Question proposed, That the clause stand part of the Bill.

It is a great pleasure to serve under your chairmanship, Ms Vaz. The clause makes changes to the main rates of the climate change levy, or CCL, with effect from 1 April 2026. The Government are increasing the main rates of CCL on gas, electricity and solid fuels by the retail prices index to maintain the incentive for businesses and the public sector to be more energy efficient.

Since 2001, the CCL has encouraged businesses and the public sector to be energy efficient by adding a tax on the non-domestic supply of energy. The Government have announced a national mission to make Britain a clean energy superpower and accelerate our journey to net zero, and improvements in energy and resource efficiency will play a significant role in reducing industrial emissions in the 2020s. Delivering on this mission will help to make the UK energy independent, protect billpayers, create good jobs and tackle the climate crisis.

The previous Government followed a trajectory of rebalancing the gas and electricity rates over a five-year period to reflect that electricity emissions are progressively lowering due to the increasing contribution of renewable and lower-emission energy in electricity generation. The CCL rates for electricity and gas equalised in April 2024, and at the autumn statement 2023, under the last Government, rates were frozen for the year 2025-26.

Now that the rebalancing has been achieved, uprating the main rates on gas, electricity and solid fuels from April 2026 will continue to provide an incentive for energy efficiency. At autumn Budget 2024, this Government also announced that the main rate of CCL on liquefied petroleum gas will continue to be frozen. This is to ensure better consistency between LPG and other portable fuels—for example kerosene, which is zero rated under fuel duty—for commercial premises not connected to the gas grid.

The changes made by the clause will increase CCL rates on gas, electricity and solid fuels by RPI with effect from April next year. Non-domestic energy supply users will see an increase on their CCL bill of around 0.025p per kWh of gas or electricity supplied. The rate on solid fuels will increase by 0.2p per kg. However, participants of the climate change agreement scheme are eligible to pay reduced CCL rates in return for meeting negotiated energy-efficiency and carbon targets. The CCA scheme enables energy-intensive industries to receive discounts of up to 92% on their CCL bill. The new six-year scheme, announced on 16 October, will provide an estimated £1.9 billion of relief to 2,600 businesses in 53 industrial sectors over its lifetime. Overall, we expect a reduction in greenhouse gas emissions as a result of the clause compared with freezing the rates.

In conclusion, the changes made by the clause will help to incentivise businesses to improve their energy efficiency, thereby progressing the Government’s climate objectives, which are vital for the UK’s long-term economic prosperity and energy security. I commend the clause to the Committee.

As the Minister said, the clause amends the main rates of the climate change levy from April 2026, in line with RPI, for electricity, gas and other taxable commodities, while continuing to freeze the rate for LPG. We will not oppose the measures in the clause.

I was pleased to see the Government confirm their plans to extend the climate change agreement scheme at the Budget. The scheme allows energy-intensive industries to claim a discount on the climate change levy, subject to taking steps towards increasing their energy efficiency and reducing emissions. At autumn statement 2023, we announced a new six-year CAA scheme, and I am genuinely pleased that the Government have chosen to reaffirm our announcement and take that forward, following consultation.

However, as the Minister may expect, I want to raise an issue with her. It has been raised at oral questions, so will not be a surprise to her. There have been several reports in recent weeks about the UK chemicals industry that are directly relevant to climate change and the CCA scheme, as the Minister will know better than me. Sir Jim Ratcliffe has warned that the UK chemicals industry is at risk of “extinction”. His firm, INEOS, closed its synthetic ethanol plant at Grangemouth this month, which will result in the loss of many jobs. That was the last remaining synthetic ethanol plant in the country. Given the ongoing concerns, I would be grateful if the Minister could provide an update on what consideration has been given to the UK chemicals industry in calibrating these policies.

As the Minister knows, the UK chemicals industry is the third-largest manufacturing sector in this country. It contributes £30 billion to our economy and directly employs 138,000 people across the country in 4,100 businesses. I presume that the Chancellor has met representatives of the sector, but I would like to hear the Minister confirm that, given how topical this issue is, how concerned the industry is and how widely reported the issues have been.

As always, I speak on behalf of the highland industries. In rural areas, only electricity and kerosene are available; mains gas is not. Electricity users pay four times more for their energy than mains gas users, so a hotel on the island of Skye may pay £80,000, whereas one in a city may pay £20,000. That causes enormous issues for people in the windiest, coldest, darkest part of Great Britain. The reason for the big disparity is that the tariffs and taxes are largely on electricity, rather than gas, and of course electricity is largely renewable. In my constituency, people can see wind farms out of their window, yet we still pay four times more for our energy than people in cities. Will the Minister elaborate on what could be done to make us more competitive?

I welcome the Opposition’s support for the clause. For quite some time there has been cross-party support for the CCA scheme. I welcome what the shadow Minister said about the Opposition’s support for the extension of that scheme for energy-intensive industries.

The shadow Minister asked me about the UK chemicals industry. As he said, it is a very valuable sector of our economy. It is obviously included in the climate change agreement scheme, which exists to ensure that businesses for which energy makes up a larger proportion of their operating costs, and that are at higher risk of carbon leakage, are supported to make changes to their processes to reduce their energy intensity. The example he provided is concerning, but we have introduced measures to help such industries to cope with the fact that they are energy intensive. I hope that answers his question. I do not know whether the Chancellor has met representatives of the sector, but I am happy to write to him on that.

The hon. Member for Inverness, Skye and West Ross-shire spoke about the cost of energy for people in his constituency. As I said, the rates on kerosene are frozen, which is why we are not uprating the rates on LPG. That will go someway towards helping those in rural areas. I declare an interest: I am not on the gas either, so we also rely on this form of energy.

LPG is not the issue; electricity, along with kerosene, is largely the issue. Very few people use LPG to heat their properties or businesses. It is electricity where the taxes are. I would be delighted to share information; I am doing a big thing about it shortly, so I have done a lot of research.

Obviously kerosene is zero rated, but the effect of the clause is to increase the main rates of CCL on gas, electricity and solid fuels by RPI. That is in line with what we announced at the Budget, and takes forward those measures, so hopefully it will come as no surprise to hon. Members.

Question put, That the clause stand part of the Bill.

The Committee divided: Ayes 9, Noes 1.

Question accordingly agreed to.

Clause 74 ordered to stand part of the Bill.