Comment by Dr. Danial Sturge, Carbon Policy Practice Manager at Energy Systems Catapult. 

The Commission for Carbon Competitiveness, a cross-party and cross-industry group, has published their inaugural Green Paper, ‘Fixing the Carbon Leak’. The Commission ran its own mini consultation alongside the government’s consultation process, receiving twenty written submissions as well as conducting four oral evidence sessions, in which Energy Systems Catapult participated.

The publication of the Commission’s recommendations follows the release of our own report on carbon leakage, which also acted as our response to government’s consultation.

Included are a number of no brainers, such as aligning with the European Union’s carbon border adjustment mechanism (CBAM) where practical and ensuring compliance with the World Trade Organisation (WTO). Both being particularly important, given the EU are already seeing challenges from China and India in response to the their CBAM. The Commission also recommends using as many existing information gathering tools as possible, on a ‘tell us once’ principle, which is effectively our ‘disclose once’ principle repackaged, and is certainly welcome.

The need for further action

But it’s not all positive. We’d like to see some of the recommendations undergo further thought and refinement. It’s our belief that applying a CBAM universally to the entirety of UK manufacturing industries – without exception – fails to recognise the complexity that industry presents. Take the chemicals sector for example, even within this one industry the products are hugely varied – from fertilisers to polymers – and all will not necessarily be suited to a CBAM. Where a CBAM make more sense, initially at least, is for the steel and cement sectors.

In a similar vein, applying a CBAM to Scope 1 emissions only limits our ability to capture emissions from electricity use and transport, both major contributors to overall imported emissions. This is especially relevant, because the UK has decarbonised its grid further than many of the countries we import from, and this advantage should not be lost.

What we do with the CBAM revenue is likely to become a more politically charged topic of debate – the Commission recommends using it “to cut or abolish green levies”. At Energy Systems Catapult we advocate removing centralised funding for renewables in favour of supplier mandates that are linked to Carbon Budgets. But the cost of past support schemes for renewables – such as Contracts for Difference – still needs to be funded, whether from bills or from tax revenue.

The process is just getting started

But the overwhelmingly positive outcome of this report, and above all the recommendations, is that industry and members of both the major political parties are all in lock stead on what it is we should be striving for. There will of course be debate on the details, but it is the first hurdle of achieving consensus that is so often needed before we can get stuck in the weeds. The Commission has been able to achieve this and it’s a positive (and necessary) step forward for what will ultimately be a difficult set of policies to design and implement.

With the government’s own consultation closing in June 2023, the process is only just getting started. And with the EU making strides with its CBAM, the next 18 months could see an important shift in how we price carbon and its role in global trade.

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