The chancellor is planning to introduce a carbon tax by 2026 to ensure that domestic producers are not undercut by countries with poorer environmental credentials.

The financial Times reports the new levies on imported carbon-intensive goods will closely mirror those of the EU. However, the EU’s own carbon tax, the Carbon Border Adjustment Mechanism (CBAM), has hardly been free from controversy.

Adopted for use on 1 October, the tax was designed to protect and encourage environmentally sound production by taxing environmentally harmful carbon-intensive products from outside of its borders.

Criticism has been levelled at the speed of implementation, only giving business 45 days after pricing was announced to comply, and many even unaware of the tax. Another issue is the sheer cost to business of administering the scheme.

The scheme was engineered before the energy concerns of the invasion of Ukraine, and this has placed some manufactures, particularly German industry, in a position where cost will already be higher, creating a greater imbalance of costs. And then there is the simple question of whether CBAM is even legal under WTO rules and create retaliatory trade measures.

So, Jeremy Hunt faces a raft of issues if he is indeed going to create a workable, fair and legal system within three years.

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