Net zero plans scaled back amid concerns over soaring fuel and heating bills

A key part of the Government’s net zero strategy that would have forced up petrol and heating bills has been scaled back amid concerns of a cost of living crunch.

The Telegraph has learned that proposals to expand the UK Emissions Trading Scheme in a bid to reduce carbon emissions have been significantly watered down after a backlash from senior government ministers.

A consultation about what areas the scheme, which caps carbon emissions in certain sectors, should be applied to had included fuel used for vehicles and heating in the UK.

But both of those elements have now been removed after fears that it could trigger a political storm, given that petrol and energy bills have seen marked increases in recent months.

The Whitehall battle has been playing out in private, with repeated redrafts of the consultation being made before it is released to the public.

The document outlining the approach was due to be published in the summer, before the Cop26 UN climate change summit in November.

Now it is expected in the spring of 2022. Early drafts said that the emissions trading scheme would be “radically” expanded, but that word is understood to have been dropped from the latest version of the document.

The scaling back of the plans reflects pressure from Tory MPs over how Boris Johnson will deliver his pledge to make the UK a “net zero” carbon emitter by the year 2050.

Opinion polling suggests broad support for tackling climate change but backing drops when voters are confronted with personal costs that could be associated with making the economy greener.

The plans will still seek to bring in emissions trading for the marine sector and waste incineration, which could ultimately force up costs for shippers and councils.

The door will also be opened to one day creating a trading emissions scheme for the agricultural industry by announcing a new push to measure carbon emissions there. However, government figures continue to argue publicly and privately that no decision has been taken on capping emissions in agriculture, given the political sensitivity of adopting what critics dub a “meat tax”.

The UK Emissions Trading Scheme sees carbon emissions capped in certain sectors, putting a price on each tonne of carbon dioxide or its equivalent. The cap is then lowered over time, increasing the price and encouraging businesses – and consumers, who can see the price rise passed onto them – to use cleaner energy sources.

The scheme, which came into place this January and replaced a European Union version, is seen as a critical way of the UK hitting its net zero ambition by encouraging change.

It currently applies to energy intensive industries, the power generation sector and aviation, but the Government is looking to expand its scope.

Plans that the scheme would apply to vehicles and heating leaked in July to The Times, with suggestions that average car and energy bills could each increase by £100 a year or more. But both elements have now been removed from the consultation, The Telegraph understands, despite the sectors contributing a major proportion of overall UK emissions.

Energy bills have risen 30% since 2010

A version of the consultation circulating in September accepted that bringing in a carbon trading scheme for heating fuel would have seen costs passed onto consumers.

It also contained a warning that three million “fuel poor” families in England would be among the worst impacted by such price increases.

The so-called “Fossil Fuel Emissions Trading Scheme” had been due to come into effect in 2023 but has now been dropped.

A call for evidence about “how emissions can be suitably measured, reported and verified” when it comes to agriculture and land use continues to be in the plan.

The move will be seen as a step towards a cap and trade scheme for the sector, with better information needed before any decision on implementation is taken.

Government figures are insistent, however, that the formal position for now remains that there are no plans to bring in emissions trading for the sector.

One government source stressed that the whole policy area continued to be under discussion, with the final approach not set to be signed off and announced until next spring.

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