The government agrees with the Committee that we must ensure our climate policies do not drive offshoring of emissions and instead maintain the competitiveness of UK industry as the economy decarbonises. Such offshoring of emissions specifically due to climate policies is termed carbon leakage. Government is committed to supporting UK industry to decarbonise, while ensuring that this does not mean deindustrialisation, and protecting and creating hundreds of thousands of jobs in regions across the UK. So far, the UK has halved its emissions, having cut them by 54% between 1990 and 2025, while growing the economy by over 85% in the same period.1 We have also seen over £90 billion of private investment announced in the clean energy industries since July 2024. This reflects that we can successfully drive decarbonisation while reaping the economic benefits of the transition. In their 2025 Progress in Reducing Emissions Report, the independent Climate Change Committee stated that our reduction in territorial emissions from 1990–2022 significantly outweighs the increase in emissions from imports over that period, reflecting the fact that emission reductions in the UK have largely occurred without offshoring emissions. We are taking ambitious steps to lay the groundwork for further industry investment to reap the benefits of industrial decarbonisation. Last year, the government set out its modern Industrial Strategy, which will drive forward ambition for UK business operating in the clean energy space. This set out several of the key measures government is taking to support Industry. Among others, this included increasing the Clean Industry Bonus from £200m to £544m to build on its success, backing growth in UK’s industrial heartlands and coastal communities, including a potential expansion to hydrogen and onshore wind. Additionally, from 2027, a new British Industrial Competitiveness Scheme will reduce electricity costs by approximately £35–£40/MWh for around 7,000 businesses. The scheme is aimed at frontier manufacturing industries within the Industrial Strategy growth sectors, as well as foundational manufacturing industries in their supply chains, and will exempt eligible businesses from the indirect policy costs of the Renewables Obligation, Feed in Tariffs and the Capacity Market. The UK ETS Authority distributes free allowances to industrial sectors at risk of carbon leakage under the UK Emissions Trading Scheme (UK ETS). These allowances mitigate the risk of carbon leakage by reducing exposure to the carbon price, while maintaining a flexible incentive for manufacturers to decarbonise over time. The UK ETS Authority will be gradually phasing out free allocations for sectors covered by the UK Carbon Border Adjustment Mechanism (CBAM) from 2027, over an indicative 9-year period. This approach will work holistically with the introduction of the UK CBAM and will ensure that there will be no gap in carbon leakage mitigation. The gradual reduction of free allocations in early years of the phase-out from 2027 will give businesses the time necessary to adapt to the change in primary carbon leakage mitigation. Government will continue to monitor the effectiveness of this transition and interaction between ETS free allocations and the introduction of UK CBAM. The delivery plan will set out the full package of measures, and how these will operate together over the CB7 period, to drive decarbonisation while supporting industry, including across electricity, infrastructure, and carbon pricing.