Instruments of interest
Greenhouse Gas Emissions Trading Scheme (Withdrawal Agreement) (EU Exit) Regulations 2020 (SI 2020/1369)
11.This instrument makes changes to prepare for the end of the Transition Period (TP) in relation to emissions trading. The instrument implements the Northern Ireland (NI) Protocol by providing a basis for emissions from electricity generation in NI to remain in the EU Emissions Trading System (EU ETS). The Department for Business, Energy and Industrial Strategy (BEIS) says that this will ensure that the Single Electricity Market (SEM) across Ireland and NI is not impacted by the UK’s withdrawal from the EU. The instrument also provides a legislative basis for UK operators to meet their compliance obligations in respect of the EU ETS 2020 scheme year, which fall due in spring 2021, in line with the UK’s commitment under the Withdrawal Agreement.
12.BEIS says that the current EU ETS covers around 1,000 power stations and industrial plants in the UK and that after leaving the EU ETS at the end of the TP, the UK will establish its own alternative carbon pricing policy, either a stand-alone domestic ETS7 or a carbon emissions tax. With the end of the TP approaching, businesses have limited time to prepare for any new arrangements, so we asked the Department when the Government will announce the new carbon pricing policy. BEIS told us that:
“It is right that as we leave the EU ETS we take this opportunity to properly consider what our long-term carbon pricing policy should be, and what will best support UK businesses in decarbonisation and to plan to have a robust carbon pricing policy in place in all scenarios.
Having two fallback options — a standalone UK ETS and a carbon emission tax — on the table gives confidence and certainty that, under any scenario, the UK will have a strong carbon pricing policy in place from January 2021. We are aware that businesses are preparing for the end of the transition period and are keen to know the carbon pricing policy which will apply from 1st January 2021 and we will announce the outcome as soon as possible to allow participants to prepare. As we reach the endgame of negotiations, it will become clearer what the best approach for UK business, and UK climate policy will be.”
13.We note that the UK’s future carbon pricing policy is an important aspect of any potential arrangements for a level playing field with the EU. We are concerned that the time for clarification of the UK’s future policy in this area is diminishing rapidly.
Direct Payments to Farmers and Cross-Compliance (Simplifications) (England) (Amendment) Regulations 2020 (SI 2020/1387)
14.This instrument simplifies the Direct Payment schemes for farmers in England as well as the arrangements for the inspection and enforcement of Cross Compliance in England.8 Amongst other changes, the instrument:
- Proposes to simplify the processing of applications of cross-border farmers who have land in England and other parts of the UK, so that applications for Direct Payments to each part of the UK where they have land do not have to be treated as a single application, making it easier and quicker for such applications to be processed. The Department for Environment, Food and Rural Affairs (Defra) told us that it has worked closely with the Devolved Administrations, and that they are planning equivalent changes, so that in future each Administration will process the applications submitted to them only in relation to land in that nation.
- Removes the ‘entitlement usage rule’. Entitlements are used by farmers to claim payments under the Basic Payment Scheme and the entitlements usage rule requires farmers to use all their entitlements to claim payment at least once every two years to prevent them being taken away. This instrument ensures that farmers will not have entitlements taken away if they do not claim payment on them.
- Removes the greening rules which are considered to have delivered little environmental benefit, while causing unnecessary administration. Defra says that this will not impact on the overall payments that farmers receive, as the budget for greening payments will be absorbed into the Direct Payments’ budget.
- Makes it easier for farmers to apply for Direct Payments, including by extending the time allowed to change applications or send supporting documents after the application deadline without being penalised.
- Removes the requirement to inspect eligibility for Direct Payments at a minimum level and instead enables the Rural Payments Agency to carry out inspections reflecting the risk of non-compliance.
- Changes the inspection and enforcement of Cross Compliance, for example by making penalties more proportionate.
15.We received a short submission from Wildlife and Countryside Link which raised a concern about a potential weakening of compliance with environmental standards and asked about the rationale for removing the use of monitoring to check on land managers. We put these issues to Defra, which explained that the new arrangements aim to better target inspections of compliance where there is a potential for significant environmental harm, and that removing the use of monitoring will not have any impact as monitoring has not been used in England. We are publishing the submission and Defra’s response on our website.9
Channel Tunnel (Customs and Excise) (Amendment) (EU Exit) Order 2020 (SI 2020/1417)
16.This instrument ensures that only one set of duty-free allowances applies when travellers import goods when entering the UK on Eurotunnel shuttle trains. HM Revenue and Customs (HMRC) explains that a duty-free shop is currently placed outside the so-called ‘control zone’ at the Eurotunnel site in France which is a part of the territory of France agreed between the French and UK governments within which Border Force officers are empowered to carry out customs controls. This means that after the end of the Transition Period, travellers would be able to enter the control zone, and then subsequently exit and re-enter it, having made further duty-free purchases, before boarding a shuttle train. HMRC says that this would mean that the same traveller could import goods, including alcohol and tobacco, more than once, and therefore benefit from duty-free limits more than once.
17.This instrument ensures that when a traveller enters the control zone more than once, any previous importation of goods before boarding the train is disregarded, so that the traveller only benefits from one duty-free allowance for the imported goods. The instrument also ensures that this disregard is without prejudice to any potential enforcement action, for example a penalty for not correctly declaring goods, that is applied to the goods that were brought into the control zone on that first entry. HMRC says that this is a temporary measure and that Eurotunnel intends to reconfigure the site in France to ensure that it is not possible to exit and re-enter the control zone. Additional legislation will be introduced shortly to require travellers entering the UK on shuttle trains to make advance declarations for the goods they are importing.
7 Draft Greenhouse Gas Emissions Trading Scheme Order 2020, see: 24th Report, Session 2019-21 (HL Paper 116).
8 Cross Compliance is the set of rules on the environment and plant and animal health and welfare that farmers and land managers must comply with to receive Direct Payments and other farm payments.
9 SLSC scrutiny evidence page: https://committees.parliament.uk/committee/255/secondary-legislation-scrutiny-committee/publications/8/scrutiny-evidence/.