Recommendation 3

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 a carbon price to be applied to consumption emissions arising from both domestic production and imports of products covered by the ETS. In particular, CBAM has the potential to help build support for green policies in historic manufacturing areas where opportunities for a renaissance in low-carbon UK-based manufacturing are likely to be greatest.