On this page:

Energy Bill 2008

Legislative Consent Memorandum

UK Energy Bill 2008

Legislative Consent Motion

1. The motion to be put to the Parliament is:

"UK Energy Bill: That the Parliament agrees that the relevant provisions of the UK Energy Bill in Part 1, Chapter 3 (Storage of Carbon Dioxide), introduced to the House of Commons on 10 January 2008, should, insofar as they relate to matters within the legislative competence of the Scottish Parliament or alter the executive competence of the Scottish Ministers, be considered by the UK Parliament."

Background

2. This memorandum has been lodged by John Swinney MSP, Cabinet Secretary for Finance & Sustainable Growth, under rule 9B.3.1(a) of the Parliament's standing orders. The UK Energy Bill was introduced in the UK Parliament on 10 January. The Bill can be found at:

http://services.parliament.uk/bills/2007-08/energy.html

3. The main purpose of the Energy Bill is to implement the legislative aspects of the Energy White Paper, Meeting the Energy Challenge (Cm. 7124, May 2007). The Energy White Paper can be found at:

http://www.berr.gov.uk/energy/whitepaper/page39534.html

4. The principal objective of the Bill is to update the legislative framework to meet the needs of the current energy market and to ensure that it is fit for the future energy challenges that the UK faces. The key elements of the Bill are:

  • Part 1: Gas Importation & Storage and Carbon Storage - This covers provisions relating to the storage of natural gas and unloading of Liquefied Natural Gas (LNG) from 12 to 200 nautical miles (nm) adjacent to the UK, as well as the storage of carbon dioxide under the seabed from 0 to 200nm;
  • Part 2: Electricity from Renewable Sources - This modifies the existing Renewables Obligation to make it more efficient and increase the use of renewables. It also amends the powers of Ofgem to run tender exercises to establish offshore transmission network operators to manage conveyance of high voltage electricity from offshore generating stations.
  • Part 3: Decommissioning of Energy Installations - This covers provisions to ensure the taxpayer is protected from meeting the costs of decommissioning energy installations in the following sectors: nuclear; offshore renewables; oil & gas.
  • Part 4: Provisions relating to Oil & Gas - The Bill makes some changes to existing legislation covering petroleum licensing and third party access dispute resolution procedures, by extending their scope to cover upstream oil and gas infrastructure.
  • Part 5: Miscellaneous - This contains various provisions covering reporting on energy requirements; giving legislative effect to earlier administrative transfer of certain aspects of energy regulation; and nuclear security.
  • Part 6: General - Consequential provisions and amendments relating to offences, subordinate legislation, transitional provision, extent and commencement.
Provisions which relate to Scotland

5. The following paragraphs describe the elements of the UK Bill for which the consent of the Scottish Parliament is sought, and provide information on two matters which both the Scottish Government and the UK Government consider do not require legislative consent. Further background information in relation to the Storage of Carbon Dioxide under the seabed is provided at Annex A.

Devolved provisions which require the consent of the Scottish Parliament:
Storage of Carbon Dioxide under the seabed- (Part 1, Chapter 3)

legislative competence for the storage of carbon dioxide within territorial waters adjacent to Scotland (0-12nm) is devolved to the Scottish Parliament under the Scotland Act.

The Scottish Ministers currently have executive competence in terms of Part 2 of the Food & Environment Protection Act 1985 (FEPA) for the control of depositions of carbon dioxide in the sea or under the seabed in UK-controlled waters adjacent to Scotland beyond territorial waters. The Bill will create consistent UK-wide licensing arrangements for carbon storage in waters 0-200nm adjacent to Scotland.

The proposed regime as it applies to territorial waters adjacent to Scotland (0 to 12nm) falls within the legislative competence of the Scottish Parliament and requires legislative consent. The Scottish Ministers will exercise the licensing authority functions provided for in the UK Bill in this area.

The UK Bill will also alter existing executive competence (described above) in the waters 12-200nm adjacent to Scotland through the disapplication of FEPA in relation to matters covered by Part 1, Chapter 3 of the Energy Bill. The UK Government has undertaken to consult closely with the Scottish Government in relation to the exercise of licensing powers in these waters. This undertaking recognises the significant extent of existing Scottish Government executive competence in waters adjacent to Scotland but beyond territorial waters, including under FEPA, and the importance of co-ordinating the exercise of devolved and reserved functions in all waters adjacent to Scotland.

Devolved provisions which do not require the consent of the Scottish Parliament

Renewables Obligation - (Part 2) - competence for the Renewables Obligation under the Electricity Act 1989 has been executively devolved to Scottish Ministers by the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) (No. 3) Order 2006 (SI 2006/3258). The Bill amends the existing Renewables Obligation regime under the Electricity Act 1989, to introduce new banding arrangements to provide different levels of support for different renewable technologies based on their cost and other considerations specified in the Bill.

The Bill will alter the executive competence of Scottish Ministers, by altering the provisions in the original Act, but the change does not require a Legislative Consent Motion. This is because the UK Government has made clear that ministerial powers and functions under the revised provisions will be executively devolved. This "re-devolution" of the revised provisions will be achieved by means of a new Order in Council under s.63 of the Scotland Act 1998 (section 94 of the Bill refers). Since the relevant provisions in the Energy Bill cannot be commenced until after the new s.63 Order has been made, and since the Order will itself require approval in the Scottish Parliament, a Legislative Consent Motion covering this element of the UK Bill is not required. The consent of the Scottish Parliament will instead be sought in connection with the s.63 Order.

Nuclear Decommissioning - (Part 3, Chapter 1) - These provisions do not extend to Scotland, so a Legislative Consent Motion is not necessary.

Proposals

6. The Scottish Government supports the UK Government's policy commitment to ensuring secure supplies of energy and tackling climate change by reducing carbon emissions. The UK Bill is intended to support delivery of those policy objectives. It will create a common regulatory framework for the storage of carbon dioxide under the seabed, and will enable support to be better-targeted at emerging renewable energy sources. Both of these features will be crucial in meeting our ambitious climate change target to reduce CO 2 emissions by 80% by 2050, and fall within the same framework for co-operation with the UK Government that the Scottish Ministers recommended to the Scottish Parliament in the Legislative Consent Memorandum for the UK Climate Change Bill 2007.

7. The Bill will also provide the enabling framework for the UK to comply with the European Union's draft Directive on the Geological Storage of Carbon Dioxide, which is expected to be agreed during 2008, and will need to be implemented within 12 months of agreement. Onshore storage of carbon dioxide will be dealt with by the draft Directive and amendments to other existing EU Directives and UK / Scottish regulations. The Scottish Government therefore recommends that the Parliament supports the Bill's provisions on carbon dioxide storage and allows Westminster to legislate on its behalf.

Consultation

8. The UK Government's Department for Business, Enterprise & Regulatory Reform has consulted publicly on the proposals contained in the Bill as part of its consultation on the preceding Energy White Paper in 2007, and in the consultation on nuclear power, preceding publication of the Nuclear White Paper in 2008. The proposals on carbon storage have been considered by the industry as part of the UK Government's competition for a carbon storage demonstrator project, and the UK Government is consulting further on arrangements for the implementation of the carbon storage parts of the Bill. Organisations from the Scottish public and private sectors, including SEPA, have been amongst the consultees, and Ministers and officials from the Scottish Government have had the opportunity to participate in these consultations and to see some earlier drafts of the Bill.

Financial Implications

9. The UK Government's view is that the Bill is not expected to have any significant implications on public expenditure. This is because the Bill makes provisions to ensure that private sector investment is made in accordance with energy policy objectives, and does not make any commitments for public expenditure. The Bill will give powers to the Secretary of State and the Scottish Ministers to recover the costs of administering the licensing regime for storage of carbon dioxide under the seabed from applicants for licences.

10. In the longer term, once a carbon storage licence has been terminated (i.e. when a carbon store is deemed to have become permanently secure), the Scottish Ministers (in relation to sites in territorial waters adjacent to Scotland) may be required to meet obligations (including financial arrangements) associated with the long term liability of the store. The UK Government may be required to meet obligations in relation to sites in waters 12-200nm adjacent to Scotland.

11. In terms of changes to the Renewables Obligation, the mechanism provides for subsidy of renewable generation by UK electricity consumers, and it is expected that these costs will be passed onto consumers through charges.

SCOTTISH GOVERNMENT

April 2008

ANNEX A

UK ENERGY BILL: LEGISLATIVE CONSENT MEMORANDUM

DETAILS OF PROVISIONS IN UK BILL AND RELATIONSHIP WITH SCOTLAND

Storage of Carbon Dioxide under the seabed

1. Carbon Capture and Storage (CCS) is a process involving the capture of carbon dioxide from the burning of fossil fuels, its transportation, and storage in secure spaces, such as geological formations, including under the seabed. CCS can be applied to a range of industrial processes including coal-fired and gas-fired electricity generation. It has the potential to reduce carbon dioxide emissions by up to 90% of standard coal-fired generation. The Stern Review 1 highlighted the potential role that CCS could play in tackling climate change, with the potential to contribute up to as much as 28% of global carbon dioxide mitigation by 2050. However, CCS has not yet been applied to commercial-scale electricity generation.

2. The Scottish Government believes that CCS has the potential to play a significant role in meeting our climate change targets to reduce CO 2 emissions by 80% by 2050, in line with international recommendations of the International Panel on Climate Change (IPCC). There are significant potential storage sites in the North Sea, where depleted oil and gas fields can be used for permanent CO 2 storage. The Scottish Government is participating in research into the potential to develop carbon stores in waters adjacent to Scotland, and the potential of the North Sea has also been recognised by the European Commission in its Communication on CCS, issued in January 2008.

3. Alongside its Communication, the European Commission also issued a draft Directive on CCS in January 2008 2, which is expected to be adopted by the European Council and Parliament later in 2008. This will create a binding framework for the regulation of the capture, transportation and storage of CO 2 across the European Union, both on and offshore, and is viewed by the EU as a necessary step in meeting its target to reduce CO 2 emissions by 20% by 2020. As part of the Directive, Member States will be required to ensure that they have in place the necessary frameworks for regulating carbon storage, and the UK Energy Bill is the vehicle that will transpose this Directive in the UK, and for waters adjacent to Scotland. Amendments to other European Directives such as the Environmental Impact Assessment (85/337/EEC) and Integrated Pollution Prevention & Control Directives (96/61/EC) will also create the new EU CCS regime, and will be achieved

in Scotland and the UK through amendments to existing regulations. The Energy Bill is likely to be the only element of primary legislation necessary to transpose the EU CCS Directive.

4. The UK Government is also committed to the development of CCS with electricity generation, and launched a competition in November 2007 to support a CCS demonstration project in the UK. This will be one of the first demonstrations anywhere in the world, and it is hoped that it would be amongst the 15 CCS demonstrator projects that the European Union wants to see in place within the next few years. The objective is for the demonstration project to be operational by 2014. The demonstration cannot proceed without an appropriate legislative regulatory regime being in place. The UK is expected to announce the competition winner during summer 2009, and having the legislative framework in place will enable applicants to compete to situate a storage project in territorial waters adjacent to Scotland.

5. Most of the activities involved in CCS are standard industrial processes and can be readily regulated by established legislation. However, permanent storage of carbon dioxide is a novel activity, and existing legislation to control depositions below the surface of the land and under the seabed is not well suited to licensing the storage of carbon dioxide. This has been recognised by the European Commission, and the draft Directive on CCS creates a completely new regulatory framework for carbon storage, whilst amending other frameworks to deal with the capture and transportation aspects. The carbon storage license provisions are also set out in such a way as to make them compatible with the granting of leases by the Crown Estate for use of the seabed, which will be necessary before exploration or storage can take place.

6. Part 1, Chapter 3 of the Bill establishes a framework for the licensing of carbon dioxide storage and the enforcement of the licence provisions. It also applies existing legislation (for example the decommissioning legislation in the Petroleum Act 1998) to marine structures used for the purposes of carbon dioxide storage. Chapter 1 of the Bill, amongst other things, asserts the UK's rights to the use of sub-surface space in waters 12-200nm adjacent to the UK for the storage of carbon dioxide. Specific requirements that the Bill will apply to the Scottish Ministers for territorial waters adjacent to Scotland include:

  • A power for Scottish Ministers to grant licences for the creation of controlled places for the storage of carbon dioxide, or exploration of potential sites in relation to this;
  • A power for Scottish Ministers to make regulations prescribing the conditions related to the application and granting of a licence for storage of carbon dioxide in a controlled place;
  • A power for Scottish Ministers to attach conditions to a licence, including provisions relating to financial security, review and modification of the licence, closure of the carbon storage facility, and provision for termination of the licence;
  • A power of direction for Scottish Ministers to require licence holders to act as directed if they fail to comply with any provisions of the licence;
  • A requirement on Scottish Ministers to keep a register containing certain information relating to licences;
  • A power for Scottish Ministers to make provision through regulations about the termination of licences;
  • A power for Scottish Ministers to transfer licensing functions to another person (a form of 'agency agreement').

7. The framework is limited to waters 0-200nm adjacent to the UK. This is due to the fact that this area is likely to be of primary interest to developers in the short-term. Moreover, storage of carbon dioxide on land requires amendment of existing EU Directives. This amendment forms part of the European Commission's draft Directive on CCS, however, national legislation in this area is dependent on agreement. The provisions in this Chapter of the Bill are intended to provide sufficient flexibility for the EU regime to be readily implemented once agreed at the European level in relation to waters.

SCOTTISH GOVERNMENT

April 2008

1 The Stern Review - The Economics of Climate Change. Nicholas Stern, 2006:

http://www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/stern_review_report.cfm

2 Proposal for a directive of the European Parliament and of the Council on the geological storage of carbon dioxide

http://eurex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0018:FIN:EN:PDF

Page updated: Tuesday, October 14, 2008