The Environmental Audit Committee (EAC) has published a report today arguing that a carbon border adjustment mechanism (CBAM) must be introduced in the UK to address the risk of exporting carbon emissions abroad, also known as ‘carbon leakage’, and to encourage international action on multilateral approaches to carbon pricing.
The report argues that if a price were put on imported carbon through a CBAM, it could drive green policies in industries across the UK economy, potentially incentivising sectors to move away from carbon intensive practices.
Currently, the UK’s emissions figures do not include carbon from imports, according to the report, which says this “understates the true picture of the carbon associated with UK consumption”.
As a result, the committee recommends that the government “commence work immediately” on developing a comprehensive UK carbon border approach, “in order that this might be implemented during the 2020s”.
EAC chairman, Conservative MP Philip Dunne, said that implementing the work required to meet the 2050 net zero target needed speeding up.
“Our committee is under no illusions that this will be a challenging policy to get right, with a clear advantage to moving multi-laterally with other trading partners, and therefore all businesses must have a voice in the discussions and the government must be upfront with its intentions,” he said.
During the EAC inquiry, MPs heard concerns that carbon pricing could lead to producers increasing the costs of high carbon products on to the consumer, exacerbating the current cost of living crisis. The report also details fears that sectors that are hard to decarbonise will need greater support if a CBAM were introduced.
However, Dunne said that for the EAC it was clear that the advantages of a CBAM outweighed the negatives.
He continued: “For too long the emissions from our consumption have effectively been ‘offshored’, leaving the problem as out of sight and out of mind. But we must all take greater responsibility for our consumption, and the practices that our businesses and organisations adopt.”
To address industry concerns, the EAC recommends that the government should consult sectors across the economy to ensure the CBAM approach works. The committee also warns in its report that a border tariff alone would be unlikely to work in isolation, and that complementary mechanisms such as standards, regulation, and support for low-carbon technologies would also be needed.
The report adds that a multilateral CBAM would be a preferred option in terms of efficiency, with a unilateral CBAM “unlikely to drive significant change” in reducing global emissions.
However, the EAC says that as work the latter could be championed much sooner by the government, it should do so with a view to opening discussions on a multilateral CBAM in the future.