Trade row looms as adviser calls for carbon tax on China

• Lord Turner proposes levy on cheap imports• Tariffs could antagonise developing countries
Tim Webb
guardian.co.uk, Monday 1 March 2010 19.49 GMT
Ministers should consider a carbon tax on imports to help struggling British manufacturers, according to one of the government's key advisers, despite fears such a measure could lead to a global trade war.
Lord Turner, who heads the UK committee on climate change, said the government should "rigorously assess" bringing in levies on cheap imports from countries outside the European Union, which are not subject to carbon-related costs such as the EU emissions trading scheme.
Ministers have in the past resisted calls from European counterparts to introduce such carbon levies, arguing they would be anti-competitive. In future, heavy industry such steel and cement manufacturers in the EU will not have to pay for most of their allowances to emit carbon under the trading scheme, unlike other firms taking part. The idea is to protect EU manufacturers and prevent "carbon leakage" – plants being moved to countries which do not have their own trading schemes.
It has emerged that Indian-owned steelmaker Corus, which is closing its Teesside plant, stands to pocket around £250m by selling unused carbon permits. Unions allege that this is why the company does not want to find a buyer for the plant.
Lord Turner said a change of approach was needed. "Business needs a clear and consistent market-based incentive to move towards a low-carbon economy. We can't solve the problem by giving out emission allowances for free as the only option for internationally trading manufacturing sectors. Border carbon-price levelling should not be excluded, but rather subject to rigorous assessment alongside other options."
It is understood that the committee on climate change will review the issue this summer. The government does not have to implement the committee's recommendations, but it must justify any decision not to do so. Turner also backed a report out this week from the Carbon Trust, which recommended imposing carbon tariffs on some imports to the EU.
Gareth Stace, head of climate and environmental policy at manufacturers' organisation EEF, said that such tariffs could help some sectors, such as cement manufacturing. But he warned: "Such border adjustment measures would not be good for trading relationships and would antagonise developing countries, and could hit British exports."
He also said they would be complex to regulate and could encourage more imports of finished goods to the EU, which would not be subject to such tariffs and which could also hit UK manufacturers.