Ministers are drawing up plans to impose carbon taxes on imports from abroad as part of efforts to hit Britain’s net-zero target by 2050, i understands. The proposals emerged as a “civil war” broke out between ministers over the best way to ensure the public pays for the carbon emissions they produce.
Chancellor Rishi Sunak is expected to lay out new carbon taxes this autumn to help the country meet its obligations to reduce greenhouse gas emissions, while also raising money to repair public finances damaged by Covid.
Among the proposals being looked at is a carbon border adjustment tax, which will slap levies on goods arriving from abroad. Such taxes aim to prevent wealthy countries such as the UK from outsourcing their carbon emissions to the developing world – known as “carbon leakage”.
One minister told i: “Carbon border adjustment tax is definitely in the mix. Eventually people will have to tackle the question of consumption – they are going to need to decide if they are willing to consume less stuff imported from China or not.”
For any domestic industry that has a carbon price placed on it, the same price would be placed on imports to prevent cheaper goods flooding the market.
Which products would be targeted has not been undecided, but the EU’s plans for carbon levies on imports will focus initially on the most carbon-intensive sectors, such oil refineries, steel and other metals, and cement.
The measures are under consideration ahead of the UK hosting the COP26 UN Climate Change Council in November. Experts have warned that the Government currently has an “alphabet soup” of carbon taxes and urgently needs to fill the policy vacuum ahead of the meeting in Glasgow.
With the UK welcoming world leaders to COP26, the Chancellor will have little choice but to spell out plans for environmental taxes in an autumn Budget and Comprehensive Spending Review.
Westminster sources said, however, that any move towards a carbon border tax would have to consider the implications it would have with major trading partners, such as the US, and how problematic it would be for post-Brexit Britain to go out and strike trade deals.
Ministers are increasingly at odds over the best way to ensure the public pays for the carbon emissions they produce, with the Treasury in a stand-off with the Department for Business, Energy and Industrial Strategy and No 10.
One source said: “There is a civil war raging between departments as to how the Government can meet its commitments.”