Border Carbon Adjustment Tariffs and Decarbonisation

Part of the debate – in the House of Commons at 5:30 pm on 16th December 2020.

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Photo of Jerome Mayhew Jerome Mayhew Conservative, Broadland 5:30 pm, 16th December 2020

My hon. Friend has hit the nail on the head, because one of the key benefits of a border carbon adjustment is that it would allow us to decarbonise, and allow our heavy industry to accept the pain of higher energy costs, therefore letting the market work in our domestic market to incentivise the development of lower-carbon technology, while at the same time protecting it from being undercut by countries that are taking a little longer to go on the low-carbon journey.

We are not going to be spending money; we are going to be making money. That money could be used as the Treasury knows best. It does not mean that the money is taken out of the economy, because it could be put straight back in—in productivity-enhancing tax cuts, I hope, but that is up to the Treasury.

Best of all—I have saved the best till last—by freeing up the ability to price domestic carbon emissions at a realistic, behaviour-changing level, we can unleash the magic of the free market to seek out the most efficient solutions to low-carbon production. We do not need the Government to pick winners and subsidise industry once a market is working properly. Give a price to carbon, and that is exactly what we will create: a many-headed monster of innovation, entrepreneurialism, dynamism and efficient, productive capital growing our low-carbon future.

This future, if we are brave enough to embrace it before other nations, rather than just following, and if we are bold enough to allow the reshaping of the economy by demand rather than by direction, will equip our industry as leaders in low-carbon manufacturing. They will be leaders because they will be swimming in their natural element, whereas their international competitors will still be struggling to react to the short-term Government green initiatives and schemes that we all currently suffer from. It is a lead that could generate exports and growth in this country.

What is stopping us from delivering on the Prime Minister’s vision of a low-carbon, dynamic economy? Some worry about a protectionism challenge at the World Trade Organisation, but with a BCA applied in an open and transparent manner, nothing could be further from the truth. This policy is about removing unfair competition, not creating it. In any event, WTO rules expressly allow for tariffs whose purpose is to protect

“human, animal or plant life and health” or

“to conserve exhaustible natural resources”.

Those are two exceptions tailor-made for this kind of tariff.

More practically, if the UK were to join the United States of America, our friends in the European Union and other countries to establish the principle of BCAs at COP26, that would be a game changer, because that would ensure their practical acceptance. Others worry that putting forward such an ambitious proposal at COP26 runs the risk of failing to achieve the consensus that would allow the PR men to claim a stunning success. It might, but the risk of failure is the price of ambition, so should we give up on our ambition? Of course not.