One of the more notorious comments from UK Chancellor of the Exchequer George Osborne came during his speech at the 2011 Conservative Party conference:

“We’re not going to save the planet by putting our country out of business.”

Now, I’m no fan of Mr Osborne, but this actually has a grain of truth about it – if we simply offshore our emissions to countries with lower environmental controls, then any ‘win’ we get cutting emissions in this country is purely illusionary. This conundrum is known in the trade as ‘carbon leakage’.

Carbon leakage is in the news in the UK with the perilous state of the steel industry – many are blaming its woes on green taxes pushing up costs. While that may be a factor, the main problem is China’s state sponsored industries dumping too much steel on the market, possibly at below the cost of production.

Many of the ‘solutions’ being bandied about, such as cutting green taxes or UK state subsidy, will simply add fuel to the fire by increasing global production and driving prices further down. Carbon emissions will rise as well.

The best, maybe only, way to solve this problem is for China to stop subsidising over-production of steel.  That would cut carbon emissions and allow other countries to compete on a level playing field. Otherwise we are on a race to the bottom.