Ministers are considering a radical plan to axe tariffs on hybrid and electric cars as part of efforts to speed up Boris Johnson’s switch to a carbon-neutral economy.
Officials are understood to be eyeing the plan as part of efforts to send a message that the country will champion free trade after Brexit and is committed to limiting climate change.
It might aid the switch to electric when new diesel and petrol cars are banned in 2030 but would also open up Britain’s car markets to cheaper foreign imports – piling pressure on producers at home.
The recommendation is among those in a new report, Clean Free Trade, released by the Centre for Policy Studies (CPS), a conservative think-tank noted for its influence upon Government decision-making.
Tariffs have already been cut on a wide range of sustainability-linked goods this year. The CPS says the Government should go further by lowering levies on more products including electric and hybrid vehicles as well as bicycles.
It also recommends abolishing tariffs and barriers on services and reducing tax breaks for fossil fuel production and consumption.
Electric vehicles – by the numbers
A Government source said cutting tariffs is “not something we’re ruling out”, but said there are “no immediate plans” to do so at the moment.
The study’s author, CPS head of energy and environment policy Eamonn Ives, said: “International free trade and protecting the environment are often seen as contradictory endeavours. Our report argues that they can and do support each other.”
A tariff reduction on electric cars risks prompting a row with Japanese car giant Nissan, whose chief operating officer said earlier this year that the Brexit deal between the UK and EU had improved its competitiveness in the UK electric vehicle market after it put up barriers for rivals.
At present, electric and hybrid vehicles imported into the UK and EU face 10pc tariffs if parts from outside the area make up more than 60pc of their value – a proportion that will tighten to 45pc in the coming years under the terms of the TCA.
Because electric batteries – which are not yet widely produced in Britain or the European bloc – often represent as much as half the value of such vehicles, this extra charge is usually triggered and pushes up the price of a new car for consumers.
Projected demand for UK-produced batteries
Mr Ives said there is now an opportunity for the Government to finish the wave of green tariff liberalisation which began last year with a shift to zero tariffs on a range of goods including solar panels, wind turbines and certain materials used in more eco-friendly products.
He said pushing for environmental goals will not undercut the UK’s ambitions to strike new deals and establish its place in the world as an independent trading nation.
Mr Ives said: “It’s always important to keep trying to advance both agendas at once, and recognise the ways in which they can be mutually reinforcing."
Sam Hall, director of the Conservative Environment Network which part-funded the report, said: “Making it easier to trade clean goods and services will make the world greener, freer, and more prosperous.”
A spokesman at the Department for International Trade said: “The UK is committed to maximising the advantages of a global shift to clean economic growth as we build back a better, greener, trading environment.
“We have used our first independent Global Tariff in nearly 50 years to create a more sustainable global trade agenda, retaining all products already set at zero percent under the EU’s tariff schedule and liberalising a further 104 environmental products as part of our Green 100 initiative.”