Autumn Statement: Carbon tax could threaten developing country economies

Posted on November 22, 2023
UK CBAM briefing pic

Today’s Autumn Statement is set to include the announcement of a new carbon tax. In advance of the Chancellor’s statement, a new report by the Trade Justice Movement and Transform Trade highlights the risks for developing countries.

The policy, known as a Carbon Border Adjustment Mechanism or CBAM, would ensure that imports of carbon-intensive products are charged the same carbon price as their UK equivalents, under the Emissions Trading Scheme.

“The CBAM is a blunt instrument and on its own, there is little to guarantee that it will drive down carbon emissions globally. There is however serious concern that a UK CBAM could hamper economic development in some developing countries.” says Tom Wills, Director of the Trade Justice Movement.

“Many developing countries have contributed a tiny proportion of historic carbon emissions, and lack the resources to decarbonise their industries. Taxing carbon-intensive imports from these economically vulnerable countries may have a damaging impact on development. Alternatively, the CBAM may result in developing countries simply selling to different markets, and have no impact on global carbon emissions,” Tom Wills went on to say.

The new report “Aligning the UK’s climate, trade and development policies: The case of the UK Carbon Border Adjustment Mechanism” calls for the UK to mitigate the potentially negative impacts of a CBAM on developing countries via sensitive policy design, such as exempting some developing countries from the scope of the scheme, or by providing long transition periods.

Ruth Bergan, Head of Policy and Advocacy at Transform Trade said “Developing countries across the world are already raising concerns that they are going to be penalised by climate-related trade measures, including CBAMs. The UK’s approach must be informed by its international commitments to common but differentiated responsibility, under the Paris Climate Agreement, and leave no-one behind, under the Sustainable Development Goals. Anything less than this will see the poorest communities paying the highest price for tackling climate change.”

Download the joint TJM and Transform Trade report "Aligning the UK’s climate, trade and development policies: The case of the UK Carbon Border Adjustment Mechanism”