Rishi Sunak could set out green taxes for imports to help UK hit net-zero target
Ministers are drawing up plans to impose carbon taxes on imports from abroad as part of efforts to hit Britain’s net-zero target by 2050, i understands.
The proposals emerged as a “civil war” broke out between ministers over the best way to ensure the public pays for the carbon emissions they produce.
Chancellor Rishi Sunak is expected to lay out new carbon taxes this autumn to help the country meet its obligations to reduce greenhouse gas emissions, while also raising money to repair public finances damaged by Covid.
Among the proposals being looked at is a carbon border adjustment tax, which will slap levies on goods arriving from abroad. Such taxes aim to prevent wealthy countries such as the UK from outsourcing their carbon emissions to the developing world – known as “carbon leakage”.
One minister told i: “Carbon border adjustment tax is definitely in the mix. Eventually people will have to tackle the question of consumption – they are going to need to decide if they are willing to consume less stuff imported from China or not.”
For any domestic industry that has a carbon price placed on it, the same price would be placed on imports to prevent cheaper goods flooding the market.
Which products would be targeted has not been undecided, but the EU’s plans for carbon levies on imports will focus initially on the most carbon-intensive sectors, such oil refineries, steel and other metals, and cement.
The measures are under consideration ahead of the UK hosting the COP26 UN Climate Change Council in November. Experts have warned that the Government currently has an “alphabet soup” of carbon taxes and urgently needs to fill the policy vacuum ahead of the meeting in Glasgow.
With the UK welcoming world leaders to COP26, the Chancellor will have little choice but to spell out plans for environmental taxes in an autumn Budget and Comprehensive Spending Review.
Westminster sources said, however, that any move towards a carbon border tax would have to consider the implications it would have with major trading partners, such as the US, and how problematic it would be for post-Brexit Britain to go out and strike trade deals.
Ministers are increasingly at odds over the best way to ensure the public pays for the carbon emissions they produce, with the Treasury in a stand-off with the Department for Business, Energy and Industrial Strategy and No 10.
One source said: “There is a civil war raging between departments as to how the Government can meet its commitments.”
i understands Mr Sunak is pushing for a simpler carbon pricing approach, which would set baseline prices according to which sectors carbon emissions are coming from, while Business Secretary Kwasi Kwarteng is eager to focus on regulation.
Boris Johnson is keenly aware he needs to lead the way on the issue, but “the PM likes to spend money more than he likes to tax people”, as one well-placed source put it.
What has become clear is that the burden of who will pay for carbon emissions is shifting from the corporate sector to consumers.
It is widely accepted that petrol and gas will become more expensive, and the idea of taxes on meat and dairy products have also been floated. At the same time, the Government’s attempts to persuade people to upgrade their homes to make them more energy-efficient have largely failed.
There is a growing recognition that ministers will have to do more to allow people to make greener decisions. One Whitehall source said that the Government was “looking at ways to help ‘fuel-poor’ families and incentivise a switch to low-carbon heating”.
A minister said that the Government may end up introducing new rules to speed up the retrofitting of old homes, if existing incentives do not prove enough. They told i: “Retrofitting is really hard. One option is that we could say that old houses have to be redone every time they go on the market, or every time they’re bought.
“But eventually, you’ll probably find that people just don’t want to live in draughty homes anyway.”
Experts have warned, however, that the Government can only hope to raise taxes to generate much-needed funds, while nudging people towards more environmentally friendly choices if there are “viable alternatives”.
Rachel Wolf, Founding Partner of policy institute Public First and co-author of the Conservatives’ 2019 election manifesto, said it suggests why a “meat tax” is a long way off.
“Agriculture and certainly meat will be the very last thing they price,” Ms Wolf said. “The problem the Government has is if they want to take people with them to reach net zero, they will have to make the costs bearable and there have to be viable alternatives right now, as there could be with electric cars. Telling people to just eat less meat is not viable.”
Source i NewsJuly 13, 2021