Burden or opportunity? How UK emissions reductions policies affect the competitiveness of businesses

The ongoing review of the UK’s Fourth Carbon Budget is closely linked to the debate over the impact that domestic climate change policies can have on the competitiveness of businesses. Notably, there are concerns that, if the UK implements more ambitious climate policies than its trading partners, carbon-intensive producers might relocate. This could mean that some affected sectors may have to reduce their production of goods and services below the optimum level that would be achieved if there were uniform international climate policies. In addition, the impact of climate change policies on emissions reductions could be limited if big emitters simply relocate, especially if they move to jurisdictions that have lower environmental standards. This paper investigates to what extent these concerns are substantiated and whether they justify a change in the UK’s ambitions for reducing its emissions, including the Fourth Carbon Budget. It does so by drawing on a range of ‘ex-ante’ and ‘ex-post’ studies.