Ted Newson is a Researcher at the Global Warming Policy Foundation
On July 16th, the government made the decision to take British Steel into public ownership. Given the strategic importance of domestic steel manufacture, and the fact that virgin steel production here has become commercially unviable, this looks like the only option left.
In March of this year, the government was found to have been spending £1.3 million a day to prop up our final domestic producer of virgin steel – Scunthorpe steelworks. Rather than focusing on nationalisation, we should focus on why steel manufacture was unprofitable in the first place, and how we ensure it can be privatised again when commercially viable.
Unfortunately, the government does not think in this way. A recent report by the Global Warming Policy Foundation suggests that Britain is on its way to even more protectionist measures to ‘protect industry’ in the form of a carbon border adjustment mechanism (CBAM) from January 2027.
In lay terms, this represents another carbon tax, like the emissions trading scheme (ETS) but for specific imported carbon-intensive commodities rather than domestically produced ones. With a new PM now in post, Andy Burnham could make his reindustrialisation dreams much more of a reality by ditching both of these approaches.
Rather than protect British industry by lowering energy costs, thereby incentivising British commodity competitiveness, the government seeks to make manufacturing firms pay an extra tax – in the form of a CBAM – for the import of six different commodities: aluminium, cement, fertilisers, hydrogen, iron and steel. Production of three of these has already collapsed in Britain, with domestic cement and hydrogen production not set to benefit while we still suffer from high domestic green taxes and energy prices. The aim of the CBAM is to penalise the ‘embedded carbon’ in imported commodities that require energy-intensive industry to produce.
This sums up the government’s policy on business quite well. Instead of dealing with the wider constraints to growth and competitiveness, they busy themselves with demand management, protectionism, and ever-rising taxes. A pragmatic new government that breaks with the past would cut the emissions trading scheme, reject a CBAM, and prioritise cheap, abundant energy, but a pragmatic government is exactly what we don’t have.
Previous carbon taxes in Britain show that they don’t reduce carbon by themselves, they just add to the cost of living and become another indispensable revenue stream to the government. What reduces emissions is technological advancement, something that is stymied by overtaxation. The invention and mass rollout of the catalytic convertor in cars has dramatically reduced the number of harmful gases emitted on motorways. The electrification of Britain has also made parts of our daily life more energy efficient. The implementation of an ETS, a CBAM, or any other carbon tax hasn’t eliminated the externality, it has just made life a little more expensive for everyone.
The belief that CBAM will reshore production of these commodities exposes the sparse business credentials of the government. High business taxes, energy prices, and input costs will all contribute to companies not wanting to relocate to Britain. What is much more likely is that manufacturers of advanced machinery and equipment (something still lucrative in Britain) will have to pay the extra price of their imported aluminium and steel.
Similarly, with no ammonia production in Britain (ironically offshored due to carbon taxes), farmers will be forced to pay the CBAM, which will likely to passed onto consumers in the form of higher food prices. The case for nationalising Scunthorpe rings hollow when downstream manufacturers are forced to pay extra for foreign steel regardless. Protectionism like this doesn’t address the ultimate cause: massive green taxes and overregulation piled onto the British steel industry.
Nationalising British Steel just before implementing a CBAM is a massive contradiction in the government’s industrial strategy. If ministers believed markets and trade policy could save steel, they wouldn’t have nationalised it. If they believe direct state ownership is what’s needed, why simultaneously build a tariff wall premised on saving an industry via price signals? This is more of a panic over Britain’s accelerated deindustrialisation than any coherent plan for growth.
In order to get industry back, Britain desperately needs to scrap the ETS and the incoming CBAM. Britain’s steel strategy shouldn’t be about making it more expensive to buy foreign steel; it should prioritise efficiency. An efficient steelworks can reduce emissions per tonne of steel and the inputs required, making it cheaper per unit and less polluting. To achieve this, tax deductions for low-emission equipment are just one policy alternative that could be put forward. We shouldn’t shy away from talking about heavy industry just because it’s polluting, we should be working to make operations at home cheaper and cleaner.
Despite now owning British Steel, the country still does not make enough steel. If things go ahead as planned, our specialist manufacturers face even higher costs when importing the raw materials that they turn into planes, trains, and other machinery. Most of Britain’s manufacturing is already uncompetitive, we don’t need more carbon taxes further undermining it.
Ted Newson is a Researcher at the Global Warming Policy Foundation
On July 16th, the government made the decision to take British Steel into public ownership. Given the strategic importance of domestic steel manufacture, and the fact that virgin steel production here has become commercially unviable, this looks like the only option left.
In March of this year, the government was found to have been spending £1.3 million a day to prop up our final domestic producer of virgin steel – Scunthorpe steelworks. Rather than focusing on nationalisation, we should focus on why steel manufacture was unprofitable in the first place, and how we ensure it can be privatised again when commercially viable.
Unfortunately, the government does not think in this way. A recent report by the Global Warming Policy Foundation suggests that Britain is on its way to even more protectionist measures to ‘protect industry’ in the form of a carbon border adjustment mechanism (CBAM) from January 2027.
In lay terms, this represents another carbon tax, like the emissions trading scheme (ETS) but for specific imported carbon-intensive commodities rather than domestically produced ones. With a new PM now in post, Andy Burnham could make his reindustrialisation dreams much more of a reality by ditching both of these approaches.
Rather than protect British industry by lowering energy costs, thereby incentivising British commodity competitiveness, the government seeks to make manufacturing firms pay an extra tax – in the form of a CBAM – for the import of six different commodities: aluminium, cement, fertilisers, hydrogen, iron and steel. Production of three of these has already collapsed in Britain, with domestic cement and hydrogen production not set to benefit while we still suffer from high domestic green taxes and energy prices. The aim of the CBAM is to penalise the ‘embedded carbon’ in imported commodities that require energy-intensive industry to produce.
This sums up the government’s policy on business quite well. Instead of dealing with the wider constraints to growth and competitiveness, they busy themselves with demand management, protectionism, and ever-rising taxes. A pragmatic new government that breaks with the past would cut the emissions trading scheme, reject a CBAM, and prioritise cheap, abundant energy, but a pragmatic government is exactly what we don’t have.
Previous carbon taxes in Britain show that they don’t reduce carbon by themselves, they just add to the cost of living and become another indispensable revenue stream to the government. What reduces emissions is technological advancement, something that is stymied by overtaxation. The invention and mass rollout of the catalytic convertor in cars has dramatically reduced the number of harmful gases emitted on motorways. The electrification of Britain has also made parts of our daily life more energy efficient. The implementation of an ETS, a CBAM, or any other carbon tax hasn’t eliminated the externality, it has just made life a little more expensive for everyone.
The belief that CBAM will reshore production of these commodities exposes the sparse business credentials of the government. High business taxes, energy prices, and input costs will all contribute to companies not wanting to relocate to Britain. What is much more likely is that manufacturers of advanced machinery and equipment (something still lucrative in Britain) will have to pay the extra price of their imported aluminium and steel.
Similarly, with no ammonia production in Britain (ironically offshored due to carbon taxes), farmers will be forced to pay the CBAM, which will likely to passed onto consumers in the form of higher food prices. The case for nationalising Scunthorpe rings hollow when downstream manufacturers are forced to pay extra for foreign steel regardless. Protectionism like this doesn’t address the ultimate cause: massive green taxes and overregulation piled onto the British steel industry.
Nationalising British Steel just before implementing a CBAM is a massive contradiction in the government’s industrial strategy. If ministers believed markets and trade policy could save steel, they wouldn’t have nationalised it. If they believe direct state ownership is what’s needed, why simultaneously build a tariff wall premised on saving an industry via price signals? This is more of a panic over Britain’s accelerated deindustrialisation than any coherent plan for growth.
In order to get industry back, Britain desperately needs to scrap the ETS and the incoming CBAM. Britain’s steel strategy shouldn’t be about making it more expensive to buy foreign steel; it should prioritise efficiency. An efficient steelworks can reduce emissions per tonne of steel and the inputs required, making it cheaper per unit and less polluting. To achieve this, tax deductions for low-emission equipment are just one policy alternative that could be put forward. We shouldn’t shy away from talking about heavy industry just because it’s polluting, we should be working to make operations at home cheaper and cleaner.
Despite now owning British Steel, the country still does not make enough steel. If things go ahead as planned, our specialist manufacturers face even higher costs when importing the raw materials that they turn into planes, trains, and other machinery. Most of Britain’s manufacturing is already uncompetitive, we don’t need more carbon taxes further undermining it.