UK looks to domestic carbon leakage scheme alongside EU

The UK has confirmed that it will launch a consultation on the implementation of a domestic carbon border adjustment mechanism (CBAM), in an effort to tackle carbon leakage.

The announcement came in a response by the Government to the Environmental Audit Committee’s report on carbon border adjustment mechanisms (CBAMs).

The final confirmation comes after months of discussions as to the best way to address the risk.

Following the audit committee’s report “Greening imports: a UK carbon border approach”, published in April, the Government confirmed in a written statement to Parliament in May that it would consult on implementing a CBAM and product standards to address carbon leakage.

In its response to the Committee, this week, the Government said it was keen to work closely with low- and middle-income countries and to align any resulting policy around a CBAM or on product standards with the interests of consumers.

It added it is “engaging actively” with the EU on the Commission’s proposal for an EU CBAM. In the response, Ministers have committed to “building a full understanding” of the implication of the EU’s mechanism on the UK’s trading relationship with the EU, including with respect to Northern Ireland.

Environmental Audit Committee chairman, Rt Hon Philip Dunne MP, said: “The Committee recommended that work on implementing a unilateral CBAM commence as soon as possible, to be prepared for roll out by the end of this decade, preferably multi-laterally or unilaterally. But this would only be the beginning: meaningful carbon reductions through this import tax would be significantly more successful if we joined a multilateral approach in the future. The US and the EU are already ahead of the curve in this regard.”

“It is therefore positive news that the Government is looking to consult on a CBAM and product standards later this year, accepting a key recommendation of the Committee. 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.”

In its report, the audit committee highlighted that a CBAM could incentivise the development of more low carbon products domestically as heavy emitting sectors look to avoid higher taxes that a CBAM or enhanced product standards would incur.

It would further mitigate the potential for heavy emitters to ‘offshore’ their emissions and send a clear signal for companies to re-evaluate their carbon footprint. To get this policy right, the EAC called on the Government to consult with sectors across the economy and SMEs.

The UK has confirmed that it will launch a consultation on the implementation of a domestic carbon border adjustment mechanisms (CBAM), in an effort to tackle carbon leakage.

The announcement came in a response by the Government to the Environmental Audit Committee’s report on carbon border adjustment mechanisms (CBAMs).

The final confirmation comes after months of discussions as to the best way to address the risk.

Following the audit committee’s report “Greening imports: a UK carbon border approach”, published in April, the Government confirmed in a written statement to Parliament in May that it would consult on implementing a CBAM and product standards to address carbon leakage.

In its response to the Committee, this week, the Government said it was keen to work closely with low- and middle-income countries and to align any resulting policy around a CBAM or on product standards with the interests of consumers.

It added it is “engaging actively” with the EU on the Commission’s proposal for an EU CBAM. In the response, Ministers have committed to “building a full understanding” of the implication of the EU’s mechanism on the UK’s trading relationship with the EU, including with respect to Northern Ireland.

Environmental Audit Committee chairman, Rt Hon Philip Dunne MP, said: “The Committee recommended that work on implementing a unilateral CBAM commence as soon as possible, to be prepared for roll out by the end of this decade, preferably multi-laterally or unilaterally. But this would only be the beginning: meaningful carbon reductions through this import tax would be significantly more successful if we joined a multilateral approach in the future. The US and the EU are already ahead of the curve in this regard.”

“It is therefore positive news that the Government is looking to consult on a CBAM and product standards later this year, accepting a key recommendation of the Committee. 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.”

In its report, the audit committee highlighted that a CBAM could incentivise the development of more low carbon products domestically as heavy emitting sectors look to avoid higher taxes that a CBAM or enhanced product standards would incur.

It would further mitigate the potential for heavy emitters to ‘offshore’ their emissions and send a clear signal for companies to re-evaluate their carbon footprint. To get this policy right, the EAC called on the Government to consult with sectors across the economy and SMEs.

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