A report by MPs in the House of Commons Environmental Audit Committee has called for a border tax on carbon-intensive imports.

Such a carbon tax would create a more level playing field for domestic producers and discourage high carbon producing industries offshore (and in turn the ‘offshoring of carbon’).

Such a carbon border adjustment mechanism (CBAM) is required, the Committee notes, because, “effective carbon pricing is crucial to decarbonisation, but cannot be achieved without effective anti-carbon leakage policies in place. The Government’s current approach to addressing the risks of carbon leakage, including free allocation of Emissions Trading Scheme (ETS) allowances, is insufficient on its own to incentivise industrial decarbonisation effectively”.

The UK has committed to achieving net-zero emissions by 2050, which will require cutting pollution from heating, buildings and transport and from the energy sector, but while net-zero policies address the UK’s territorial production emissions, 43 per cent of the UK’s consumption emissions arise from imports currently.

The EU is planning to introduce the world’s first CBAM that will apply to certain goods in sectors including cement and aluminium. The UK and EU have agreed to consider linking the UK and EU ETS systems, which would exempt UK producers from the EU’s CBAM (and vice versa), and the MPs have expressed the hope that there is a political recognition on both sides that linkage of CBAM schemes in due course could be achievable.

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