Chamber and committees

When it comes to their competitors outwith the UK, the new mechanism that the UK is bringing in—the CBAM—will be phased in as the free allocations drop, which will effectively protect businesses from competition from imports that come from countries that do not have the same emissions trading function or procedure that we have in the UK.

When it comes to their competitors outwith the UK, free allocations will gradually drop from when the new mechanism that the UK is bringing in—the CBAM—is implemented, which will effectively protect businesses from competition from imports that come from countries that do not have the same emissions trading function or procedure that we have in the UK.

Obviously, the ETS and the CBAM are UK Government measures, although the four nations are kept in the loop by the UK Government on the direction of travel.

Obviously, the CBAM is a UK Government measure, although the four nations are kept in the loop by the UK Government on the direction of travel.

It is not really in my gift to say what the UK Government will do. Obviously, the ETS and the CBAM are UK Government measures, although the four nations are kept in the loop by the UK Government on the direction of travel.[ has corrected this contribution. See end of report.]

The ETS is not new. The UK ETS was a replacement for the EU ETS as a result of Brexit—it was brought in by the previous UK Government to replace that mechanism. That was because it was understood that, if we did not have a replacement, that would leave businesses vulnerable. There has been a long period since the end of the previous session of Parliament, when I was sat in the chair that you are in now. At that time, five years ago, we were looking at the implementation of a UK ETS to replace the EU one, because we were exiting the EU. That is a great deal of notice. I guess that the uncertainty at that point, five years ago, would have been about whether the UK ETS was going to work but, of course, it has been working for the past five years.

A business regulatory impact assessment—BRIA—has been done for the instrument. The ETS instrument is designed to protect businesses that have high emissions but that are performing a necessary function in producing what they produce. Free allocations are given to high-emitting businesses that industry needs to operate. Also, the CBAM is coming into force. That will put additional levies on top of imports that are produced in countries that do not have a similar ETS, which will further protect businesses.

All the high-emitting industries in Scotland have substantial free allocations associated with them. When it comes to their competitors outwith the UK, the new mechanism that the UK is bringing in—the CBAM—will be phased in as the free allocations drop, which will effectively protect businesses from competition from imports that come from countries that do not have the same emissions trading function or procedure that we have in the UK. [Gillian Martin has corrected this contribution. See end of report.] If we did not have that, that would put businesses here at a disadvantage.

Yes. If they are high emitting, there are more free allocations associated with their business.

That is when the spatial energy plans will be delivered, so I hope that the strategy will be published by then. However, we have had some curveballs recently. We have had the Finch verdict and various other Supreme Court verdicts, which we must assess so that we can come to an informed view on all those issues and what we think needs to happen. As long as there are no more major curveballs, I hope that the strategy will be published by then.

That was the result of a combination of a couple of things. There was powdery snow rather than the sort of snow that sticks to overhead transmission lines. I am giving my layman’s assessment, given that I was at the relevant Scottish Government resilience room meetings. There was also a lack of wind—on the whole, it was not particularly windy. Storm Arwen was particularly bad in causing outages because there was an unusual wind pattern that brought down trees in winter, when there would not normally have been wind coming from that particular direction. Trees grow to withstand the wind that they expect. Every day is a school day when you speak to people who deal with such outages. Storm Arwen caused a lot of tree fall, which brought down a lot of lines. On this occasion, there was mainly a particular type of snow and there were not the kinds of winds that would bring down power lines.

We will reach out to SEPA and, as and when any information becomes available, we will pass that on to the committee.

Every point that Fergus Ewing has just made I have absolute sympathy with. That is why we have asked NESO to do the strategic planning work that I mentioned in response to Maurice Golden. The assessment that it will undertake will give us that detail. It is all about energy security.

On constraint payments, I think that they are an absolute scandal, to be honest, and they are one of the reasons why we need to improve capacity in the grid. Why are we paying developers to stop generating? Most people in Scotland will find it absolutely unbelievable that that is the case. That energy—that electricity—has nowhere to go, and the grid upgrades will allow more of it to go into the grid and to be used.

There are also opportunities for more local offtakers to take that electricity, too, and the Scottish Government has been looking at heat networks—the work that Màiri McAllan is doing—and at the high-intensity industries that we are trying to encourage to come to Scotland, as part of the work that Kate Forbes is doing with the green industrial strategy.

The work that we have asked NESO to do will be absolutely fundamental to how we go forward. We need to ascertain where the energy security and resilience weak spots are and plan accordingly, and that very important work needs to be done to inform what we, in turn, will do. That future strategic spatial energy plan is, in effect, what we have commissioned NESO to do, and it will allow us to ascertain exactly where the weak spots are in the Scottish grid and in energy generation. We can then plan on that basis with the expert advice that it will supply us with.

Okay—I just wanted to clarify that.

To go back to what Fergus Ewing said, there is an opportunity for constrained power to be used to produce green hydrogen, although the potential for that has not yet been exploited at scale. As you rightly said, in your constituency, the H100 Fife project is leading the way in proving the point that hydrogen could be safely used for heating homes. There are different views on whether that is feasible from a cost point of view, but the H100 project is seeking to prove the concept. I was delighted to be able to visit it to see what it is doing.

Water usage, whether for hydrogen or anything else, is continually assessed by Scottish Water and SEPA. Hydrogen would not be the only high water usage industry. There are many high water usage industries in Scotland, including breweries and distilleries, and hydrogen would be another one. We would need to ensure that we had the volume and the capacity to allow that. Anyone who required to use a great deal of water would have to engage with SEPA and Scottish Water on their plans before they could implement them, because their business case would depend on that water being available. They would need to assess whether they had the volumes that they needed before they put in a planning application associated with what they wanted to do.

In general, water scarcity is becoming a more pressing issue in Scotland. Last year, we had record water scarcity, and river levels were very low. That started a lot earlier in the year than is usually the case. SEPA issues licences for water abstraction from watercourses, and quite a number of people who would ordinarily apply for such licences, such as farmers, were told that they could not take water from watercourses over a period of several months.

Scottish Water monitors the volumes in its reservoirs. Until fairly recently—up until the past few months—Scottish Water’s reservoirs were back at their normal levels, except in Dundee. People think that “sunny Dundee” is just something that a Dundonian came up with for a laugh, but it is genuinely true—rainfall levels in the Dundee area are a lot lower than those in the rest of Scotland. That is why Scottish Water has implemented a household usage pilot in Dundee.

Given the more general concerns that exist, Scottish Water, SEPA and the Scottish Government are working together to produce water scarcity reports and assessments of where water is needed. Consideration needs to be given to the availability of water, whether to produce hydrogen or for anything else. For example, a lot of the beer that Brewdog makes is made in my constituency, which is where the company’s headquarters is. Brewdog had to engage with Scottish Water, because it wanted to expand and it required more water. At the same time, planning applications for new housing developments were going through the council.

An assessment is made at local level of what water is required in particular areas, and that would be the case in relation to hydrogen production.

More generally, your question gives me the opportunity to mention a hobby-horse of mine. We must start treating our water as a precious resource. The fact that it is rainy in Scotland does not mean that we have an abundance of water. We have the best water in the UK when it comes to water quality. However, the supply is not infinite, and we should not take its availability for granted. Scottish Water puts millions of pounds into upgrading its facilities to stop leakages and to bring down the emissions associated with processing our water, and SEPA constantly monitors our river sources and our watercourses.

If a hydrogen producer wanted to invest an awful lot of money in a way that involved counting on water coming from a particular watercourse, that would have to be bottomed out with SEPA well before it put in a planning application.

If someone is in danger of being told by SEPA in the months between April and September that they might not get a licence to take water, that is a pretty precarious position for their business to be in. A combination of all those things applies not just to hydrogen but to anyone who needs a water supply to run their business or housing development, or whatever it is.