FirstFT: UK exporters face hefty EU carbon tax bill after Sunak weakens climate policies

Receive free World updates

We’ll send you a myFT Daily Digest email rounding up the latest World news every morning.

Good morning.

Prime Minister Rishi Sunak’s weakening of UK climate targets has left British exporters facing hundreds of millions of pounds in EU carbon border taxes within the next decade — revenues that otherwise would have flowed to the Treasury.

The UK carbon market, which sets the price large manufacturers and energy companies must pay for every tonne of CO₂ released, has collapsed after the Conservative government weakened a number of green initiatives.

UK emissions prices have fallen to less than half the EU equivalent in recent months, having previously traded near parity.

The EU’s forthcoming carbon border tax regime will seek to penalise countries with substantially lower carbon costs than the bloc’s. As a result, the drop in UK emissions prices means that British exporters to the EU will become liable for the EU tax when it comes into force in 2026. Read the full story.

• Opinion: Non-European companies need not fear the EU’s new carbon border tax, writes the bloc’s commissioner for the economy, Paolo Gentiloni.

• Post-Brexit border controls: The planned rules on animal and plant products imported from the EU will cost businesses an estimated £330mn a year in additional red tape charges, the government has admitted.

Here’s what else I’m keeping tabs on today:

• UK Conservatives: The party’s conference continues with Rishi Sunak’s premiership under intense scrutiny, while chancellor Jeremy Hunt is expected to shift attention from a row over high taxes by pledging a rise in the minimum wage and new sanctions on benefit claimants who refuse to seek work.

• Economic data: Nationwide issues its house price index for Britain, while S&P Global publishes manufacturing purchasing managers’ indices for Canada, the EU, France, Germany, Italy, the UK and the US.

• Donald Trump: A case brought by New York attorney-general Letitia James against the Trump Organization is set to begin. Some Republican donors fear his legal troubles may help him win the party’s presidential nomination.

Five more top stories

1. Exclusive: Frankfurt prosecutors have charged a German citizen with insider trading in one of the country’s largest such cases, public prosecutors told the Financial Times. The 48-year-old allegedly used confidential information about forthcoming M&A deals from a partner at boutique investment bank Perella Weinberg in 20 different trades. Here’s how much he is alleged to have made.

2. US president Joe Biden said America would “not walk away” from Ukraine after Congress jettisoned $6bn in aid to avert a government shutdown, even as Republicans tied further funding to the contentious issue of border security. Here’s how Ukrainian and European officials reacted.

• Opinion: By dangling the threat of military co-operation, Russia and North Korea are probably warning Seoul not to arm Ukraine, writes Andrei Lankov.

• Related: An anti-Ukraine former prime minister has won Slovakia’s elections, which could undermine western unity in helping Kyiv in its war against Russia.

3. Asia faces one of its worst economic outlooks in 50 years, the World Bank has warned, as it downgraded its 2024 forecast for gross domestic product growth for developing economies in east Asia and the Pacific. The bank also cut its forecast for China’s growth next year, citing a string of weak indicators for the world’s second-biggest economy. Here’s more from the World Bank’s latest forecasts.

4. Exclusive: Spotify’s boss has urged the UK to cut the dominance of big tech companies, saying the government should use its freedom outside the EU to “show leadership” on regulation. Daniel Ek also warned that the speed at which artificial intelligence was changing would quickly make any new rules obsolete. Read his full interview with the FT.

• More Big Tech: Twenty of Europe’s biggest telecoms companies have called on the EU to compel tech giants to pay a “fair” contribution for using their networks.

• Opinion: The debate about who should regulate AI has been very top down, but the Hollywood writers’ strikes has shown how workers can take the lead, writes Rana Foroohar.

5. BAE Systems has won a £3.95bn contract to build a new generation of attack submarines for Aukus, the trilateral security pact between the US, the UK and Australia. Britain’s biggest defence contractor said the funding would cover development work until 2028, allowing it to start the detailed design phase of the programme and start to buy long-lead items. Here’s more on what the new “hunter-killer” submarines can do.

The Big Read

Ireland is booming, thanks to the impact of global tech, and bumper corporation tax receipts have filled its coffers. But its government has plenty of problems to solve, with transport, health, education, energy and water services under increasing strain after a decade of under-investment following the 2008 financial crash. How will the country put its newfound wealth to work?

We’re also reading . . . 

• Personal conduct: BP’s Bernard Looney is the most recent case of how embarrassing revelations about senior leaders can damage trust and cause significant upheaval.

• London’s decline: Don’t blame the messenger — bad press is not a cause but a symptom of the UK market’s woes, writes Helen Thomas.

• Inflation battle: The “last mile” of bringing inflation back to a 2 per cent target will be the toughest, the European Central Bank’s deputy head tells the FT.

• Zimbabwe politics: The African nation’s president is preparing to restart talks on $14bn of unpaid debt as deep divisions persist over disputed elections.

Chart of the day

Wall Street bankers are eagerly anticipating that a rebound in dealmaking activity will lift bonuses and morale after more than a year in the doldrums, but fear that a return to the industry’s 2021 peak remains a long way off. 

Take a break from the news 

Kuranosuke is the first child born in the small community of Ichinono, Japan, for more than two decades. The one-year-old boy is cherished by a cooing, tribute-bearing platoon of surrogate grandparents from around the village. His existence has made him a hero — and focused minds on Japan’s demographic crisis.

Additional contributions from Benjamin Wilhelm