Minister puts carbon border tax on agenda

The carbon border adjustment mechanism, commonly known as a carbon border tax, will be among options in a consultation later in the year, Lucy Frazer, the financial secretary to the Treasury, said yesterday.

Groups including the Climate Change Committee and the Centre for Policy Studies have asked ministers to consider such a tax to tackle the problem of “carbon leakage”. This is when countries impose costly environmental requirements on domestic industries, which results in these industries either relocating or losing out to competitors in more lax and cheaper countries.

Frazer said that “the best way to prevent carbon leakage would be for all countries to move together in pricing, regulating and therefore reducing carbon emissions”, but that the government would consider domestic action.

She said it intended to “consult later in the year on a range of carbon leakage mitigation options, including on whether measures such as product standards and a carbon border adjustment mechanism [CBAM] could be appropriate tools in the UK’s policy mix. A CBAM applies a carbon price to specified imports to mitigate differences in carbon pricing between jurisdictions.” The Centre for Policy Studies has said a carbon border tax would ensure a level playing field for industries in the north and the Midlands.

Read more in The Times here.

Date Added: Tuesday 17th May 2022