U.K.’s Boris Johnson Considers G-7 Bid on Green Border Levies
(Bloomberg) -- U.K. Prime Minister Boris Johnson is considering using his G-7 presidency to try and forge an alliance on carbon border taxes, according to two people familiar with the matter.
As holder of the rotating G-7 presidency and host of global climate change talks in November, Johnson has said he wants to make cutting emissions a key priority for recovery efforts.
As part of that, he wants to expand carbon pricing at home. He also wants to get G-7 countries to discuss so-called carbon border adjustments -- penalties on imported goods that are produced in countries with weaker climate laws, according to the people.
The idea is to protect industries in countries that have higher carbon prices while prodding other regions to move ahead with similar climate action. But it is controversial. A decade ago, the European Union was forced to backtrack on a plan to include international flights in its carbon market, after the proposals caused an uproar and threats of retaliation from Brazil to the U.S., Russia and China.
The U.K.’s presidency is still in early stages and proposals are yet to be agreed. A text would likely allow for an agreement in principle, rather than a binding commitment, one of the people said. A U.K. government spokesman declined to comment.
The U.K. is looking to the election of Joe Biden as U.S. President to inject fresh momentum into discussions, after the world’s second largest emitter was largely absent from climate talks for the last four years. Under the presidency of Donald Trump, the U.S. refused to sign G-7 communiques that sought to find common ground on cutting emissions and pulled out of the Paris Agreement.
In contrast, Biden has made climate change a priority in his first weeks as U.S. President. He publicly supported a price on carbon while campaigning, though it hasn’t been part of his main climate blueprint since he took office. Treasury Secretary Janet Yellen also advocated for a price on carbon before taking office.
The U.K. wants to take a leadership role in tackling climate change this year, and has already set the most ambitious carbon cutting goals among developed nations. It has moved to start its own internal carbon market after leaving the European Union’s emissions trading system. But it remains concerned that this could damage competition at home. Energy Minister Anne-Marie Trevelyan has said the U.K. is looking at ways to tackle the issue of carbon leakage -- where a polluting company moves its operations to a country with less stringent climate laws.
Johnson and his finance minister Rishi Sunak are also looking to expand the U.K.’s internal carbon market across the economy and considering a carbon border levy, one of the people said. Carbon pricing has been used in the U.K. to help drive coal out of the power mix, and could also be a method to get homeowners to rip out their gas boilers and replace them with heat pumps.
Trevelyan said last week that the U.K. is also closely monitoring EU plans for a carbon border adjustment that will introduce a levy on emissions embedded into goods. The EU’s plans are due to be announced in June, around the same time that G-7 leaders plan to meet in the southwest of England.
The European Parliament’s environment committee is voting this week on a resolution urging the European Commission to put a price by 2023 on emissions from imported products, including cement and steel, and link the levy to the region’s emissions market.
The idea may have traction in Canada where Prime Minister Justin Trudeau also announced plans to increase its carbon price. However, Japan has yet to publicly announce its backing for a carbon price.
Australia’s Prime Minister Scott Morrison has also been invited to the G-7 meeting in June. With an economy heavily reliant on fossil fuels, he’s one of Johnson’s key target countries in his effort to get all nations to commit to net zero greenhouse gas pollution targets.
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