Healey draws up plans for ‘green tax’ on imported fuel amid fears it will bump up prices even more
John Healey is reportedly considering a carbon tax on imported fuel in Wednesday’s Budget, intended to address the advantage overseas producers have over British refineries, which pay environmental levies. The proposal could raise petrol prices if fuel suppliers pass on the costs, as critics warn, while the Government says it is assessing the measure’s feasibility and impact.
The proposed carbon border adjustment mechanism would apply some or all of the environmental charges paid by British firms to imported refined fuel. The report comes as motorists face planned Fuel Duty rises of 3p per litre in January and 2p in March, and higher fuel prices linked to the Iran war have reportedly added £10 billion to their costs. The Treasury declined to comment on Budget speculation.
In short
- A proposed carbon tax could apply environmental charges to imported fuel.
- Critics warn the cost may be passed on to motorists.
- Fuel Duty is already scheduled to rise by 5p per litre.
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The case for
A carbon border charge could put imported fuel on a more comparable footing with fuel refined in Britain, whose producers already pay environmental levies. Supporters could argue this would reduce the incentive to shift production abroad, protect domestic industry and encourage lower-carbon production, while the Government assesses how to limit unintended effects.
The case against
The charge could increase suppliers’ costs and, if passed on, add to motorists’ bills at a time when fuel prices and planned Fuel Duty rises are already putting pressure on household budgets. Critics could argue that any protection for domestic refineries should be weighed against that risk, and that the measure’s impact on prices and feasibility remains uncertain.
Explained simply
British refineries pay charges linked to the carbon emissions from making fuel. Imported fuel may not face equivalent charges, which can make it cheaper for overseas producers to sell in the UK.
A carbon border adjustment would apply some or all of those charges to imported refined fuel. The Government is assessing whether such a measure is workable and what effect it could have; the Treasury has not commented on the Budget speculation.
The issue matters to drivers because suppliers could pass any added costs on through higher prices at the pump. It comes as motorists face planned Fuel Duty rises and increased fuel costs linked to the Iran war.