Boris Johnson plans to put in place a carbon tax on imports from polluting industries to protect British farmers from foreign rivals.
The proposals would initially target heavy industry such as steel, but could in the future be extended to agriculture, a major emitter of CO2.
British farmers would likely hail the move as a lifeline if it comes to fruition, amid widespread concern that rivals in Australia and elsewhere could use new trade deals to flood the country with cheap goods.
Environmental activists are also likely to be in favor.
However, free market activists are likely to view the plans as a shift towards protectionism and there are fears the plan could drive up prices in stores.
Ministers are keen to avoid carbon leakage, where Britain is reducing pollution inside the country only to import dirty products in ever larger quantities.
A spokesperson for the Business Department said: “We recognize the importance of ensuring that our climate change policies are not undermined by emissions, industrial activity and jobs that simply move to the world. ‘foreign.
“We therefore pledge to encourage our trading partners to work together to mitigate the effects of climate change through diplomacy, so that different countries do not regulate emissions at different rates.”
The comments follow a call from former Trade Secretary Liam Fox asking the UK to steer carbon taxes at the border ahead of the Cop26 climate conference, and as the Union European Union provides for similar rules.
The tax would only apply to parts of the economy covered by national pollution taxes in order to align with World Trade Organization rules.
In Britain that would mean the Emissions Trading System (ETS), which currently includes heavy industry, power generation and domestic aviation – which could affect steel imports in from China and Turkey.
The government is also considering expanding its emissions trading system to cover the rest of national emissions, which in the long run could include agriculture and land use.
Minette Batters, leader of the National Farmers Union, spoke out in favor of carbon pricing in agriculture as she moved away from the EU’s £ 3.5bn subsidy scheme .
But experts warn that accurately calculating emissions from land use may be too complex for a carbon tax system.
The government is reluctant to adopt a carbon tax without knowing that others will do the same. London is likely to raise the topic at the G7 summit next week, although insiders have said it will not be a major theme of the meeting.
Brussels will present its own plans for a carbon tax by July 14 – likely a two-year pilot for industries covered by its own ETS, which it could expand to include road transport and building emissions.
Joe Biden’s climate envoy John Kerry said earlier this year that the US president is considering a similar tax but wants to avoid possible unintended negative impacts.
Business Secretary Kwasi Kwarteng also warned last year that a border carbon tax could lead to higher prices for consumers if not implemented by many countries at once.
Besides China’s refusal, any proposed border carbon tax risks meeting opposition from India, Brazil and developing countries, many of which are already frustrated by the lack of cooperation on the border. deployment of the Covid vaccine.
Representatives of India have already raised “real anger” at the proposals, according to a source close to the talks.
Josh Buckland, former business department advisor and consultant at Flint, said it’s clear that border carbon taxes are now taken seriously, but significant challenges remain.
He said: “It’s actually a kind of trade barrier that needs to be dealt with at the diplomatic level.
“It becomes more of a problem for the UK after Brexit because we have a big pro-trade agenda and are trying to get deals across the world.”
But he said the UK, US and EU movements have sent a powerful message to the rest of the world that failure to decarbon could have economic consequences.