Eustice: Wider carbon pricing ‘won’t work without border tax’

Environment secretary George Eustice has given cautious backing for slapping a tax on imports of products from countries without a price on carbon, while also arguing against quickening the Paris Agreement’s ‘ratchet mechanism’.

Interviewed by BBC journalist Andrew Marr yesterday morning, Eustice was first asked about the prospect of a “tax on carbon intensive food – in other words, meat”.

In a blunt reply, Eustice said that, “We are not going to have an arbitrary meat tax or meat levy – that’s never been on the cards. I’ve never supported it,” repeating the position that the prime minister outlined earlier this year.

However, that view stands in contrast with a paper that accompanied last month’s Net Zero Strategy, which found that the public would need to reduce consumption of beef and curb other carbon-intensive activities to put the goal in reach. The paper, produced by the Behavioural Insights Team (an independent organisation once part of the Cabinet Office) was withdrawn almost as soon as it appeared, its publication being accidental, according to the government.

“For the next seven years, we have a big programme to repurpose the agriculture budget that we have, so there is no case for any kind of carbon emissions trading or meat tax or any such thing in the food sector,” Eustice emphasised.

“However, beyond that, were you to introduce some kind of emissions trading scheme to try to reduce carbon emissions further, and develop private finance in this area, then you would also need to have some kind of carbon border tax to take account of those countries that maybe weren’t pulling their weight,” in terms of reducing emissions, which could be seen as a reference to India and China, for example.

“It’s widely recognised that an emissions trading scheme in carbon, in carbon credits, can’t really work unless you have some sort of border tax,” Eustice told Marr, as it can result in carbon leakage: industries leaving for cheaper and less robustly-regulated jurisdictions.

“We’re not going to allow producers in this country to be undercut by those who aren’t doing their fair share. We are not going to export pollution. So if you don’t want to export pollution, you do at some point have to consider something like a carbon border tax,” Eustice added. In principle, taxing imports from where carbon goes unpriced should avoid this problem.

Furthermore, wider domestic carbon pricing, whether through a carbon tax or broader emissions trading scheme, “can only make sense” with a carbon border adjustment mechanism, Eustice said.

In an implicit admission of the diplomatic ructions that it would produce, he said that “in an ideal world” it would be introduced multilaterally, “with the whole world coming together to agree this”. Both the US government and European Commission are also backing the idea but a joint statement issued by Brazil, India, China and South Africa in April expressed “grave concern” about the proposal, describing it as a “discriminatory” trade barrier that would be contrary to the ‘common but differentiated responsibilities” set forth in the UN Framework Convention on Climate Change (UNFCCC).

A UK carbon border adjustment mechanism (CBAM) clearly will not be introduced overnight, Eustice admitted, while confirming that the Treasury is working with the Department for Business, Energy and Industrial Strategy on models for one. A CBAM was also backed by the prime minister’s father, Stanley Johnson, and former trade secretary Liam Fox, in a speech in May. It has also been pushed by think tank Policy Exchange.

Eustice later appeared on Times Radio, where he said that COP26 had been “really positive”, with ministers from around the world praising the “substantial pledges” that had been made at the conference. “The money’s there too,” he added, largely for anti-deforestation and climate finance measures. “We shouldn’t be cynical,” he argued, rejecting comments from climate campaigner Greta Thunberg that the COP26 was already a failure.

He was quizzed about the prospect of amending how frequently nationally determined contributions are submitted and reviewed at COPs. Under the Paris Agreement, this should be every five years. With another added in response to Covid-19, the Glasgow talks are the first of this cycle.

But some countries, particularly small island states and in the developing world, consider that a faster pace is needed, and that NDCs should be submitted and considered either every one, two or three years instead. An annual cycle was backed by former UNFCCC executive secretary Christiana Figueres in a lecture last week.

However, “I’m not sure this technicality around a ratchet is something that we would push for or would be in the final text,” to be agreed this week, said Eustice, which led him to be accused of undermining COP26 president (and Cabinet colleague) Alok Sharma.

But Sharma’s team would not be drawn on his comments. “As the COP presidency, the UK is listening to the views of all parties and the final text will be agreed by consensus. We’re looking forward to further productive negotiations this week,” said a spokesperson.