Editor's PickForexUK may eventually need carbon border tax, George Eustice says

November 8, 2021

The UK may eventually need to implement a carbon dioxide border tax to stop consumers effectively exporting greenhouse gas emissions abroad, the environment secretary has said.

On Sunday, George Eustice insisted he was not in favour of a domestic meat tax to help reduce global heating and that such a proposal had “never been on the cards”.

But, in an interview with the BBC’s Andrew Marr, he said that in the long term a CO2 border tax – a levy on imports related to the amount of CO2 generated by meat production – might be necessary because otherwise emission trading schemes would not work.

Eustice also said the Treasury and the Department for Business, Energy and Industrial Strategy were looking at models for how such a tax might operate.

Downing Street has ruled out a CO2 tax that would impose higher costs on UK meat producers and Eustice said a claim that he favoured a meat tax, based on an interpretation of an interview he gave before the start of the Cop26 summit, was wrong.

“What I actually said is that in seven years we have a big programme to repurpose the agriculture budget that we have, and so there is no case for any kind of carbon emissions trading or meat tax, or any such thing in the food sector,” Eustice said.

But he said the logic of emission trading schemes – imposing caps on the emissions allowed by producers – made a CO2 border tax inevitable.

“Were you to introduce some kind of emissions trading scheme to try to reduce carbon emissions further … then you would also need to have some kind of carbon border tax to take account of those countries that maybe weren’t pulling their weight,” Eustice said, stressing that ideally this should be done multilaterally.

Eustice also said a CO2 border tax might be necessary to protect domestic producers. “If you don’t want to export pollution, then you do at some point have to consider something like a carbon border tax,” he said.

Asked if this meant higher taxes on goods coming from countries like China and India, Eustice said he would phrase it differently. “We would be saying, as countries taking the action necessary to deal with this global challenge, that we’re not going to allow those producers in this country to be undercut by those who aren’t doing their share,” he said.

In the past, No 10 has been wary about endorsing CO2 border taxes. Boris Johnson is known to dislike anything that suggests consumers may have to pay a price for the shift towards net zero.

But at their summit in Cornwall in the summer, G7 leaders acknowledged the need to tackle the problem of “carbon leakage”, in language that acknowledged the case for border taxes. The EU has published its own plan for what is effectively a CO2 border tax, known as the carbon border adjustment mechanism.

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