in hydrogen to fuel its cereal making process.  

Scotland’s Annadale Distillery will receive £3.6m in government investment in new thermal heating technology. 

Edie reports that government funding also includes 11 carbon capture, usage and storage (CCUS) innovations to the tune of £9.2m, plus a further £21.2m for projects using bioenergy for hydrogen production and CCUS.