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Webinar: Carbon pricing after Brexit: delivering the UK’s Green Industrial Revolution

Webinar: Carbon pricing after Brexit: delivering the UK’s Green Industrial Revolution

When the UK left the European Union, we also left the EU Emissions Trading Scheme (ETS), a scheme in which big polluters are given a set allowance for their emissions of greenhouse gases. If they pollute above this level they must buy carbon permits, or if they emit below their allowance they can sell their allowance for profit, incentivising companies to reduce their carbon emissions.The U.K’s new ETS debuted on the 19th of May 2021, with the U.K’s carbon price trading at £50, £5 above the EU equivalent, meaning that U.K companies are strongly incentivised to cut their emissions and low carbon fuels and energy are more attractive.  

In March 2021, the All Party Group on Sustainable Finance hosted a webinar on ‘Carbon pricing after Brexit: delivering the UK’s Green Industrial Revolution’ which was chaired by Polly Billington, Chief Executive of UK100 and Director of the APPG’s Secretariat. This event brought together MPs, the head of the Zero Carbon Campaign and the CEO of the Green Finance Institute to discuss how the U.K’s carbon pricing policy could be revised to ensure that it is ambitious enough to deliver Net Zero by 2050. 

Hannah Dillon, Head of the Zero Carbon Campaign, voiced her concern that only about a third of the U.K’s emissions have a carbon price attached under the U.K’s new ETS, as the scheme only applies to internal flights, electricity generation and highly energy intensive industries. The Zero Carbon Campaign is calling for the government to place a charge on every tonne of CO₂ emitted in the UK and to use this tax revenue to invest in decarbonising the economy alongside protecting the public from increased costs, including through funding a ‘carbon dividend’ for lower-income households.

70 percent of people polled support the introduction of a tax on the producers of greenhouse gas emissions

Hannah argued that there is a broad public mandate for introducing carbon taxes, rather than just relying on emissions trading schemes, by referencing Zero Carbon Campaign’s polling which found that 70 percent of people polled support introducing a tax on the producers of GHG emissions.

Darren Jones, Labour MP for Bristol North West and Chair of the BEIS Select Committee, spoke next and outlined two important things to consider when revising carbon pricing:

  • Ensuring that  people do not bear the costs of carbon pricing in their everyday lives.
  • Making sure that carbon pricing policy is designed with Net Zero by 2050 in mind and is used to deliver this legally binding commitment.”

Dr. Rhian-Mari Thomas, CEO of the Green Finance Institute, made the compelling argument that carbon pricing can help correct the market failure of the costs of goods/services and the profits of businesses not being reflective of their climate impacts. This argument that the right policies can ensure that markets work more efficiently and internalise the climate impacts of goods/services was also raised by Jerome Mayhew, Conservative MP for Broadland and Environmental Audit Committee member. 

Jerome spoke in favour of introducing border carbon adjustments, a mechanism to ensure that raising carbon taxes does not make domestic businesses uncompetitive internationally, through introducing tariffs on imports which are equal to the extra costs incurred by domestic producers due to carbon taxes. Jerome argued that this is not a form of protectionism, but rather would create a level playing field between domestic companies that incur carbon taxes and foreign companies that do not incur carbon taxes. This would mean that U.K industries would be incentivised to reduce their emissions while ensuring that this incentivisation does not make them uncompetitive. Read more about Jerome’s campaign for border carbon adjustments in his recent CapX piece on carbon pricing.

Barry Gardiner MP for Brent North and former Shadow Secretary of State for International Trade, raised a concern that border adjustment taxes could unfairly penalise the countries that are least responsible for climate change – net-exporter countries in the global South. Jerome recognised this valid concern and suggested that there could be rebates for less economically developed countries.

‘What should parliamentarians be doing to create the conditions where we can start acknowledging the price of carbon in our economy’

Polly Billington put this  question to the panellists, and built on the broader theme of how to build a public mandate  for more ambitious carbon pricing. Jerome suggested the key to achieving this is for MPs to clearly advocate for the benefits of carbon pricing to their constituents and educate the public about how carbon pricing could work. 

Ensuring that consumers do not bear the costs of carbon pricing, such as through higher energy bills, is clearly crucial to building broad public support for higher carbon pricing. As was raised in the discussion, up to £23 billion per year of tax revenue could be created from carbon charges by 2030, which could be used partly to offset rises in household bills, as well as being invested in developing low-carbon infrastructure. 

Throughout the discussion there was consensus between the speakers that carbon pricing needs reforming to make it strong enough to enable the U.K to meet our Net Zero targets, but that the costs of carbon charging should not be borne by the public.

Zero Carbon Campaign resources


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