Work on unilateral carbon border adjustment mechanism must commence immediately, says committee

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The UK Government should develop plans for a carbon border adjustment mechanism (CBAM) to address carbon leakage as the date to achieve net zero emissions gets closer, the Environmental Audit Committee states.

Publishing its report examining the issue, MPs argue that a CBAM could drive green policies in industries across the UK economy as the practice of ‘offshoring’ the UK’s emissions is addressed.

Environmental Audit Committee Chairman, Philip Dunne, commented: “The targets, timetable and overall strategy for meeting net zero have been set: now the work must speed up to make the ambitions a reality.

“A carbon border adjustment mechanism can drive change not only by addressing carbon leakage, but by driving low-carbon change across our economy. 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.

“Our Committee is clear that the pros of a CBAM outweigh the cons. 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.

“I look forward to the Government’s response to our Committee’s latest report and to a statement of its intentions on carbon pricing.”

Currently, the UK’s emissions figures do not include carbon from imports which understates the true picture of the carbon associated with UK consumption. According to the Committee, CBAM could help address this.

However, the Committee also heard concerns that carbon pricing could lead to producers increasing the costs of high carbon products on to the consumer, which could exacerbate the current cost of living crisis.

It is necessary, the Committee argues, for the CBAM to incentivise the development of more low carbon products to ensure people are not adversely affected. The Government should also improve awareness raising around carbon pricing and a CBAM, if introduced, to demystify the policy for consumers.

The Committee recognises that sectors that are hard to decarbonise will need greater support. It is therefore integral that when designing a CBAM, that the Government consults sectors across the economy and SMEs to ensure the approach works: a one-size fits all approach is unlikely to suffice.

The Committee is of the view that a CBAM alone will not deliver the desired results: complementary mechanisms such as standards, regulation and support for low-carbon technologies are also needed.

The Committee is aware that a unilateral CBAM is unlikely to drive significant change to reduce global emissions, with a multilateral CBAM likely to be the preferred and more effective option.

However, work on a unilateral CBAM can be championed much sooner by the Government, with a view to opening discussions on a multilateral CBAM in the future.

The government has two months to respond to the Committee’s report.

‘Greening imports: a UK carbon border approach’ is available to read on the UK Parliament website.