A new report, 'Levelling Up and Zeroing In', by the Centre for Policy Studies says the Government can level up and decarbonise the economy simultaneously by introducing a carbon border tax, alongside a selection of other policies. 

The central argument of the report is that with pragmatic policy choices, levelling up and decarbonisation can go hand in hand, rather than being mutually exclusive objectives. It advocates a carbon border tax, in which importers pay duty on goods dependent on their carbon footprint. Such a policy would help reduce pollution and level up the economy by using these revenues to help local economies.

A carbon border tax would also see energy-intensive imports 'put on a level playing field with British businesses' and revenues could help support the economies in many of the same areas the government wants to 'level up'.

The report points out the North and Midlands are home to the areas with the highest emissions per person in the UK. Where London and the South East have service-heavy economies that are far less carbon-intensive, there are localities around the other regions of the UK that require a great deal of attention to decarbonise.

  • The steel industry is heavily concentrated in a small number of areas, such as Scunthorpe and Port Talbot. Around 15% of all UK industrial emissions come from just those two places.
  • 90% of the manufacturing capacity of the energy-intensive ceramics sector is represented in Stoke-on-Trent, employing 7,000 people.

For decarbonisation to succeed and to retain public support, says the report, the places that will be most impacted by the carbon transition can also benefit from new green jobs and investment.

Specific recommendations advocate that the UK should:

  • Make full expensing permanent and introduce a ‘green super deduction’ for clean business investment.
    • Many British businesses will need to spend significant sums to decarbonise, such as on new equipment, machinery and plants: they should be able to fully offset these investments against their tax bills.
  • Extend carbon pricing to more of the economy.
    • The UK Emissions Trading System should be broadened out to include more of the economy, for instance, bringing agriculture, transport and heating into its scope.
  • Reform skills provision, beyond the young.
    • Broadening the scope of the Apprenticeship Levy to make it much more flexible for employers to use, would accelerate the stated goal to improve and expand lifelong learning, while allowing workers to transition into clean jobs.
  • Support investment into clean research and development.
    • Funding for innovation needs to be maintained as well as examining how to better regulate emergent industries which could help deliver new technologies to cut greenhouse gases from sectors such as agriculture or in the energy supply.
  • Adopt a carbon border tax. 
    • The carbon border tax, or ‘carbon border adjustment mechanism’ would provide a level of insurance against ‘carbon leakage’ and give British industries the reassurance they need that taking steps to decarbonise will not mean they are unfairly undercut by cheaper yet dirtier imports.
  • Fund a bold new programme of technical universities. 
    • Revenues from the carbon border tax and wider carbon pricing should be used to create technical universities in areas in need of levelling up, to help equip workers for precisely the sorts of green jobs which will form the future green economy.
    • Carbon revenues could also be channelled into economic development funds for local authorities.

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External links

Levelling Up and Zeroing In, Centre for Policy Studies

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