Government launches consultation on carbon border tax as part of 'green day'

Thu 30 Mar 2023
Posted by: Phillip Adnett
Trade News

Green digital globe

The UK government has unveiled a series of environmental and energy security policies today (30 March), including a consultation that could lead to the introduction of a border tax on carbon intensive goods.

As part of its ‘Green Day’ announcements, a consultation on “addressing carbon leakage” at the UK border will cover potential policy areas such as introducing a ‘carbon border adjustment mechanism’ (CBAM), mandatory product standards and measures to help grow the market for low carbon products.

The consultation can be accessed here, and will close at 11:59 on June 2023.

Carbon border tax

Under a CBAM, additional taxes could be placed on imports of products that are made using highly polluting processes, partly to safeguard domestic industry from goods produced in countries with less stringent environmental standards.

The UK and EU are expected to increase coordination on their respective CBAMs, reports the FT.

As reported previously by the IOE&IT Daily Update, the EU will implement its own CBAM from 23 October this year.

Full package

Other measures in today’s package include:

  • an extra £10bn for UK Export Finance to boost exports, particularly in the clean growth sector
  • £160m aimed at kickstarting investment in the UK’s floating offshore wind industry
  • £240m in green hydrogen development projects

‘Stepping up’

Prime minister Rishi Sunak said that his government was “stepping up to power Britain and ensure our energy security in the long term with more affordable, clean energy from Britain, so we can drive down energy prices and grow our economy.”

Energy security secretary Grant Shapps said that the plan would help fix the UK’s cost of living crisis, whilst the UK exports its “green growth expertise to the world.”

According to the Telegraph, the measures being are viewed by Whitehall as an important part of the government hitting its target of net zero emissions by 2050.


However, industry experts were critical of the announced policies.

According to the Guardian, most of the plans are based on existing commitments and do not have any new funding.

Referring to a song by the US pop-punk band Green Day, shadow environmental secretary Ed Miliband said he feared a “boulevard of broken dreams” in relation to the government’s Net Zero plans, calling for a repeal of the ban on offshore wind as well as increased investment in energy efficiency technology, according to the Independent.

Corporate Leaders Group UK director Beverley Cornaby told environmental site Edie that while aspects of the announcement were to be welcomed, “it is not clear what level of emission reductions they will result in, nor whether this will be enough to enable the UK to compete on the global stage for vital private investment.”

Other green industry representatives called the announcements “inadequate”, “not bold enough” and “piecemeal”.

Hunt warns of protectionism

The measures were described by UK officials as a response to the US’ Inflation Reduction Act, which provides the American green industrial sector with subsidies and tax breaks and has prompted a strong diplomatic response from the EU and other nations, according to Bloomberg.

As part of the measures, chancellor Jeremy Hunt wrote in the Times that the UK would not go “toe-to-toe” with the US and EU when it comes to green subsidies, instead focusing on private capital investment and pro-growth regulation.

Hunt had previously called the act as “very real competitive threat” to the UK’s green sector.