Recommendation 27

Having been a long-standing leader in climate finance, the UK now risks falling behind by failing to install mechanisms to mitigate carbon leakage. The EU has already launched its carbon border adjustment mechanism (CBAM). It is now over a year and a half since we called on the Government to begin work immediately to develop a UK CBAM. We welcome the Government’s consultation on addressing carbon leakage risk, but are concerned to note the Minister’s view that it is better to encourage other countries to develop their own carbon pricing than to introduce our own CBAM. As we have argued before, the UK should be doing both. The Government must get on with it and plug the leaks that the UK’s emissions trading scheme risks causing, by developing a carbon border adjustment mechanism. (Paragraph 142) The effect of UK government policy on global and local investment