Fifth Report - Greening imports: a UK carbon border approach
Select Committee
Environmental Audit Committee
HC 737
4 April 2022
Recommendations
8 results
5
Deferred
We recommend that the Government commence work immediately on developing a comprehensive UK carbon border...
Recommendation
We recommend that the Government commence work immediately on developing a comprehensive UK carbon border approach, in order that this might be implemented during the 2020s. We recommend that this include a CBAM as part of a co-ordinated set of …
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Government Response Summary
The government is working internationally to promote carbon pricing and announced its intention to consult on carbon leakage mitigation options, including a UK CBAM, but does not commit to any course of action.
8
Acknowledged
Para 54
Our recommendations to Government on the design of the carbon border approach are as follows:...
Recommendation
Our recommendations to Government on the design of the carbon border approach are as follows: a) to ensure, from the outset, that the carbon border approach is designed to adhere to the principles of common but differentiated responsibilities and respective …
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Government Response Summary
The government acknowledges the importance of balancing priorities including WTO rules, free trade, and the needs of developing countries. They will continue working with international partners in the G20, WTO, and OECD to advance global climate goals and are supporting developing countries' climate ambitions with financial contributions.
12
Acknowledged
Para 71
The UK and EU have agreed to consider linking the UK and EU ETS systems,...
Recommendation
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), simplifying administrative processes for UK-EU trade; as linking can be a lengthy process, …
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Government Response Summary
The government states it is open to linking the UK ETS internationally in principle and is considering a range of options, and that cooperation and dialogue on carbon pricing will continue to be important.
13
Deferred
We recommend that the Government: a) Set out in its response to this report: b)...
Recommendation
We recommend that the Government: a) Set out in its response to this report: b) how it intends to work with stakeholders in the EU and UK to understand how the proposed EU CBAM, would affect the UK, including in …
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Government Response Summary
The government announced its intention to consult on a range of carbon leakage mitigation options, including a UK CBAM, later this year, but does not commit to any course of action.
15
Deferred
Para 89
To navigate the design options available and ensure a policy response that is effective in...
Recommendation
To navigate the design options available and ensure a policy response that is effective in achieving its objectives, it is important that the Government articulate from the outset the objectives of the UK’s carbon border approach, so that the design …
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Government Response Summary
The government announced its intention to consult on a range of carbon leakage mitigation options, including on a UK CBAM, later this year.
16
Deferred
Para 90
We recommend that the Government: a) clearly define its objectives for any carbon border approach...
Recommendation
We recommend that the Government: a) clearly define its objectives for any carbon border approach at the outset, and ensure the choice of policy options and design consideration at each stage is led by these objectives. These should encompass the …
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Government Response Summary
The government announced its intention to consult on a range of carbon leakage mitigation options, including on a UK CBAM, later this year to seek a wide range of views from stakeholders on the UK’s future carbon leakage mitigation policy.
18
Deferred
Para 98
We recommend that the Government, at the design stage: a) Include a strategy to engage...
Recommendation
We recommend that the Government, at the design stage: a) Include a strategy to engage with the public in the design of the carbon border approach to develop and maintain public support and keep the public informed of the changes …
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Government Response Summary
The government announced its intention to consult on a range of carbon leakage mitigation options, including a UK CBAM, later this year, and is committed to communicating in an open and transparent way as it develops its carbon leakage mitigation policy options but does not commit to any course of action.
20
Deferred
We recommend that the Government: a) Ensure, through the oversight of both Cabinet Committees on...
Recommendation
We recommend that the Government: a) Ensure, through the oversight of both Cabinet Committees on Climate Action, that the UK’s carbon border approach is aligned with existing environmental, trade, development and fiscal policy, through both its design and implementation stages. …
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Government Response Summary
The government agrees with the importance of aligning its approach to carbon leakage with wider policy and will continue to engage with Cabinet Committees and work across Government and announced its intention to consult on a range of carbon leakage mitigation options, including on a UK CBAM, later this year.
Conclusions (12) Observations and findings — click to expand
1
Conclusion
Acknowledged
Para 30
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. A clear …
Government Response Summary
The government agrees that multilateral solutions are needed and is working internationally to promote carbon pricing and build a common understanding of carbon leakage risks, and announced its intention to consult on a range of carbon leakage mitigation options.
2
Conclusion
Acknowledged
Para 31
Multilateral and global approaches to carbon pricing represent the most appropriate way to support global decarbonisation. Since the process to negotiate and agree these is lengthy, they cannot provide the urgent action necessary in the short term. Pursuing a unilateral carbon border approach does not preclude continuing to push for …
Government Response Summary
The government agrees that multilateral solutions are needed and is working internationally to promote carbon pricing and build a common understanding of carbon leakage risks, and announced its intention to consult on a range of carbon leakage mitigation options.
3
Conclusion
Deferred
Para 32
While net zero policies address the UK’s territorial production emissions, 43% of the UK’s consumption emissions arise from imports. The UK’s principal carbon pricing mechanism, the ETS, applies to domestic production, but no carbon price is currently applied to imports of the same products. A CBAM could address this, enabling …
Government Response Summary
The government is working internationally to promote carbon pricing and announced its intention to consult on carbon leakage mitigation options, including a UK CBAM, but does not commit to any course of action.
4
Conclusion
Deferred
Para 33
Alongside CBAM, the UK’s carbon border approach needs to comprise a set of complementary policies, including product standards, to tackle consumption emissions beyond those covered by explicit carbon pricing, and support decarbonisation across the economy. Careful design is needed to ensure the carbon border approach is successful in achieving its …
Government Response Summary
The government is working internationally to promote carbon pricing and announced its intention to consult on carbon leakage mitigation options, including a UK CBAM, but does not commit to any course of action.
6
Conclusion
Acknowledged
Para 52
The UK is an open, trading economy, and trade can be a powerful lever to drive environmental outcomes. Careful design, alongside inclusive engagement with trading partners, is needed to ensure that any CBAM and wider carbon border approach are aligned with the UK’s international obligations and commitments, including the principle …
Government Response Summary
The government agrees that multilateral solutions are needed and is working internationally to promote carbon pricing and build a common understanding of carbon leakage risks, and announced its intention to consult on a range of carbon leakage mitigation options.
7
Conclusion
Deferred
Para 53
As the UK continues to negotiate its own trade agreements following exit from the European Union, there is an opportunity to align trade policy with the UK’s role as a leader in climate change action; further analysis is required to understand how the UK’s carbon border approach might interact with …
Government Response Summary
The government is working internationally to promote carbon pricing and announced its intention to consult on carbon leakage mitigation options, including a UK CBAM, but does not commit to any course of action.
9
Conclusion
Acknowledged
Para 63
In our view, the Government’s commitment to work with stakeholders to understand the potential impact of an EU CBAM on UK industry and ensure no unreasonable barriers to trade is welcome. Given the potential UK impacts, clarity is needed on how the Government intends to do this, and urgently, given …
Government Response Summary
The government is actively engaging with the EU on their CBAM proposals through formal and informal channels and expects the EU CBAM to take into account the UK's carbon pricing.
10
Conclusion
Acknowledged
Para 69
It is at present unclear how the proposed EU CBAM might impact the UK, particularly Northern Ireland, where electricity generators are currently under the scope of the EU’s ETS. We understand that this is a dynamic discussion which depends on wider continuing negotiation between the UK and EU, as well …
Government Response Summary
The government is actively engaging with the EU on their CBAM proposals and will continue to engage with stakeholders and monitor developments closely to build a full understanding of the implication of the EU CBAM on the UK’s trading relationship with the EU, including with respect to Northern Ireland.
11
Conclusion
Acknowledged
Para 70
The Government has committed to ensuring businesses do not face any unreasonable barriers to trade; further detail would be welcome on how it plans to work with stakeholders in the EU and UK to achieve this. Given that electricity generators in 48 Greening imports: a UK carbon border approach Northern …
Government Response Summary
The government is actively engaging with the EU on their CBAM proposals through formal and informal channels and expects the EU CBAM to take into account the UK's carbon pricing.
14
Conclusion
Acknowledged
Para 88
As the report of the Treasury’s Net Zero Review notes, there can be no one-size-fits- all mechanism to address carbon leakage risks. The UK’s carbon border approach needs to comprise a set of complementary policies, designed to drive industrial decarbonisation in the UK and globally. A CBAM will be an …
Government Response Summary
The government agrees that multilateral solutions are needed and is working internationally to promote carbon pricing and build a common understanding of carbon leakage risks, and announced its intention to consult on a range of carbon leakage mitigation options.
17
Conclusion
Deferred
Para 97
Pricing the carbon element, so low-carbon products become less expensive than high-carbon ones, is a powerful lever to reduce consumption emissions, to support the development of low-carbon products and increase access to such products. Currently, high energy prices and rises in inflation are contributing to stark rises in living costs; …
Government Response Summary
The government announced its intention to consult on a range of carbon leakage mitigation options, including on a UK CBAM, later this year.
19
Conclusion
Acknowledged
The UK’s carbon border approach needs to be aligned with the Government’s wider environmental policies, and integrated into trade, development and fiscal policy. The context for carbon border measures is not fixed, and CBAM in particular represents a new policy lever. It is important that the UK’s design for a …
Government Response Summary
The government agrees with the importance of aligning its approach to carbon leakage with its wider environmental, trade, development, and fiscal policy and will continue to engage with all the appropriate Cabinet Committees as it consults on a possible UK CBAM.