Closing the emissions loophole: The case for a carbon border tax

Top lines

A UK carbon border tax (CBT) could kill two birds with one stone: reducing global carbon emissions while also reducing UK reliance on Chinese and Russian energy and metal imports. 

Without a carbon border tax, imported goods produced without internalising the cost of carbon emissions can undercut British and European producers. This represents a significant loophole that can lead to ‘carbon leakage’. 

British steel, aluminium and other industrial inputs have been severely undercut by competition from China and Russia. This not only threatens jobs and investment in the UK, but also increases reliance on countries that pose a security risk to the UK. 

A carbon border tax, if poorly designed, could disadvantage developing countries who rely more on fossil-fuel energy. Labour should support an exemption for all countries covered by the UK’s trade preferences system for low-income partners.

Ahead of COP26, Labour should push for a carbon border tax to ensure that the UK meets its climate ambitions. As things stand, the Government has failed to outline a green trade strategy despite the UK’s leadership of the G7 and COP26 this year.

Photo: Thorpe Marsh power station, Doncaster, UK, 29 August 2010. Tom Blackwell via Flickr.