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— The clock is ticking for the U.K. to decide whether it wants its own carbon border tax.
— Does the tax system hold the key to net zero policy? One climate expert wants the Treasury to do more.
— Why isn’t Rishi Sunak at the climate finance summit in Paris? Good question, say campaigners.
A very warm welcome to Friday’s POLITICO Pro Morning Energy and Climate UK. Hay fever is letting up and Elton John is headlining Glastonbury — there can’t be a better way to ease into the weekend.
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CBAM COUNTDOWN: A government consultation on a potential U.K. carbon tax on imports is, as of midnight last night, closed — and the clock is ticking for the government to decide the way ahead.
Recap: Ministers launched the consultation on “addressing carbon leakage risk” back in March, following recommendations from MPs that the U.K. needs its own version of a carbon border adjustment mechanism (CBAM). That means a levy on carbon-intensive imports to ensure the U.K. doesn’t undermine its climate goals by simply shipping in goods produced in countries where carbon controls are less strict.
Here’s looking at EU: The U.K.’s policymaking is being spurred on by the EU’s own CBAM plan. Brussels is moving ahead with plans for the world’s first CBAM, which will be introduced in a transitional phase from October this year, although levies won’t be payable until 2026 and will then phase in gradually up to 2034. The policy will initially affect imports of cement, iron and steel, aluminum, fertilizers, electricity and hydrogen.
Knock-on effects: The EU’s plan is not without consequence for the U.K. — and those impacts could be complicated. As the government’s consultation closed on Thursday, UK Steel warned that 23 million tons of non-EU steel could be diverted from the EU into the U.K. market if the EU CBAM comes into force before a U.K. equivalent is in place. That, they warn, would risk flooding the U.K. market, undercutting costs and devastating the domestic steel sector.
Steeling themselves: “We need a U.K. carbon border adjustment mechanism to level the playing field on carbon costs across local and international suppliers,” said Gareth Stace, director general of UK Steel, adding that the U.K. could lead the world in the development of “net zero steelmaking” — but only if there is a national steel industry left to do it.
Get on with it: Philip Dunne, chair of the House of Commons environmental audit committee, which published a report on CBAM last year, told MECUK that, with the consultation period complete, there was “no time to lose” to get a U.K. CBAM “up and running.”
Quote: “We trust the government’s policy response will be swift and decisive,” Dunne said. “The U.K. cannot risk having its standards falling behind those of other industrial nations in its net zero journey.”
Government response: A government spokesperson told MECUK: “We are working closely with the steel industry on a sustainable and decarbonized future. We will continue to review if it is necessary to introduce measures to combat cheaper steel entering the U.K. market, and our recent consultation has sought views and evidence across stakeholders and the industry on how best to meet our commitments on decarbonization.”
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WHAT WE THINK: The Department for Energy Security and Net Zero has published its quarterly public attitudes survey on climate change and net zero. It found an overwhelming 82 percent of the public are concerned about climate change, although that has declined slightly from a high in fall 2021 when the figure was 85 percent. Eighty-nine percent of people were aware of the concept of net zero, a figure that hasn’t changed much since 2021.
SIZEWELL RULING: A legal challenge against the government’s decision to approve the Sizewell C nuclear plant has been dismissed. The campaign group Together Against Sizewell C, which argued the government did not consider alternatives to nuclear power, said the decision “does not signal the end of our efforts.” The BBC has more.
JESUS VS BIG OIL: The Church of England is selling all its remaining oil and gas investments, saying that “not nearly enough” progress had been made by fossil fuel companies in transitioning to net zero. Full story here.
INDUSTRY WEIGH IN: Business leaders have thrown their weight behind an amendment to the Financial Services and Markets Bill, which would insert “nature” into the regulatory principle on climate. The bill is back before the Commons on Monday.
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GREEN TORY DREAM TEAM: The Tory green caucus, the Conservative Environment Network, marked its tenth anniversary this week by announcing a new advisory council, including former Cabinet ministers Alok Sharma, Simon Clarke and Chris Grayling.
Also on the council: Environmental Audit Committee Chair Philip Dunne, MPs Katherine Fletcher, Selaine Saxby and Iain Duncan Smith, Leader of Cornwall Council Linda Taylor, Leader of Solihull Council Ian Courts, and Public First founder and 2019 Conservative manifesto co-author Rachel Wolf. Full membership here.
Election in sight: The newly beefed-up committee will aim to push net zero and wider green goals up the Conservatives’ pre-election agenda. Sharma said the CEN had been a “critical voice in keeping environmentalism at the heart of successive Conservative governments,” adding that he wanted to “ensure the government has a bold and positive environmental agenda ahead of the next election.”
INTERIM CCC CHAIR: Leading climate scientist Piers Forster has been appointed as the Climate Change Committee’s interim chair. Longstanding chair John Gummer is standing down at the end of June and the government is currently selecting a permanent replacement. There’s no strict timetable on that process but climate campaigners expect that a new chair will be in place by the fall.
GRAHAM’S ONGOING AMAZON ADVENTURE: Energy Security and Net Zero Minister Graham Stuart is rounding off his trip to Brazil today with a visit to sustainable farming and forest restoration projects in the Amazon, as part of a visit to offer U.K. support and advice to Brazilian leaders preparing to host the COP30 climate summit in 2025.
NSTA REVIEW: The government reviews the North Sea Transition Authority (NSTA) — the unit responsible for regulating the North Sea — every three years. Those wanting the complete run down can find it here.
CALL TO ACTION: It’s time for the Treasury to up its game on net zero. So said climate change committee Chief Executive Chris Stark on Wednesday at an event on green tax organized by the Green Alliance.
Watch those revenues: The government’s decarbonization targets bring “fiscal risks,” Stark warned. He said: “Of the order of 40, 50, maybe even more billion [pounds] per year of revenue rests, ultimately, on the fact that we have a tax system that was built, understandably, around a high carbon economy because that is the way economies work.”
Crikey, that sounds a lot: It is a lot. Think fuel duty, which alone raises £25 billion a year. As people swap gas-guzzlers for electric vehicles, that tax take is going to start coming down.
Let’s get fiscal, fiscal: “In terms of skewing the net zero story towards making choices easier for people and businesses in this economy, tax is a completely fundamental lever that we haven’t really used so far,” Stark said. Take low-carbon generated electricity: “You could use the tax system to skew the incentive towards using cheaper electricity that is generated from low carbon sources and away from fossil fuels.”
Time for a national chat about tax: Big changes to the tax system are not “politically popular,” Stark said, but the time has come for hard conversations. “You need to discuss what you are doing in the round as you decarbonize [the economy],” he insisted.
Political firepower needed: Stark was very nice about DESNZ but clearly doesn’t believe the department can drive the changes needed. “The problem, if there is one,” he explained, “arises from the fact that, if you don’t have the political leadership at the top to do this grand thing, then making it all happen is essentially an exercise in pushing lots of bits of string.”
PARIS PARTY: Global leaders are gathering for a second day alongside their host, French President Emmanuel Macron, to discuss climate targets and the global financial system. The “Macron summit” (as Macron no doubt hopes it will be called) sees 40 leaders gather in Paris. Full coverage from our POLITICO colleagues in Brussels here.
Sunak says no: Representing the U.K. is foreign minister Andrew Mitchell, a widely-respected figure from his days in charge of international aid. But some are saying Prime Minister Rishi Sunak should have shown up.
Quote: “It’s really disappointing not to see Sunak [there],” said Alex Scott, climate diplomacy and geopolitics program lead at the think tank E3G. “It’s not far to go.”
MITCHELL’S PLEDGE: Mitchell announced Thursday that the U.K. has started talks with 12 partner countries across Africa and the Caribbean to allow those nations to pause debt repayments if they are struck by a climate disaster such as floods. Embedding “climate resilient debt clauses” (CRDCs) into loan agreements would allow developing countries to funnel money into climate recovery rather than immediately repay loans, the government said in a statement. The World Bank also committed to allowing countries to pause payments in the case of a climate emergency.
Context: U.K. Export Finance — the government’s export credit agency — initially announced the debt clauses at COP27 last November. Gareth Redmond-King, international lead at the Energy and Climate Intelligence Unit (ECIU), said that the U.K. is now “stepping up” to deliver those promises.
But but but … He adds: “It would arguably be much better if more of what was provided by the wealthiest countries in the world was provided without the need for it to be repaid, not simply as a loan.”
PRIVATE PLEDGES: E3G’s Scott said more pressure should now be exerted on private creditors to also incorporate debt repayment clauses.
Reaction: “I think what we’re seeing is ministers taking up small areas of leadership like this debt deferment clauses on the basis of the U.K.’s long standing reputation of climate leadership,” Scott said. “But the lack of engagement at the highest political level is really risking dwindling U.K. credibility and reputation.”
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