In April 2019, the Government entered into a commercial agreement with British Steel Ltd in relation to their annual obligations under the EU emissions trading system (ETS). This agreement was needed to support the operator in complying with its 2018 EU ETS obligations, in the absence of receiving its expected 2019 free allowances, due to restrictions placed on the UK’s participation in the EU ETS during negotiations on the withdrawal agreement.
My right hon. Friend the Member for Tunbridge Wells (Greg Clark) informed the House of this agreement on 1 May 2019—a bridge facility valued at around £120 million under section 7 of the Industrial Development Act 1982 at an interest rate of LIBOR plus 7%. Under this commercial agreement, the Government were entitled to recover the next allocation of allowances issued to British Steel Ltd, and sell these back to the ETS market to recover the full cost of the bridge facility.
Following ratification of the withdrawal agreement, restrictions on the UK’s participation in the EU ETS market were lifted in February 2020 and the Government successfully recovered the allowances to which they were entitled. The Government have since successfully sold these allowances back to the EU ETS market, and concluded the contractual obligations with British Steel (in compulsory liquidation), under control of the official receiver.
I am pleased to inform the House that sale proceeds of nearly £140 million have been received. This exceeds the total cost owed to the Government from this bridge facility, delivering value for money for the UK taxpayer.
The Government have also sold a separate 3,191 allowances in their possession. These allowances were transferred to the UK national Government holding account within the EU ETS union registry, over several years, following the closure of several operator and trader accounts, in line with EU ETS registry regulations. The net sale proceeds from this transaction is around £80,000. This transaction is not related to the agreement with British Steel Ltd, and the sale of 3,191 allowances was undertaken separately for administrative reasons to provide value for money to UK taxpayers.