Official Report: Minutes of Evidence

The Chairperson (Mr Butler): I welcome Ms Jane Corderoy, the director of the Department's climate change and green growth policy division; Mr Richard Coey, deputy director of the Department's emissions trading scheme (ETS), carbon pricing and Windsor framework branch; and Mr Joseph Kelly, deputy principal of the emissions trading scheme branch. Thank you for your time. I am speed-reading because it is a plenary day, and we want to get the most out of our time. I invite you to brief the Committee.

Ms Jane Corderoy (Department of Agriculture, Environment and Rural Affairs): Thank you very much for the opportunity to address the Committee again, following our letter of 26 February 2026 and the recent evidence given by Stena Line and the UK Chamber of Shipping. I know that the Committee has a keen interest in the emissions trading scheme. The team has presented to the Committee on the scheme several times and briefed it on the policy and the statutory instrument (SI). I am conscious that the Committee has received a significant volume of written and oral evidence on the SI, so we will attempt to keep our opening remarks as focused as possible on the areas in which clarity would be most helpful.

The Committee was advised, in the letter of 26 February 2026, about the significance of the statutory instrument in relation to linking discussions between the UK Government and the EU on the respective emissions trading schemes and the impact of linking on securing the carbon border adjustment mechanism (CBAM) exemptions.

Discussion of those two matters together must be handled carefully, as we do not want to invite speculation on the progress or outcome of ongoing linking negotiations as, to do so, risks interference in the operation of carbon markets and, as such, risks breaching market abuse regulations.

Given the significance of the update, alongside updating the Committee, we immediately contacted a range of local key stakeholders. We were aware that Stena and the UK Chamber of Shipping were going to give evidence to the Committee, so, in similar terms to how we wrote to the Committee, we wrote to both of them on the issue of linking and CBAM to ensure that they were also party to that information. In addition to sharing that information, we met both parties in advance of their attendance at Committee last Thursday.

It is a very complex area, and the link between the SI and the potential to secure linking, and therefore CBAM exemptions for businesses here, is significant. It is important therefore that the Committee is aware that, in addition to writing, we also had a meeting with the UK Chamber of Shipping and, at that meeting, we also included officials from the UK Department for Transport, the UK Department for Energy Security and Net Zero (DESNZ) and His Majesty's Treasury (HMT).

I will hand over now to Joe and Richard to cover some of the more detailed points.

Mr Joseph Kelly (Department of Agriculture, Environment and Rural Affairs): Since our previous session with the Committee on 19 February, we have engaged with other stakeholders, including the Mineral Products Association Northern Ireland (MPANI), the CBI and Manufacturing NI. The consistent message from that engagement has been the importance of linking and securing CBAM exemptions.

As referenced in our departmental Assembly liaison officer (DALO) letter dated 26 February, matching maritime scope is a requirement for UK/EU ETS linking and exemption from the EU CBAM. That avoids significantly higher costs in admin burden for businesses and consumers across the UK. The benefit to the UK economy will be worth nearly £9 billion by 2040, when considered as part of the overall reset package of work, including ETS linking.

By contrast, and while not directly comparable, internal UK Government analysis underpinning the impact assessment estimates the cost of purchasing allowances for GB-NI voyages at around £10 million to £15 million per year. That does not represent a direct cost to Northern Ireland but indicates the scale compared with the benefits of linking.

It is the Department's informed view that failure to achieve a link and resultant CBAM exemptions will have a much greater impact for Northern Ireland businesses and consumers. The EU CBAM covers seven sectors, pricing the direct emissions from the entire production process of goods within scope and the electricity used. The UK ETS maritime legislation will only price emissions from transporting goods by ship, which is a small component of the final price of goods.

An EU CBAM exemption also removes the major trade barrier for £7 billion of UK exports that are currently within its scope. That means that, while the UK ETS maritime regime may be relevant to more overall goods, the cost impact could be far smaller and more diluted across supply chains than the costs associated with not securing an exemption from the EU CBAM.

We are aware of concerns raised by the UK Chamber of Shipping about misalignment between the proposed UK maritime scheme and the EU scheme. There are no meaningful differences between the UK ETS and the EU ETS requirements. Those referenced by the UK Chamber of Shipping are minor operational differences.

We are also grateful for the opportunity to address concerns raised and shared by the Committee about the lack of a specific Northern Ireland impact assessment. Although the UK-wide impact assessment did not disaggregate into devolved Administration-specific detail, NI implications were carefully considered throughout, supported by close and ongoing engagement with NIO and DAERA.

That is why voyages between GB and NI would receive a 50% surrender derogation to ensure parity in ETS obligations across the Irish Sea, preserving the competitiveness of ports in Northern Ireland compared to ROI. That is something that the AERA Minister and officials pushed strongly to achieve and is a significant win for Northern Ireland. The uniform carbon price applied consistently without multiple carveouts ensures that emissions reductions are delivered at the lowest overall economic cost and that market distortions are minimised. Exemptions undermine those benefits. In light of that, the exemption was secured only after prolonged negotiation, and it should be noted that the Isle of Wight has no similar exemption.

Independent research, which we pressed to secure during the policy development process and was not undertaken with respect to other devolved Administrations, found minimal risk of competitive distortion, carbon leakage or a shift to other forms of transport at NI-GB routes as a result of carbon pricing under the UK ETS.

In addition, as we advised the Committee on 19 February, internal analysis conducted by the UK Government showed very small price impacts on common goods in Northern Ireland. There was around 6p per ton on agricultural dry bulk input, such as barley, and less than 1p per litre on fuel. Those translate to well below a 1% increase in the final price of the goods examined. We do not recognise Stena Line's claim of a 6% increase in freight rates. Transport costs make up only a small share of final consumer prices. UN data shows that shipping costs accounted for just 13% of the value of goods imported to the UK by sea in 2021. A 6% rise in freight rates would therefore add less than 1% to the prices for NI consumers, which is consistent with the UK Government analysis. While any increase is unwelcome, the alternative would see NI consumers facing significantly higher costs if no CBAM exemptions were secured.

International evidence, including from the EU ETS, shows that passenger ferry fares typically rise by only low single-digit percentages. On the GB-ROI routes, where 50% of emissions are already priced under the EU ETS, operators have added a small surcharge — around €2 per passenger, or €11 per vehicle each way — between Dublin and Holyhead.

The exemption that has been given to the Scottish islands is because of the specific lifeline nature of their services. Should any NI route be considered to be a "lifeline" and be captured within scope at a future date, similar arguments would be made in an attempt to secure an exemption for that route.

It is important to remember that, even with the ETS applied, the maritime sector remains significantly less taxed than the GB road-freight sector. Road haulage already faces substantial fuel taxation. It paid nearly £25 billion in fuel duty in 2024-25, while shipping pays no fuel duty. By contrast, the estimated annual costs of UK ETS allowances purchased for the entire UK maritime sector is around £100 million — a fraction of what the equivalent fuel duty would cost.

I will also address concerns about the lack of decarbonisation options and government support. The ETS carbon price, alongside funding of other policies, is a primary driver in creating decarbonisation options. It creates economic incentives to drive forward planning and investment in low-carbon technologies, thus improving their commercial viability and investability. Maritime emissions must be addressed. The UK domestic maritime sector produced an estimated 8 million tons of carbon dioxide equivalent in 2019. In 2022, maritime contributed 8% of total UK transport greenhouse gas emissions. That is more than bus, rail and domestic aviation sectors combined. Emissions trading is a proven policy for reducing emissions in the most cost-effective way.

I also stress that options are available to reduce emissions, which the ETS further incentivises. Shore power facilities exist in the UK and globally, and low-carbon fuels are already being used to decarbonise, although we acknowledge that there is more to do. Again, that is the purpose of applying a carbon price. A project funded by the UK Government, and led by Stena, demonstrated that it will now be feasible and profitable to decarbonise the Dublin-Holyhead ferry route using biomethanol. That route was identified as a leading candidate for the UK's first green shipping corridor. Heysham port is expected to have shore power available in 2026. That will enable all Heysham routes across the Irish Sea to operate with zero emissions.

There are many measures, such as route and speed optimisation, that maritime operators can take immediately to improve fuel efficiency and, thereby, reduce emissions. They can also retrofit wind-assist technologies, Flettner rotors and air lubrication systems. The DFT maritime emissions model assumes that speed optimisation alone can reduce main engine fuel consumption by up to 27%.

The Committee will be aware that the UK Government are supporting the sector to decarbonise, including through the UK Shipping Office for Reducing Emissions (SHORE) research and development programme. Since 2022, £240 million has been allocated to clean maritime research and development as part of the programme, which has demonstrated clean maritime technologies across the UK, including in Northern Ireland. UK SHORE has funded over 200 projects, directly leveraging over £110 million private investment and match funding. Businesses based in Northern Ireland have received at least £18 million from UK SHORE competitions. A further £448 million from UK SHORE has been announced for 2026 to 2030 to accelerate the decarbonisation of the sector. The next phase of funding was announced on 3 March 2026 — £271 million to research and develop clean maritime solutions and technologies. The AERA Minister has secured a Northern Ireland-specific event, scheduled for 12 May 2026, to drive and guide local engagement and bids from here for funding.

We welcome the impressive developments that Stena has made in decarbonisation, but much of the maritime sector has made little or no progress in that regard. The inclusion of maritime in the ETS will incentivise those operators to take action.

Finally, on the call for a delay, we stress that operators should be well prepared. Intent to include maritime was first signalled four years ago, in March 2022. That was followed by extensive consultation, including bespoke engagement sessions for Northern Ireland stakeholders. Operators of ships of 5,000 gross tons and above are already equipped to undertake monitoring, reporting and verification, and they have years of experience in doing so under one or more regimes at national or European level. Regulators have built high-quality, digital-first systems for bringing operators into the scheme; there is an online emissions monitoring and reporting platform that explains to operators what to do as part of the process; and free-of-charge voluntary on-boarding guidance has been opened since November 2025 to help walk operators through the steps needed for ETS compliance. More than 96% of expected participants can voluntarily get on board to set up accounts, receive cost-free support with their emissions-monitoring plan from the regulator, access guidance and become familiar with the requirements.

The Committee will be aware that, if the legislation is not passed by the NI Assembly, it will not proceed in any other jurisdiction in the UK. I hope that we have fully reflected the consideration that was given to the impact on Northern Ireland during the policymaking process and that we conveyed the level of support for CBAM that was expressed to us during our engagement with industry and the way in which the SI interacts with obtaining the exemptions.

Thank you for the opportunity to update the Committee. We will be happy to address any questions.

The Chairperson (Mr Butler): Thank you so much, guys. Before going to the questions that I have written down, I have a question on that last piece, Joseph, if you do not mind. It seems that the SI is being dealt with slightly differently, in that the threat is being held over the Assembly of the impact that there will be if we do not pass it. That seems not to be the same as a lot of SIs, where the Sewel convention can kick in, or the UK Government can reach over. Will you explain why it seems to be slightly different for this legislation?

Mr Richard Coey (Department of Agriculture, Environment and Rural Affairs): Yes. It is the same process as with any legislation that implements the UK ETS. The UK emissions trading scheme is made under the UK Climate Change Act 2008. That Act sets out that any legislation to implement or amend an emissions trading scheme has to be dealt with and passed in all legislatures in which the scheme will have effect. After that legislation is passed, it is forwarded to His Majesty's Privy Council for consideration to make it an Order in Council.

I get that this is different from other SI processes, in which an SI is made at Westminster and may be extended to Northern Ireland through a legislative consent motion. That is not the case here, so the Sewel convention does not apply. It is an SI that is being treated, to all intents and purposes, as if it is a Northern Ireland statutory rule (SR), so it has to go through the full process here and cannot come into effect unless the Northern Ireland Assembly passes it. In conjunction with that, unless it is passed by all UK legislatures, it cannot come into effect on a UK-wide basis. It has to have approval from all the UK legislatures in which it will have effect, if it is to come into force at all.

The SI is unique, I suppose, in how it is made under the Climate Change Act. It is not the same as an SI that would be laid at Westminster. It is unique in that the SI is being laid in and progressed through the Assembly as opposed to a legislative consent motion being progressed through the Assembly.

The Chairperson (Mr Butler): OK. I do not want to put you in a difficult position, but I need to ask you about your dealings with the NIO or the UK Government on the intent and the veracity, as I would call it, of the SI and about the position that we are in. From the feed-in that you received, do you feel that the Department was given enough information on the severity of the SI and enough time to deal with it?

Mr Coey: That goes back to our formulating of the policy options. There was engagement with the NIO and the Department at that stage, primarily from the UK Government. There were NI-specific questions in the consultation. The Minister was emphatic that views would be sought specifically on the impacts in Northern Ireland that may not occur in the other devolved Administrations. Given the potential impact in Northern Ireland and the fact that there was that proposal, at consultation stage, of the 50% exemption, the Minister felt that it was important that that information was front and centre and clear in the consultation process, so that those issues could be teased out during that process.

Our views were listened to during the policy development process, yes. Joe touched on that in his presentation. Even the 50% exemption proposal for Northern Ireland was hard won. Other devolved Administrations were not keen about our securing that, so we had to push quite strongly for it.

It might be worth mentioning the likes of the Rathlin ferry and the Strangford ferry, because there have been questions about them. They are not in scope at the minute, but if, at any stage, there should be any consideration of reducing the threshold to bring those types of ferries within scope, we would make arguments similar to those that the Scottish Government made about the lifeline nature of its services to attempt to secure —

The Chairperson (Mr Butler): They are not within the scope because they are below 5,000 tons.

Mr Coey: They are well below the tonnage.

The Chairperson (Mr Butler): OK. Did you want to come in on that, Jane?

Ms Corderoy: Richard covered it well. I cannot overstate how significant a win it was to secure the Northern Ireland-specific questions, the Frontier Economics report, the additional impact assessment and the 50% exemption to ensure parity between routes from the North and those from the South. We have good relationships with the other three Governments through the emissions trading scheme. Through the UK's Net Zero, Energy and Climate Interministerial Group, on which our Minister and the Minister for the Economy are represented, there have been deep dives across all four nations to look at the expansion of the scope of the ETS.

DESNZ should be praised for taking on the views of the devolved Administrations in negotiations on alignment between the UK and the EU. It is restricted in what it can share with us, because those negotiations are international, but it very much takes on the concerns that we face locally and the challenges that we have identified.

The Chairperson (Mr Butler): The 50% derogation that has been negotiated applies only to pedestrian traffic — foot passengers. Is that correct?

Mr Coey: No, it applies to freight as well, because it applies to all routes that are within scope.

The Chairperson (Mr Butler): If we were to do a side-by-side analysis of the derogations and mitigations for EU members, particularly the Republic of Ireland, would we see that they are like for like or, as has been presented to us, that we would be worse off?

Mr Coey: There is not an exemption, as such, for the Republic of Ireland to GB routes, because those are classed as international voyages. Under the EU scheme, 50% of international voyages are within scope. That, rather than an exemption, brings 50% of the emissions on routes between the Republic of Ireland and GB into scope.

When it comes to exemptions that the EU facilitates, Member states can apply for a derogation for islands with populations of 200,000 or fewer permanent residents. That is similar to the Scottish Government's islands exemption in that there is a facility for member states to apply for an exemption for islands of equivalent populations that have what they consider to be lifeline services.

The Chairperson (Mr Butler): I do not know whether you have looked at this, but do any EU member states have what looks like an internal, additional tax? We are talking about the UK raising tax from internal movements, with no sign of the money raised going into a decarbonisation project or being returned to the scheme to incentivise it. Do any EU member states have such an internal tax?

Mr Coey: You mentioned reinvesting the money in decarbonisation. The EU requires member states to reinvest 100% of the revenue that they raise from the ETS for climate purposes. That is not the case in the UK, which means that it is different anyway. I do not want to use the word "tax", but I know that that is how it could be perceived.

The Chairperson (Mr Butler): Yes.

Mr Coey: Are you talking about a member state with some parts that rely more than others on maritime transport, such as Spain with the Spanish islands?

The Chairperson (Mr Butler): Yes.

Mr Coey: I do not know the exact population figures, but the likes of Majorca have populations that do not fall below 200,000. The Spain to Majorca route might be considered to be similar to the Northern Ireland to GB route. I have not looked into the detail of it, but something like that would probably provide an example that is on a par with our situation.

The Chairperson (Mr Butler): OK. This is my final question before I bring in members. Thank you for your answers.

One of the biggest stumbling blocks for me is the link to the CBAM and other negotiations. I understand that there are probably commercial sensitivities around those negotiations, but firm weight is being attached to the case that our not being able to agree this would put the CBAM negotiations up in the air. Will you succinctly and clearly set out where the balance of the economic impact lies? The impact of agreeing to the ETS has been presented to us; however, we are told that, if we do not pass this SI, and the CBAM exemptions do not apply, the financial cost to Northern Ireland could be much more significant. Will you set out that cost?

Mr Coey: Unfortunately, I do not have disaggregated figures for Northern Ireland. From figures for the potential economic impact that were provided to us by the UK Government, it is estimated that £7 billion of goods in the export market to the EU could fall within the scope of the CBAM.

We have been given a figure of £9 billion as a potential cost if a CBAM exemption were not achieved. Unfortunately, Chair, I do not have anything disaggregated —.

The Chairperson (Mr Butler): For me, the difficulty will be segregating the impact on Northern Ireland from the wider impact on GB. We still have the fallout from Brexit, the Windsor framework and all the difficulties that are already faced with east-west trade and movement. We will probably do a bit of work on this and ask a few more questions.

I will open the discussion to the rest of the Committee, and we will see what happens from there.

Mr McAleer: I appreciate that the data for the North cannot be disaggregated from the information in the initial economic impact assessment, but what does the Frontier Economics report that was carried out for the Department say about the impact here?

Mr Coey: That was raised by the Chamber of Shipping and Stena Line at the evidence session with the Committee last week. The Frontier report looks primarily at the risk of carbon leakage and modal transport shift. In his presentation, Joe referenced the fact that, while the economic impact assessment was carried out on a UK-wide basis, it is not disaggregated to the individual Administrations. Because of the unique circumstances in Northern Ireland, however, we pushed for a more-detailed assessment of the impacts on Northern Ireland. That Frontier Economics report does not look at the economic impact, as such, but it does look at the potential risk of carbon leakage. When I say "carbon leakage", I mean the risk of the impact from trade being diverted south of the border or north of the border, if this were applied. We were primarily trying to make sure that we would not be putting anybody in the north of Ireland at a disadvantage compared with those in the south of Ireland on account of the emissions that would be covered by the emissions trading scheme, be that the EU or the UK version.

Ms Corderoy: It is fair to say that the amount of money that is involved in the CBAM exemptions, in terms of impact on consumers, absolutely dwarfs the amount of money that we are talking about associated with the maritime SI. As Joe said, CBAM is mentioned to us at every single meeting that we have with stakeholders. Local businesses and industry mention it to the CBI as being the most important thing. Joe also said that, while the CBAM covers seven sectors, it impacts directly on all the goods in the sectors where the UK ETS maritime extension will impact on the cost of transporting goods by ship. It is that smaller cost — the smaller component of the final price of the goods.

Mr Coey: This may not be for today, but it is definitely something that we can follow up on. At the minute, Invest Northern Ireland is holding CBAM awareness seminars for stakeholders. There is one for Newry this week, I think, and one in Derry, either this week or next week. Those seminars are being organised by Invest Northern Ireland to let businesses know what information is available about the CBAM. After this meeting, we can follow up on that and share details of those events with the Committee.

Mr McAleer: DESNZ has said that, if there is no link between the EU ETS and the UK ETS, there will not be an exemption from CBAM. You are saying that the cost of CBAM vastly outweighs the implementation of the SI.

Ms Corderoy: Yes, that is what DESNZ has —.

Mr Coey: That is the EU's position, regardless of who it is negotiating with. The EU has a link with Switzerland. The EU has a condition whereby, if another Administration wants to have an exemption from its CBAM, there has to be a linked ETS so that similar carbon prices are applied across each system. The process is not unique to the UK's negotiations with the EU.

Mr McAleer: Thank you.

Miss McIlveen: I still have concerns about the lack of a detailed economic assessment of the impact on Northern Ireland, which was detailed in the very good presentation that we received from the witnesses at our evidence session last Thursday. The requests that the UK Chamber of Shipping and Stena made were not about throwing the baby out with the bathwater but about giving us an opportunity to phase the scheme in so that we could get our procedures in place, perhaps even looking to the three-year model that was used for the EU ETS.

It feels as though Northern Ireland is being bounced into this. I am not really keen on how we are doing our politics around it, either, given the flurry of activity over the past number of days. We are nearly being blackmailed into voting for something that we are uncomfortable with. There was plenty of time in advance of all this to have had proper conversations about the impact, be that with CBAM or even in the broader politics around the EU's piece. I am still not particularly happy about it. I would like to know what conversations were had about delaying this, even for the 12-month period, including looking for an amendment that would have allowed the commencement to be next July, as opposed to this July.

Mr Coey: We did not have any conversations about delay because we had the consultation process. The first time that this was mooted was back in 2022 as part of a wider consultation about developing the ETS. At that stage, it was proposed that, subject to further consultation, it would be implemented in 2026. The specific consultation that was launched at the end of 2024 set out in more detail the policy proposals that are now contained in the SI. It was always the case that 2026 was proposed, and we did not receive any feedback during the consultation process that suggested that we needed to do otherwise. Over the past two weeks, a lot of concerns have been received about the SI that were not raised during the consultation process; they have come to the fore only now. The potential time delay was not an issue because nobody raised it with us before now. We always proposed 2026 as the date from which it would be implemented.

It is not necessarily the case that what the economic impact assessments are saying, and what the UK Chamber of Shipping and Stena are saying in their assessments and figures, is wrong or right, or that what we are saying is wrong or right. It is based on two different metrics. I think that Stena suggested last week that this would put the price of a container up by £15 per container, whereas the figures that we indicated when we briefed you previously were 6p per ton on agricultural feed stocks and less than 1p per litre on fuel. Those were on the basis of individual commodities, whereas the figures that Stena has given are based on overall containers. It is not necessarily the case that the two figures are wrong; they are just based on two different types of measurement. As Joe said, Stena and other shipping companies are already adding an environmental surcharge onto routes within the scope of the EU ETS. I think, Joe, that you said something like —.

Mr Kelly: It is €2 per passenger and €11 per car or vehicle, each way.

Miss McIlveen: Whatever way in which you look at it, it is still a tax that is going to commence on 1 July 2026 for all those using our shipping lanes.

Mr Coey: It is an additional cost, but it is to incentivise those within the scope of the ETS to decarbonise. It is the same for any other sector, including the power-generation sector, the dairy sector and the aviation sector, and anybody else who is within its scope.

It is maybe worth mentioning — I do not think that this has been specifically mentioned — that the aviation sector has been within the scope of the ETS since 2012. To date, the figures show that the ETS has been an extremely effective decarbonisation policy. We are exploring the possibility of using it in other sectors in which we think that it could make a difference. We are using the word "tax", but it is a tax or charge that could be reduced by behavioural change. It is not just about access to shore power or alternative fuels; it is also about other things. Joe, you mentioned a few of them during your presentation.

Mr Kelly: It is also about speed optimisation and quicker turnarounds in port. There are practical steps that can be taken while people wait for the infrastructure to catch up. The modelling shows that speed optimisation could save 27% of the main fuel emissions.

Miss McIlveen: The difficulty in all this is that Northern Ireland will be unfairly discriminated against in comparison with others in the rest of the United Kingdom. In some ways, for me, it really makes the case for that bridge to Scotland much stronger. I am being facetious now. Thank you for that.

Mr Coey: No problem.

Ms Corderoy: There is an important point in what Richard said. It is an incentive. If operators take action, they can reduce the cost to them. The cost is not on people travelling or bringing goods across: it is on the operators. That is where it lands. You talk about a cost being imposed, but it is on the operators, and, if they take action, that can be minimised.

It is also worth saying that I heard about the issue of asking for a delay only last Thursday. It had never been mentioned to us before. It is true that stakeholders have talked about the money from ETS coming back in as support: that has been something that we raise and that they raise. However, any question of delay has not been put to us before, I do not think.

Mr Coey: No.

Miss McIlveen: Is delay something that they might be open to?

Ms Corderoy: The timing of the —.

Mr Coey: The SIs have already been passed in the other Parliaments. An assessment would need to be done to see what the benefits of a delay would be. A delay would mean that we would not implement it this year. The EU and UK are keen to do a deal on linking as soon as possible. There are no timescales on that, and I do not want to start speculation on it.

Ms Corderoy: The businesses are ready. In the on-boarding that was talked about, a week or two ago, there were 200 operators already registered. There is a lot of expectation and planning in the sector for this, because it has been four years in the making and had two consultations. There is a lot of readiness in the sector. You will see that some of the actions that have been taken by Stena and possibly by other operators are in anticipation of this.

Mr Kelly: A further difficulty would be due to it being a market-based system. A delay could potentially impact on the price of carbon, because the market is ready for this to happen in 2026. That would have to be factored into any decision as well.

Ms Finnegan: Every time that I hear another sentence, I could ask 100 more questions about this. I think that I understand it, and then a whole other thing comes. Going on the argument of a just transition and applying those principles, you have said here about the infrastructure. It is about incentivisation, and you have talked about speed optimisation. Is the scheme about decarbonisation or simply raising revenue? What guarantees can the Department give that the revenue generated through the scheme will be reinvested into the infrastructure needed to decarbonise maritime transport? We heard from Stena Line that, although it is incentivising — you have mentioned speed optimisation — the alternative fuels are four times the price of the ordinary fuel, and we do not have the infrastructure here to plug in to charge up.

Mr Coey: I appreciate that there is still work to be done there. With the way things currently are with the UK ETS, the revenue is not hypothecated, so it goes into the central UK Government pot. Although the ETS revenue is not specifically being earmarked for decarbonisation, an announcement was made last week to release some more money under the UK SHORE funding. It was £271 million. As part of that, the Minister recently secured a commitment from the UK Government's Department for Transport and Department of Energy Security and Net Zero to come across here to give a roadshow that specifically indicates to NI stakeholders how they can access that revenue. It is one thing to make the announcement but another to show people how they can apply for and make use of that revenue. Even though it is not being funded directly by ETS moneys, that extra revenue is being made available for decarbonisation. That decarbonisation for the shipping industry should then, hopefully, allow it to reduce its costs over time.

Ms Finnegan: OK. I assume that it is seen as a carbon tax because the infrastructure is not in place.

Mr Coey: Absolutely.

Ms Finnegan: There is a supply adjustment mechanism in the EU ETS. Is that applied in the UK ETS?

Mr Coey: Not at the minute. The supply adjustment mechanism in the EU ETS was introduced to tackle the unique problem that they have of perceived oversupply of allowances in the market. Back when that came into force, it was perceived that there were perhaps too many allowances in circulation. A supply adjustment mechanism ensures that the number of carbon allowances in circulation is constantly monitored. For example, if prices go too high, there may be a perception that there are not enough allowances on the market. A supply adjustment mechanism releases more allowances into the market in order, hopefully, to bring the prices down. Conversely, if the price of carbon falls too low, the supply adjustment mechanism allows for the withdrawal of a quantity of allowances from the market in order, hopefully, to bring the price back up again.

There are two separate markets, and there are not the same market dynamics between the UK and the EU. That is something that will have to be looked at as part of the negotiation process. If we had linked markets, the supply adjustment mechanisms that would be appropriate for each market would have to be negotiated in order to determine the best process for dealing with the number of allowances in both markets. At the moment, there are two separate markets, and the availability of allowances in each market is completely discrete. The market dynamics have to be looked at in isolation. It is not the case that, because the EU has such a mechanism, that puts it at either a disadvantage or an advantage over UK participants. It is just that the market dynamics are different. That will have to be looked at during the negotiations.

Ms Finnegan: OK. Does that not cause divergence between the South of Ireland and here? If those negotiations are ongoing, I would imagine that the question of divergence would be a part of that.

Mr Coey: The ultimate outcome of linking would be that you would have a linked market. Businesses north and south of the border would be paying the same, because the markets would be linked. They could buy either a UK or an EU allowance for compliance purposes. Over time, you would expect the prices to converge.

Ms Finnegan: OK; thank you for that.

Mr Blair: Some of the questions that I was going to ask have already been answered. I would like to get a bit more detail on the thoughts of the business sector on the matter. I am mindful that the Committee has very recently had useful briefings from the shipping sector. There were wider CBI concerns about not doing the SI and not having CBAM exemptions in place. Did the CBI give that information directly to DAERA, or is that information that you got from the UK Government or from another source?

Mr Coey: The Minister met the CBI around this time last year, and the CBAM was one of the items on the agenda. That was something that the CBI brought up even before the linking process had started. It knew that the EU CBAM was coming in on 1 January, and there was some nervousness as to how that might be applied or not in Northern Ireland. That was discussed directly with the Minister around February 2025, I believe, although I cannot remember the exact date. Last week or the week before, Jane spoke directly to the CBI about the matter.

Ms Corderoy: The CBI said that that was the thing that was most frequently raised with it. This particular SI had not been raised with the CBI.

Mr Blair: OK. The CBI has proactively been making it clear that that is something that needs to be avoided in terms of the CBAM. It has done that probably to all of the —.

Mr Coey: It reached out to the Minister last year.

Mr Blair: I am sure that it has done so with all the devolved regions across the board.

Mr Coey: I am not 100% sure, but I know —.

Ms Corderoy: The CBI and business organisations signed the joint letter that was issued to the EU and the UK in May 2025.

Mr Coey: That is right, of course.

Ms Corderoy: The joint letter was signed by 52 organisations across the UK and the EU, saying that they wanted alignment and the CBAM exemptions. The letter was sent to everybody who was involved in the EU negotiations, including the UK Government and all the devolved Administrations.

Mr Coey: That was ahead of the start of the linking process.

Ms Corderoy: That is how important it was for business.

Mr Blair: OK; it is good to have that information. Thank you.

There is one other thing that I want to ask you. You may not know all the details, and I accept that this may not be a departmental responsibility. Is the decarbonisation levy or surcharge that is being placed on passengers by ferry companies and, perhaps, on freight by other shipping companies applicable in Northern Ireland?

Mr Coey: Some companies may be levying an environmental charge at the moment.

Mr Kelly: Some companies are levying an environmental charge. It has not been specified as an ETS charge. I believe that it is described as an environmental surcharge, and it is comparable with the amounts that are being charged on similar routes between ROI and GB.

Mr Blair: The ferry companies made it clear to us that they have made substantial investments in decarbonisation trials and new vessels. I expect, then, that the surcharge that they are possibly already implementing in Northern Ireland is paying towards that. You may not know that, but something that I did not know until today and that has not been demonstrated to the Committee is that charges are already in place, basically, and it is useful to know that.

Mr Kelly: Yes, for some operators. We are aware of one operator that is doing that.

Mr Blair: OK, thank you for that.

The Chairperson (Mr Butler): Members, do you have any other questions to ask in this session? No.

Members, because I am not picking up an absolute vibe from the Committee, and I know that we do not have to come to an absolute position, I suggest that members have 10 or 15 minutes for a focused closed session for a bit of discussion. We will then resume in open session to talk about what we discussed. I will put the Question, and we will come up with a way forward. It could be a short closed session, and there may not be further discussion, but it may quantify some of the issues. Are members content with that?

The Chairperson (Mr Butler): We are in open session again. Thank you for your indulgence, members, in discussing whether there were any other issues and to see whether we will be able to get consensus when we put this to the vote.

To ensure that we have full transparency, I will outline some of the things that were mentioned in the discussion in our short closed session. Those included the speed at which this has come and not having Northern Ireland-specific CBAM figures. The issue of the cost of fuel was raised, given the current geopolitical context. Issues that were raised were the fact that 90% of our movement of trade and passengers being by sea singles Northern Ireland out as an outlier; the weight of the argument and the fact that it has come at this late stage in the negotiations; and the lack of figures, particularly the wider CBAM figures for the UK. The CBI was mentioned in the context of its having had talks on ETS with the Department, but that not having been raised as a significant issue. It was also mentioned that the Mineral Products Association has been vocal on CBAM, which will be coming down the line imminently.

Members, was anything else mentioned in that discussion that should be put on the record?

Mr Blair: Chair, rather than saying that the Committee is aware of an issue from CBI, perhaps we should say that the Committee has been made aware that CBI has expressed serious concerns about what the impact will be on the wider industry if CBAM costs are not avoided.

The Chairperson (Mr Butler): Yes, so that would be for clarification.

Mr Blair: We need to be more specific than saying that CBI "had issues". We have to specify that CBI flagged up serious concerns about what the outcomes will be of not making preparations to avoid those costs.

The Chairperson (Mr Butler): Yes. The issue of the linkage between the UK Government and the EU in linking the two blinking issues was raised, but that is above our pay grade, to be fair.

Miss McIlveen: Has CBI contacted the Committee about its concerns, whether serious or otherwise?

The Chairperson (Mr Butler): About CBAM?

Miss McIlveen: If this is all being linked — we have heard reference to that — I do not feel that I am in a position to make comment on CBI, given that I have not heard from CBI.

The Chairperson (Mr Butler): We could write to CBI about the fact that it was included in a conversation with the Department and the due diligence that the Department does in touching base with stakeholders. Are members content that we do that?

The Chairperson (Mr Butler): I have gauged that there will not be consensus, but I am happy to put the Question, if there is a resolution to do so. Declan, if I put the Question, will you be in a position to support it?

Mr McAleer: The Department for Energy Security and Net Zero in Britain has said that there is no link with the EU ETS and therefore no exemption from CBAM. The departmental officials told us that the cost of implementing the SI would be dwarfed by the CBAM costs, if we were to be hit by them. I think that there is very little option. We would be in favour of implementing the SI.

The Chairperson (Mr Butler): OK. I will put the Question, because I see a couple of nodding heads, and I can do the maths. OK, troops.

The Committee for Agriculture, Environment and Rural Affairs has considered the draft statutory instrument, the Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026 and is content to support the SI as drafted. Can I get an indication of those for and against?

The Chairperson (Mr Butler): Thank you, members. I really appreciate that. It was worth doing, even if we did not get it any further down the line.