Should UK plc pay up for its imported emissions?

The world’s biggest manufacturing economies generate vast amounts of greenhouse gas, but there’s a strong case for making the emissions embodied in the goods they produce for consumption abroad the importer’s responsibility

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As the warning sign beloved of small retailers says: “You break it, you pay for it.” But many countries and businesses could be accused of ignoring this precept when it comes to taking responsibility for the carbon footprints of the goods they import.

China, the world’s biggest manufacturing economy, is the source of 27% of global CO2 emissions, according to the World Bank, yet a large proportion of these can be attributed to the country’s production of materials, machinery and consumables for export. Other Asian nations with a large manufacturing base – India in particular – are in a similar situation. This has led some observers to argue that the consumers of their exports should be held more accountable for the CO2 emitted in the process of producing and sending these abroad.

Do people even know about imported emissions?

Georgia Elliott-Smith is managing director of Element Four, a sustainability and wellbeing consultancy. During her presentations, she often asks audiences to inspect the labels on their clothing, as she wants them to realise where the garments were manufactured.

“This tends to result in a few ‘aha!’ moments,” she says. “These are usually followed by a lively discussion in which we see how the harms of our consumerism appear on someone else’s ledger.”

Elliott-Smith argues that “justice must be at the heart of climate action”. This should account not only for current imports but also for historic harms caused by exploitative practices such as colonialism. All told, she adds, “it’s clear that our efforts to decarbonise the UK are being thwarted by the sheer volume of stuff we import, often from the most polluting countries”.

Elliott-Smith suggests “a key policy that would show global leadership”: the introduction of a carbon border adjustment mechanism (CBAM). This is a levy applied to a product, based on its carbon emissions, when it enters the country of consumption.

“That would prevent polluting imports from being sold cheaply and put foreign manufacturers under more pressure to reduce the emissions associated with their goods,” she says. “It would also positively affect our domestic manufacturing sector.”

Given the practical challenges involved in creating a fair and sustainable CBAM system, much negotiation and consensus-building among the stakeholders would be required. Current carbon accounting methods and emission records can vary widely in their complexity and implementation. Questions also arise about transparency in reporting when the onus is put on companies to disclose their own emissions.

Why is it so hard to spread responsibility for emissions?

Eleni Diamantopoulou, an associate specialising in energy and sustainability at law firm Womble Bond Dickinson, notes that the EU is set to introduce a CBAM mechanism for sectors including steel, electricity and hydrogen. She believes it’s highly likely that Westminster will need to follow suit if it’s to prevent the UK from “being flooded with high-carbon imports deflected by the EU’s CBAM”.

But Diamantopoulou also highlights reports suggesting that some UK government departments have far less appetite than others for any kind of CBAM. For instance, some fear that its introduction could lead to higher costs for consumers already struggling to make ends meet as the cost-of-living crisis grinds on.

“The issues with CBAMs demonstrate that it would be beneficial to have a unified global carbon taxation scheme, rather than a series of national schemes that sometimes conflict,” she argues.

After all, production-based accounting, such as the models reported to the UN framework convention on climate change, can be notoriously difficult. Gian Autenrieth is co-lead at the D-REC Initiative, an industry-led coalition aiming to accelerate the energy transition in energy-poor nations. He points out that only those industries linked to Fortune 500 multinationals report their emissions in China, India, Indonesia and Cambodia. This makes it hard to understand the true environmental cost of imports and then for these to be passed on via carbon credits, which may result in higher prices.

As Autenrieth puts it: “Until exporting countries account for their emissions and factor the consequential costs into the price of their products, the question of whether the consumer should pay for the externality in the meantime is justified.”

How to account for emissions from logistics

Of course, land-based manufacturing is not responsible for all harmful pollution. About 90% of global trade relies on ocean shipping, which contributes heavily to import-related greenhouse gas emissions. Efforts to assign responsibility for these have been too fragmented so far, reports Diane Gilpin, founder-CEO of Smart Green Shipping, a design firm working to reduce the environmental impact of the maritime transport sector.

“Until we reach a point when CO2 emissions arising from the trade of goods are given the degree of urgency they deserve, the system can only be deemed as failing,” she argues.

Our efforts to decarbonise the UK are being thwarted by the sheer volume of stuff we import

Ian Thompson, vice-president for the northern European operations of procurement firm Ivalua, explains that the UK imported £70.3bn worth of products from China last year – almost 11% of its total goods imports. Given the sheer scale of this activity, he suggests that it would be “impossible” for any government to police the millions of suppliers (and suppliers of suppliers) contributing to the value chain of a finished import. Not all of these would be of Chinese origin or have a poor sustainability record, he adds.

Thompson argues that government policy-making can instead be a tool to hold importers and exporters accountable for making accurate disclosures of their environmental impacts.

“It can lay the foundation for alternative approaches, such as an ‘economic benefit shared responsibility’ model, where responsibility for trade-related emissions is shared by producers and consumers,” he says.

Would fairer emissions accounting make enough difference?

That concept has gained significant backing among environmentalists. Adrian Ramsay, co-leader of the Green Party of England and Wales, notes that estimates of imports’ emissions contain a large degree of uncertainty. He believes the UK’s consumption figures should include calculations related to emissions from imports and he supports the idea that some sort of carbon levy should be applied on goods entering the country.

“This would incentivise imports of low-carbon products,” says Ramsay, who adds: “In some cases, we should consider prohibiting high-carbon imports altogether.”