Carbon Border Tax would stop Britain hiding its true carbon emissions

• Importing electricity, carbon-intensive goods and raw materials from overseas allows Britain to hide carbon emissions
• During the recent “coal free” fortnight, no domestic coal was used to power the grid – but Britain imported an estimated 40.4 GWh of Dutch coal-fired generation
• To level the playing field and cut emissions, CPS Research Fellow Tony Lodge proposes a new Carbon Border Tax for carbon-intensive sectors, such as steel, coal and electricity production.
• Agreeing that a Carbon Border Tax is a legitimate policy tool must be part of the COP26 agenda. 

Britain’s commitment to cut greenhouse gas emissions to net zero by 2050 shows how seriously the Government is taking this issue. But it does not address the increasing offshoring of emissions.

A new paper from the Centre for Policy Studies calls for the introduction of a Carbon Border Tax on carbon-intensive imports to reduce global emissions and better support domestic industries.

In ‘The Great Carbon Swindle’, respected energy and infrastructure analyst Tony Lodge, a CPS Research Fellow, explains how ‘carbon offshoring’ allows Britain to mask the full extent of the emissions involved in supply chains and calls for more action to be taken ahead of COP26.

The UK imports six times more electricity than it exports, and is increasingly reliant on power delivered via undersea “interconnectors”. Yet the same carbon levies are not applied – indeed, we have no way of knowing the actual source of the electricity we are using.

The result is that, even as we have slashed the use of coal power in the UK, we are importing it from overseas. During the recent “coal free” fortnight, where no domestic coal was used to power the grid, we imported an estimated 40.4 GWh of Dutch coal-fired generation.

The same is true in terms of carbon-intensive raw materials such as coal. Even as British pits have closed, we are still importing millions of tonnes from overseas for industrial use, in particular in the steel industry. This carries with it additional emissions costs, for example in terms of transportation.

Emissions from imported goods and raw materials, including coal, steel and electricity, are not included in UK statistics, allowing Britain to continue using energy generated from fossil fuels, and other energy intensive products, while appearing to be meeting emissions targets.

This not only hides the real picture in terms of emissions, but it also discriminates against UK companies which are subject to climate levies, planning and regulatory hurdles that their competitors overseas do not have to face, such as the Carbon Price Floor.

Lodge argues that, with the COP26 climate conference in Glasgow looming, this is a chance for Britain to show global leadership – and incentivise our trading partners to lower their own emissions. Failure to act, he says, will lead to more hidden pollution, fewer jobs, insecure power supplies and more global emissions.

Dealing with the most carbon-intensive imports, including steel, coal, chemicals, cement, fertilisers and electricity, would not only help put an end to carbon leakage but also cut Britain’s global greenhouse gas footprint.  It can also lead to more domestic production in these sectors.

Because such a tax would be limited to carbon-intensive sectors, it could be calculated with reference to the electricity mix of the exporting country – making it far simpler to introduce than economy-wide carbon taxation. This would also incentivise other countries to invest in nuclear or renewable energy and generate revenues that could be used to cut costs for consumers.

Tony Lodge, CPS Research Fellow, said:

“Britain’s new legal commitment to cut greenhouse gas emissions to net zero by 2050 carries Herculean responsibilities to decarbonise the energy, transport, industry and housing sectors. A carbon Border Tax would provide a far more accurate picture of Britain’s true carbon footprint, deter carbon offshoring and reduce global carbon emissions. It would also establish a clear British policy lead on climate change as the COP 26 summit approaches.”

Tony Lodge - Friday, 13th March, 2020