³ÉÈË¿ìÊÖ

If the grid capacity is there, it could be by 2030.

You ask me whether I recognise the situation. We actually recognised it back in January, which is why we suggested a four-nations approach to tackling the issue as well as a four nations joint ministerial group in much the same way that we worked on a four-nations basis on issues around the pandemic. However, the UK Government has not taken up that offer.

Will we work with the UK Government? Of course we will. We will work with it where we can and highlight the actions that we think should be taken. However, we can work with parties only if they are prepared to work with us. We have not yet had a positive response to the suggestion of all four nations working on a joint ministerial basis, which I think, given the nature of the crisis, would be the right thing to do.

The Jackdaw oil field is at a different stage. I saw the motion that you lodged in Parliament on the matter; our position on Jackdaw is the same as our position on Cambo, and that position has been reinforced by the Scottish and UK Governments’ independent adviser on climate change, the Climate Change Committee, which said that there should be a compatibility checkpoint not just for new projects but for consented developments that are not yet in production. Our view on Jackdaw is exactly the same as our view on Cambo with regard to the compatibility checkpoints, and it has now been reinforced by the review and recommendation of the Climate Change Committee.

The fact that such a large number of companies—largely unhedged companies—has exited the market during the crisis demonstrates the gamble that they have taken in the energy market. They have been gambling with a business model that is based on low wholesale gas prices and it has gone wrong for them. They simply move out of the market and the costs of that are picked up by consumers, because of the way in which the supplier of last resort system operates.

We should not tolerate companies operating in the energy markets that do not have the capital and the capacity to manage volatility in those markets. They gambled when the prices were low and it worked for them. Then, when the price went up, they decided to get out of the market because the business model no longer worked.

I think that the regulator should have addressed the issue at an earlier stage, because there was always the potential for that to happen. It is okay to say, with hindsight, that we should have moved at an earlier stage, but the regulator is there to model potential risks and to protect the customer. In this case, I think that it has failed, that the system has failed for consumers and that, as a result, we will pick up the costs for many years to come, given the billions of pounds that are involved.

There is a need for the regulator to recognise the failure on its part. The UK Government should also be looking at why the situation has been allowed to arise and at how we can make sure, through the introduction of regulatory changes by Ofgem, that it does not happen again in the future.

That brings me to the announcement that Ofgem intends to move to a system that involves a quarterly, rather than a twice yearly, price cap mechanism. I do not think that that will change anything. It will not change people’s household bills, unless the cost of fuel starts to drop significantly. All that it will mean is that people might get a drop in price at an earlier stage, so that, instead of waiting six months for it, they might have to wait only three months. Although that is a positive, I do not think that the proposed change to the system will change anything in the present market, given where we expect energy prices to go over the course of the next year to 18 months, according to the intelligence that I am getting about the sector.

I also think that the proposed change risks putting people in difficulty. With the price cap increase in October last year, which resulted in a significant rise in prices over the winter, when people’s demand for energy consumption was at its peak, people at least knew that they had some respite until April, when the next price cap review would be implemented. If we had had a quarterly system, there would have been another increase in January, right at the peak of demand, when folks’ energy use is at its highest level. That could have resulted in more people being put into financial difficulty. There are potential unintended consequences of moving to a system of four price cap changes a year. It has potential benefits, as I mentioned, but there are also potential downsides.

In addition, I do not think that that change amounts to the fundamental reform that is necessary to make sure that we have an energy market that protects consumers’ interests. The very fact that so many companies exited the market for the reasons that I outlined demonstrates that consumers’ interests were not sufficiently front and centre in the way that the system was being regulated.

As regards Ofgem’s view that people should go to their energy company first if they have concerns, I think that that is, by and large, probably still good advice. Some energy companies have hardship funds and payment plans that they can use to assist people who are having difficulty. It is important that the regulator scrutinises the way in which suppliers provide that advice and information, that the information is appropriate and that they also provide advice on where customers can go for independent advice, over and above what they have been told by their energy supplier.

Transmission charges continue to act as a barrier to the roll-out of renewables in Scotland. We know that they make renewable energy, both onshore and offshore, more expensive in Scotland than in other parts of the UK, because we still have a system that is based on geography. Ofgem brought forward its proposal on locational marginal pricing without consulting the Scottish Government and without us knowing anything about it. That came completely out of the blue, despite the fact that Ofgem had apparently been working on its proposal for more than a year, and despite the fact that I meet Ofgem on an almost quarterly basis. There was no intelligence about it whatsoever.

Our early analysis of locational marginal pricing is that it could still have a negative impact on Scottish projects; indeed, it could potentially have even more of a negative impact that the current arrangements. We are doing further work on that. We have discussed the matter with National Grid to express our frustration and unhappiness at the lack of engagement with the Scottish Government on such an important issue.

We are also feeding into a consultation exercise that the Department for Business, Energy and Industrial Strategy is taking forward as part of its transmission charging arrangements. Locational marginal pricing is one option—it is not necessarily the only option. It will be interesting to see what other options BEIS chooses to bring forward.

The reality is that the transmission charging mechanism that we have has been designed on the basis of closeness to population centres. However, as the vast majority of renewable energy that we will have in future will come from locations away from population centres, we need a transmission charging scheme that recognises that, that is fair to consumers and developers, and which does not become a barrier to the type of investment that is absolutely critical to driving down energy costs—in other words, investment that ramps up renewable energy capacity.

We are due to receive data from the third sector organisations that distribute that fund for us so that we can look at where we at with distribution and whether we need to add resources to it. Those measures are part of what we are considering in the Government’s wider response in trying to support people.

The fund is specific and targeted at those who are experiencing particular distress and who are at risk of self-disconnecting because of energy costs. We expect to get data from third sector organisations in the coming weeks on how the overall amount of the fund is being utilised at the moment, and we will then be able to assess whether we need to do more to help support and sustain the fund in future. We are very open to considering whether we can provide further support through that fund, if necessary.

I do not think that we have disaggregated the data on fuel poverty, and I do not know whether we have disaggregated the broader poverty data, either. I suspect that we have, and I would broadly expect the fuel poverty data to mirror the broader poverty data in its disaggregation. If the disaggregated poverty data were to show that women are experiencing greater levels of poverty, which I believe it does, I would expect that to be mirrored in the fuel poverty element, too. However, I do not think that we have disaggregated data on a gender basis with regard to fuel poverty.

Thank you, convener, and good morning, everyone. The Scottish statutory instrument that you are considering is routine. It concerns the application of the Scotland-specific equalities duties to the new environmental governance body, Environmental Standards Scotland.

As ESS is established as a non-ministerial body—it is part of the Scottish Government Administration, albeit independent of ministers—it is automatically covered by the public sector equality duty in the Equality Act 2010 and there is no need for a separate order to add ESS to the scope of that duty.

The Equality Act 2010 (Specific Duties) (Scotland) Amendment Regulations 2022 will apply the Scotland-specific equality duties to Environmental Standards Scotland by adding it to the Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012. Those will require ESS to publish equality outcomes and report on progress towards achieving those; report on the mainstreaming of equality; and publish information on the gender pay gap and equal pay. It is important that ESS is included in the full range of equality duties that are expected of Scottish public bodies.

Committee members will be aware that the Scotland-specific duties are currently under review and that a consultation is on-going on proposed changes to the 2012 regulations. However, it is not reasonable to delay the inclusion of ESS in those duties. ESS will be included with other public bodies in the scope of amendments to the 2012 regulations.

I hope that that provides a useful overview, and I am happy to respond to any questions that the committee may have on the matter.

Given that ScotRail is about to come into public ownership, it will be part of the Scottish Administration and will be covered by the 2010 act. The Minister for Transport is considering any further changes that we might make.

Good morning. I am pleased to give evidence to support the draft affirmative instrument to amend the Greenhouse Gas Emissions Trading Scheme Order 2020.

The UK emissions trading scheme is a key policy for meeting Scotland’s ambitious emissions targets. The scheme is a cap and trade system that is designed to limit overall emissions in the covered sectors and incentivise cost-effective decarbonisation.

When the scheme was established in January 2021, the legislation dealt exclusively with issues essential to its initiation and continued operation. At the time, ministers from the four Governments agreed to defer implementing some technical and operational aspects that were not immediately essential, with the intention of adding further provisions during the first year of operation. That is the purpose of the affirmative instrument and the negative instrument, which were laid simultaneously in Parliament.

To be clear, the provisions in the affirmative instrument are designed to support the continued smooth operation of the UK ETS and to deliver the existing policy intentions rather than to fundamentally change the way in which it functions or applies in Scotland. In broad terms, the instrument aims to clarify the powers of enforcement that are granted to the regulators—the Scottish Environment Protection Agency, in Scotland’s case—and some of the enforcement actions that are available to them. It also extends enforcement powers to the registry administrator—that is, the Environment Agency.

The instrument makes it an offence to intentionally obstruct a regulator in exercising powers of entry; prevents double counting of excess emissions penalties that apply for some operators; and gives the regulator powers to impose civil penalties on operators that fail to return allowances to which they are not entitled.

Finally, although I am unable to go into specifics today, given the on-going discussions with the other Administrations, I am confident that, in the coming months, we will be in a position to publish a joint consultation to explore further policy reforms to the UK ETS as well as the common framework agreement. At that point, I would be more than happy to return to the committee, should it wish me to, in order to discuss the matter in greater detail.

Thank you for inviting me to give evidence on the net zero, energy and transport portfolio budget for 2022-23.

The portfolio draws together many of the key strands that are required to deliver on the Government’s ambitious and world-leading plans around climate change. The portfolio budget and policy areas will ensure that significant progress is made in delivering the commitments that are embedded in the programme for government and the Bute house agreement, thereby enabling the Scottish Government to successfully meet its statutory climate targets and protect the natural environment, while continuing to support the most vulnerable in society and deliver a safe, accessible and affordable public transport system.

Our ambitious 2022-23 budget requires a sea change in the direction of Government expenditure, with reprioritisation towards programmes that underpin our move to a green agenda and cover all aspects of the portfolio: the natural environment, public transport, active travel, energy and climate change.

In the budget, we are spending more than £3.4 billion on transport, including investment of almost £1.4 billion to maintain, improve and decarbonise Scotland’s rail network, and £414 million to support bus services and their use through concessionary travel schemes, including the extension of free bus travel for young persons aged under 22. We will provide a record level of investment in walking, wheeling and cycling, which is increasing to £150 million—an increase of 30 per cent from the 2021-22 figure.

We are also providing record investment to protect and restore nature, including our peatlands, and to tackle the causes of biodiversity loss. We will continue to support our forestry bodies to deliver on the woodlands creation target, which will see 15,000 hectares of new planting in 2022-23.

We recognise that substantial investment is needed to deliver on our waste and recycling targets, and in this year’s budget we are investing more than £43 million to drive Scotland’s circular economy, which will reduce reliance on scare resources and reduce waste.

We are committed to taking strong action to meet the climate challenge and are investing almost £50 million in climate action, including £20 million for the just transition fund to accelerate the development of a transformed and decarbonised economy in the north-east and Moray.

Finally, we will continue to provide significant budget for energy to support heat decarbonisation in order to make our homes and buildings warmer, greener and more energy efficient. That will include increasing funding to help to support the fuel poor through heat transition.

The portfolio’s budget delivers on an ambitious agenda, but it is not without risks, such as the on-going impact of Covid on the public transport system and the uncertainty around demand-led schemes such as the under-22 concessionary travel scheme. However, I reassure the committee that I will continue to reprioritise within my budget not only to meet our legal, statutory and contractual commitments but to achieve value for money against a backdrop of a challenging fiscal position.

I am more than happy to respond to any questions that committee members might have.