CIOT/IFS debate: Carbon border adjustment – what approach should the UK take?

The UK government is consulting on how to prevent carbon leakage – that is, how to prevent UK taxes on greenhouse gas emissions simply leading to emissions-generating activities moving abroad. One of the main options up for consideration is a Carbon Border Adjustment Mechanism (CBAM)– a tax on imports based on their embedded and untaxed carbon content. Should the UK introduce a CBAM? Would it promote fair competition between firms in different countries and help to drive down global carbon emissions?

If the UK adopts a CBAM, how should it be designed? Which products should it apply to, how should untaxed carbon content be measured and how should exports be treated? When would a CBAM risk challenge under international agreements? What other policies need to sit alongside a CBAM to stop carbon leakage?

Our panel of experts at this debate included:

• Michael Keen, Ushioda Fellow at Tokyo College, University of Tokyo and an International Research Fellow at the Institute For Fiscal Studies

• Alice Pirlot, Assistant Professor, International Law, Faculty Associate, Centre for Finance and Development, Geneva Graduate Institute 

• Jennifer Rowland, Deputy Director for Energy and Transport Tax, HM Treasury

• Richard Woolley, Head of Energy and Climate Change, Chemical Industries Association

The event was chaired by Helen Miller, Deputy Director at the IFS.