Treasury plots carbon levy raid on imports

Measures are part of efforts to prevent British jobs going abroad to countries more tolerant of emissions

THE Treasury is plotting a new tax on imports from countries with high carbon emissions as part of a scramble to protect British industry from efforts to go green.

Ministers are considering bringing in carbon border taxes to make sure UK businesses that face high domestic carbon costs are not undercut by cheap imports.

Products affected are initially likely to include raw materials such as steel, but the tax could eventually be extended to the likes of cars and refrigerators – ultimately driving up bills for consumers.

There are concerns that UK manufacturers will shift jobs to more lenient countries abroad rather than decarbonise unless the taxes are introduced, harming the economy as well as efforts to cut emissions.

Lucy Frazer, financial secretary to the Treasury, told Parliament that the Government would consult later this year on a “range of options” to level the playing field for UK businesses.

These include “whether measures such as product standards and a carbon border adjustment mechanism (Cbam) could be appropriate tools in the UK’S policy mix”.

She added: “A Cbam applies a carbon price to specified imports, in order to mitigate differences in carbon pricing between jurisdictions.”

The EU is preparing to introduce the world’s first carbon border tax, which will see taxes on imports of steel, aluminium, fertilisers and electricity introduced from 2026.

The proportion of the UK’S emissions accounted for by imports has already risen, from about 41pc in 1997 to 43pc in 2018, as the UK economy shifted from a manufacturing base towards the services sector.

Imports are currently excluded from the national carbon targets, leading to criticism that the UK’S emissions are not fully recognised.

A carbon border tax would risk increasing bills for consumers as manufacturers pass on costs, although they would be unlikely to take effect in the UK for several years.

The tax would also bring in revenue, notes James Heywood, head of welfare and opportunity at the Centre for Policy Studies think tank, which has backed carbon taxes.

He said: “What really matters is not necessarily the price impact, but what is done with the revenue.

“If, for example, that revenue is used to cut taxes, it will offset the impact for consumers and put money back into people’s pockets.”

MPS on the environmental audit

‘For too long emissions from our consumption have been offshored, leaving the issue out of sight and out of mind’

committee recommended a shift towards carbon border taxes in a report in April, but also reported concerns that they could worsen costof-living pressures.

Philip Dunne MP, chairman of the environmental audit committee, said at the time: “Our committee is clear that the pros of a Cbam outweigh the cons. For too long the emissions from our consumption have effectively been ‘offshored’, leaving the problem as out of sight and out of mind.

“But we must all take greater responsibility for our consumption, and the practices that our businesses and organisations adopt.”

Discussing the policy with the committee in February, Ms Frazer said it was important for manufacturers to realise that “wherever they base themselves there will be consequences”.

She added: “The country that they are in may not have any domestic regime yet, but in the future it may have a domestic regime, or be subject to some sort of import taxation.”