While the world watches with dismay and awe at events in Ukraine, the trade policy churn continues quietly.
London still consulting on options for a ‘UK CBAM’
The UK is tracking the international discussions about cross-border carbon taxes very closely – but is still some way away from introducing a clear policy of its own on the subject.
This was clear from evidence given by a senior government minister at a session of the House of Commons’ Environmental Audit Committee on Wednesday (23 February), at which the EU’s proposed Carbon Border Adjustment Mechanism, and similar measures around the world, came under scrutiny.
“We are making progress on a number of elements in this area,” claimed Lucy Frazer, Financial Secretary to the Treasury.
Frazer said the UK would shortly be launching a public consultation on UK ETS – the emission trading scheme which replaced (and largely duplicated) the EU ETS from the start of last year – and she added that there would also be consultations on a market structure for low-carbon goods.
“We have to have consultations – and then we will build policy,” she told MPs.
The UK government’s stated policy is that a multilateral agreement on carbon emissions trading across advanced economies would be preferable to the unilateral imposition of rebalancing measures such as those implied by the EU CBAM programme.
UK ‘interested in exploring’ multilateral carbon trading schemes
Frazer noted that there were a number of international carbon schemes under discussion, such as the ‘climate club’ favoured by Germany, or the IMF’s international carbon price floor initiative.
“We are keeping abreast of those developments. We are interested in addressing carbon leakage multilaterally, so we would welcome an opportunity to explore these ideas further,” she said.
However, critics have claimed that the UK’s position outside of the EU carbon trading scheme has left the country potentially vulnerable to the imposition of CBAM taxes on the import of carbon-intensive UK products into the EU.
Could UK and EU link their emissions trading schemes?
Frazer was unable to offer cast-iron reassurances on this point, saying only that she would “expect” the EU to take the UK ETS into account when assessing the interaction of UK and EU carbon pricing mechanisms.
She also noted that the UK and EU had included provisions for cooperating on carbon pricing within the post-Brexit Trade and Cooperation Agreement, and the UK government said in its Net Zero review paper last October that it was “open to the possibility” of linking up the UK and EU schemes.
“But we are not at that point yet,” she told MPs.
EU-UK talks on Northern Ireland set to go quiet as election looms
The UK’s negotiations with the EU over implementation of the Northern Ireland protocol are to be put on ice for the next couple of months, as campaigning gets under way for elections to the Northern Ireland assembly.
At technical level, negotiations on the various aspects of the protocol’s implementation will continue. But it is now clear that no resolution will be found to the arguments over controls on goods moving from Great Britain to Northern Ireland until after the elections are over.
A meeting between UK foreign secretary Liz Truss and Commission vice-president Maroŝ Šefčovič in Brussels on Monday (21 February) yielded little more than bland expressions of determination to find solutions.
The provisions of the protocol are highly sensitive for the communities of Northern Ireland, with unionists decrying the application of border controls at Northern Irish ports as an effective denial of the unity of the UK.
And while there was no official confirmation of the strategy of putting the negotiations on the back burner for the duration of the election campaign, the two sides’ lack of urgency gave a clear enough message.
“There has been neither a breakthrough nor a breakdown,” Šefčovič said after Monday’s meeting. “The hard work continues.”
Progress on customs, but data access issues still irking EU side
An EU official said there had been some progress in discussions at technical level over how customs forms could be simplified for goods moving into Northern Ireland from the British mainland.
But he rejected the UK argument that the risks of a threat to the EU single market from goods coming into Northern Ireland were so low that in reality no customs checks were needed.
“We still don’t have access to the UK’s IT systems,” the official claimed, pointing out that the UK had committed in the protocol to share its goods movement data with the EU in real time.
“Our ability to see what is coming into Northern Ireland is therefore limited. But we do see a potentially significant redirection of trade flows – a big increase of the volume of UK goods moving into Northern Ireland and onwards from there. This is not theoretical.”
The official also said there was still no meeting of minds on the question of sanitary and phytosanitary controls.
“We will only make progress in this area when the UK accepts that GB goods coming into Northern Ireland have to meet our standards,” he declared.
UK gains WTO committee chairmanship for first time
The UK’s ambassador to the WTO, Simon Manley, has been appointed as the new chair of the WTO’s committee on trade and environment.
Manley’s appointment, confirmed at a meeting of the WTO’s General Council on Thursday (24 February), marks the first time a UK official has chaired a major WTO committee since it became a fully independent member of the Organization post-Brexit.
“The WTO has an important part to play as we ramp up momentum towards a climate resilient zero carbon global economy. I look forward to bringing WTO Members together to discuss tangible actions on climate change, environmental degradation, sustainability and biodiversity loss,” Manley said.