The world’s largest single market has launched a bold plan to tax carbon at its borders. The rest of the world is paying very close attention.
This is a great example of the stupidity of Brexit in an integrated world. Rishi Sunak has allowed the market for carbon credits in the UK to collapse post-Brexit, meaning the price of carbon in the UK now undercuts that in the EU. That means British exporters to the continent will now have to pay carbon taxes into the EU’s coffers, when previously they would have been using that money to buy carbon credits from the UK taxpayer. Thus the Tories spend our so-called ‘sovereignty’…
when previously they would have been using that money to buy carbon credits from the UK taxpayer.
Can you explain this? Wouldnt the exporters still have to pay the carbon tax?
My understanding was that the carbon tax applies to exporters from jurisdictions where carbon pricing undercuts the EU emissions market. So by oversupplying emissions credits in the UK post-Brexit (and thus letting the price per tonne drop to around half of the EU price), Sunak has brought UK exporters in-scope of the tax.
You are correct. This is from the CBAM Q&A document:
Conversely, if a non-EU producer has already paid a carbon price in a third country on the embedded emissions for the production of the imported goods, the corresponding cost can be fully deducted from the CBAM obligation.
