Professor David Russell CBM0004

Written evidence submitted by Professor David Russell


Weighing up carbon border tax measures


I am writing in response to the call for evidence; carbon border adjustment mechanism.


I am making this submission in a personal capacity.


I do not have any interests to declare in making this submission.


My interest and reason for making this submission is based upon my professional research experience and expertise with regard to emissions and carbon taxation. I am a Professor of Corporate Social Responsibility and as a former academic (now company Chairman), 

I have published extensively in this field, including journal articles and books, so I feel that I have something to contribute to the committee’s deliberations and would be happy to provide further and fuller particulars if the committee feel there is some merit in the points that I have made.


The approach of the Environmental Audit Committee to prioritise the use of taxation in an attempt to achieve the outcome of mitigation of the carbon footprint of many imported goods and services to address carbon leakage is welcomed.


With this in mind, it is worth considering banding of taxation with a disproportionate tax burden, for the highest carbon content of goods and services, and where little / no attempt at mitigation may be demonstrated. Moreover, the use of an allowance system, similar to personal tax allowances could be introduced alongside taxation to provide some alleviation for certain countries in some situations.


A balance must be struck for the price of carbon to be used as the basis for a carbon tax. The balance requires consideration of both the level of tax, to curb behaviour to the desired emissions pathway, alongside the costs of clean up / reparation. These are likely to be different and will change over time with the development life cycle and the reduction in natural capital.


Finally, the Committee, should give careful consideration to other measures alongside carbon taxes for efficacy. I would propose that the full costs of carbon activities, less the taxation deduction, should be imputed and recognised in financial statements, whereby this is internalised as a contingent liability and a provision made against reserves in the statement of financial position. The intention is to prevent the distribution of these reserves for the benefit of third parties at the expense of the environment and for investors / lenders to determine the carbon deficit exposure. Such an approach will overcome greenwashing. Moreover, this proposal would have little impact on the competitiveness of a business, but would reduce the value added of carbon intensive products and could be introduced for all businesses. This would be consistent with the theoretical and conceptual framework underpinning company law and accounting standards and could be adopted internationally over time.


I am happy to provide further and fuller particulars, including references to published research, including my own research if these matters are of interest.


October 2021