The UK government rightly trumpets its record of reducing CO2 emissions - between 1990 and 2016, emissions within the UK’s borders fell by 41%, one of the largest declines in the western world. However much of this decline is down to a greater share of goods and services originating from overseas, which are not counted towards the UK’s CO2 emissions.
For all of the talk of reaching net zero by 2050 here in the UK, it might seem a bit pointless if at the same time we’re importing goods from countries where little effort is being made to tackle the issue of rising greenhouse gases.
The government has recognised the issue of ‘carbon leakage’ and is currently consulting on whether it should introduce a ‘Carbon border adjustment mechanism’ (CBAM) on relevant imports.
If we in the UK, and ideally the wider western world, placed a carbon tax on manufactured goods originating from carbon-intensive countries, this would encourage such countries to quicken the pace of their own decarbonisation efforts, whilst at the same time allowing our own domestic production to compete for market share.
A recent example of where this policy might be effective is in steel production. China, the largest CO2 emitter in the world by far, has persevered with a carbon intensive growth model in contrast with much of the developed world, allowing it to export relatively cheap goods worldwide.
Most worryingly, its steel exports have had a major impact on domestic production in recent years, with British steel tinkering on the brink. UK steel producers work on very thin margins and can be easily undercut by other countries that make cheaper, higher emission steel.
If an effective carbon levy could be applied on carbon-intensive imports, not only would this help level the playing field by giving domestic production a chance to compete, it would also go some way to encourage the world’s largest CO2 emitters to transition from fossil fuels to greener alternatives and reduce carbon leakage.
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