A new European Union carbon border tax could lead to tariffs being slapped on British imports of steel, cement and aluminium in a climate change trade war after Brexit.
The tax will give the European Commission the power to impose levies of imports on goods with a heavy carbon footprint. The tariff would target countries where the carbon emissions price is lower than in the EU.
If Britain was to diverge too far from the EU’s green policies, the trade defence measures would prove a powerful weapon as the EU toughens its global climate diplomacy.
Energy intensive industries such as steel are likely to be targeted. Half of all UK steel exports are to the EU, which remains Britain’s major trading partner.
Sources in Brussels said the tax, which is in the early stages of drafting, was aimed principally at unfair competition from polluting non-EU countries such as the US, China and Russia. Experts said it was as yet undecided whether the levy would make up the difference in the carbon price or be much higher.
But diplomats admitted the plan could also be levelled against Britain, which left the EU on January 31. The tax is likely to gain support as a way of protecting European businesses after the commission launched its plan to cut the EU’s net carbon emissions to zero by 2050.
“If the UK decides to go its own way on climate change policy after Brexit, that will certainly build impetus behind the carbon tax plan,” one EU diplomat said.
“We started designing the carbon border adjustment mechanism. We might imagine that we will apply this mechanism to the UK in order to restore the level playing field,” Pascal Canfin, the French head of the European Parliament’s environment committee said.
“This is another example of the UK needing to take a decision on whether it continues to take an EU approach or not in the knowledge that if it doesn’t there is the possibility of facing trade penalties,” said Sam Lowe, a trade expert at the Centre for European Reform think tank.
Brussels is anxious that Britain plans to use Brexit to start a slash and burn of EU regulation after Brexit, undercutting the bloc, and gaining a competitive advantage. The EU has demanded that the UK sign up to “level playing field guarantees” on sectors including the environment as the price of a new post-Brexit trade deal.
“The threat of carbon border measures is the way the EU will keep the climate sceptic and environment hating dogs in the UK on a very tight leash,” said Sanjeev Kumar, of the Change Partnership, a climate NGO.