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Tony Lodge is a Research Fellow at the Centre for Policy Studies. ‘Britain’s Inconvenient Truth – How the UK hides its emissions abroad’ will be published by the CPS.

This year sees British political leadership centre stage for three major global events. The first was ticked off last month when Brexit got done. The second will be in June for the first Commonwealth Heads of Government Meeting (CHOGM), with Britain outside the EU and eager to sign new trade deals with some of the world’s fastest growing economies. The third, and potentially the most significant, will be its ability to pull off a new global climate agreement at the ‘COP 26’ Glasgow summit in November.

Britain will chair ‘COP 26’ with arguably the most ambitious climate change laws and goals in place of any industrialised country. It has already legislated to deliver net zero carbon emissions, by 2050 and bans are being brought forward for petrol and diesel cars by 2035. The messaging here is clear. Britain will lead by example and design, and own the legislative model to deliver this huge change whilst creating green jobs and slashing emissions. The world should watch, follow and copy Britain’s leadership, shouldn’t it?

Before we examine some important flaws in present policies, it is important to acknowledge the huge strides which the UK has made in this area. To date, the UK is ranked seventh out of 61 countries on the climate change performance index, in comparison with the EU 27, which is ranked 22nd.

We reduced emissions by 42 per cent between 1990 and 2018, and the economy has grown by 75 per cent in that period. This was largely achieved by effectively replacing coal with gas and renewables for the generation of electricity, and remains unparalleled with regards to such a titanic shift over a relatively short period.

But while the UK has delivered giant strides at home, it has a growing dirty secret: it is increasingly offshoring and hiding emissions and with it exporting jobs, industry and investment. This is known as ‘carbon leakage’ and needs to be urgently tackled.

Importantly, the Government has acknowledged this issue for the first time, and is to undertake a Treasury review to better understand how British emissions can be cut without seeing them simply exported elsewhere. A variant on this point, but an important example, are the carbon intensive raw materials which are imported into the UK to supply important industries such as steel. For example, industrial coal supplies are coming in from as far afield as Siberia, Australia, the USA and Colombia. The coal is being railed and shipped tens of thousands of miles; it’s still the case that you can’t make raw steel in Britain without coal.

New Centre for Policy Studies research shows that on a per tonne of coal basis then importing it to industrial customers in Britain from Kuzbass in Siberia – through the port of St Petersburg – emits 569 per cent more in CO2 equivalent emissions than transporting coal mined in Britain. Lower, but still considerable transportation statistics are registered for the USA (235 per cent more) and Colombia (211 per cent) but a significant 625 per cent increase puts a big shadow over Australian coal imports. This is despite new British projects being delayed on local environmental grounds.

Though the UK has almost ended the burning of coal to generate electricity, there is a growing one-way trade in the import of electricity from Europe to keep the lights on. New forthcoming Centre for Policy Studies research will show how Britain is offshoring emissions into Europe where coal plants there are supplying our electricity via undersea interconnector cables. Though the Government now claims Britain is enjoying coal-free electricity periods, that is a play on words and strictly speaking incorrect. Instead we are importing coal and gas generated electricity from the EU, particularly the Netherlands and Germany, and consequently offshoring greenhouse gas emissions into the rest of Europe.

In recent years, Germany has opened new coal plants and doesn’t plan to phase them out until 2038. This offshoring in turn undermines the electricity market in Britain as overseas imports don’t pay the power and pollution taxes facing British fossil fuel generators. It is a growing sleight of hand, which the Government must address as a priority as it damages energy sector investor confidence and undermines its claim to have sustainable and credible green policies.

This brings us to the need for a wider solution and where British leadership is needed to close these loopholes, end offshoring and support less polluting domestic production where possible – the need to examine a British carbon border.

Britain must now consider targeting particular carbon intensive goods and power supplies which are imported and carry a large transport and transmission footprint. It is here where Britain is increasingly offshoring emissions and consequently jobs, production, investment and growth. Such a policy should look to new carbon border levies based on the carbon intensity of the exporting nation’s electricity grid. The levies would reduce in line with reductions in that country’s carbon emissions from its energy sector thus delivering global progress.

The EU is already looking at a carbon border but this risks merely insulating, consolidating and prolonging high emissions within the EU unless carbon prices there rise significantly. Global Britain must now take the lead and show how such policies can work to both reduce global emissions, end offshoring whilst delivering growth, investment and jobs at home.

37 comments for: Tony Lodge: Britain’s dirty emissions secret – carbon leakage. Here’s what it is and how to tackle it.

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