UK to consult on carbon tariffs on imports, following calls to act from MPs

The confirmation of the consultation has been made today (21 June) in the official Government response to a report first published by the Environmental Audit Committee (EAC) of cross-party MPs in April. That report from the EAC recommended that the UK Government should “immediately” work to develop and launch a unilateral carbon border adjustment mechanism (CBAM).

CBAMs require organisations in the private and public sectors to pay for the carbon generated in the manufacture of products, to or above the level that they would have if they produced the goods in the UK. CBAMs are often touted as a way to stop businesses from “offshoring” their emissions.

Without a CBAM, the UK has signed a number of notable post-Brexit trade deals with big emitters including Australia. The EAC warned that this could set a poor precedent for the environmental impact of future deals. Its report also emphasised the UK’s as COP26 host, which it officially holds until COP27 starts in Egypt this November, means that other nations will be looking to the UK for leadership on sustainable international trade approaches.

The Government’s response to the EAC’s report confirms that a consultation on proposals for a domestic, unilateral CBAM will be launched later this year. The response indicates a desire for the UK to work with less wealthy nations to ensure that, as well as imposing the CBAM, it will provide practical support for decarbonisation and compliance.

EAC chair Philip Dunne MP welcomed the Government’s response and urged Ministers to use the results of the upcoming consultation to launch a CBAM “as soon as possible” – certainly by the end of the decade.

Dunne added: “It is absolutely critical for the success of any resulting policy decision that it has support across the economy and in no way harms the consumer, particularly at such a time of rising cost of living, which is of concern to us all.

“The Committee looks forward to further constructive engagement with Ministers on this crucial policy area. We want to level up the playing field for domestic manufacturers who are already contributing to the UK emissions trading scheme.”

While the response was welcomed, it is to be noted that the UK Government is reportedly yet to implement a key change it promised following a previous EAC report. Environment Secretary George Eustice and Lord Zac Goldsmith, speaking at an EAC hearing on Monday (20 June), said they were not aware that work had begun to assess the environmental impacts of existing free trade agreements and to ensure that this assessment is applied before agreements are finalised in the future. This work was promised by the Government in February.

EU CBAM

The Government’s response to this latest EAC report states that UK Ministers are actively engaging in “building a full understanding” of the EU’s proposal for its own multilateral CBAM.

The EU reached an agreement on its own CBAM in March and pledged to bring the mechanism into effect from 2026. MPs on the EAC expressed concerns at that point that Ministers were not thoroughly looking at the implications of this on the UK’s trading relationship with EU nations and particularly Ireland and Northern Ireland.

In the last three months, the EU has faced a string of delays in efforts to update its internal emissions trading scheme (ETS) and its plans for the CBAM. An agreement was finally reached last week, with the CBAM’s full introduction potentially delayed until 2033. Click here for a full explainer from edie’s content partner Euractiv.