Source · Select Committees · Public Accounts Committee
Recommendation 17
17
We asked about the feasibility of a tax based on carbon embedded in imports (a...
Conclusion
We asked about the feasibility of a tax based on carbon embedded in imports (a carbon border adjustment tax) to reduce the risk of pushing emissions abroad. The Treasury told us that it was considering this as part of its net zero review. It explained that it needed to further investigate the proposal, particularly whether it would be effective in maintaining UK jobs and facilitating decarbonisation in the Global South, how it could be implemented and whether it would comply with World Trade Organisation rules. It explained that the European Commission was considering a carbon border adjustment tax and it expected to learn from this about how the UK could tackle the issue of imported carbon in future.31 30 Qq 20-21 31 Qq 21-22 14 Achieving Net Zero 2 Wider engagement Engaging with the general public
Government Response
Acknowledged
HM Government
Acknowledged
4: PAC conclusion: Government does not have a clear way of determining whether its actions to reduce emissions in the UK are transferring emissions to other countries. 4: PAC recommendation: The Department should review how policies aimed at reducing UK- based emissions take into account the risk that emissions are passed to other countries and explore how to make the level of emissions generated in the manufacture of imported goods more transparent. 4.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2021 4. 2 BEIS is jointly leading a cross-government work programme with HMT on the issue set out in this re commendation (often referred to as ‘carbon leakage’). This includes developing an analytical framework to consider the risk and potential impact of carbon leakage and assessing the range of mitigation measures av ailable. 4. 3 The recently published Industrial Decarbonisation Strategy sets out government's current approach to mitigating carbon leakage and includes a commitment to establish a targeted approach to mitigating ind ustry’s leakage risk throughout the journey to net zero as the UK’s emissions reduction policies become m ore ambitious. HMT will be publishing more analysis on risks and possible mitigation options in the up coming Net Zero Review. 4. 4 The department will also be reviewing ‘free allocation’ policy as part of a wider review into the UK Emissions Trading Scheme (UK ETS) now that it has been set up. This review will focus on how free allocations can be distributed more fairly or better targeted in line with a reduction to the overall cap. The department currently has a call for evidence open that is part of this review. 4.5 Regarding transparency, the Department for Environment, Food and Rural Affairs (Defra) publishes estimates of the emissions associated with final demand in the UK irrespective of where these arise globally (UK-Carbon-footprint). BEIS will continue to engage with Defra and researchers who provide these statistics to explore opportunities to provide more transparency. 4.6 The Industrial Decarbonisation Strategy commits to developing proposals to improve embodied emissions data transparency and for new product standards to support the development of the market for low carbon industrial products. A call for evidence will be launched on low carbon industrial products in 2021- 22.