Chancellor Philip Hammond should use this autumn’s Budget to introduce a carbon tax covering the whole economy, according to the Policy Exchange think tank.

Its proposal has received backing from former Chancellor Lord Darling and ex-Tory leader Lord Howard.

The think tank noted that Energy Minister Claire Parry has committed the UK to using some form of carbon pricing post-Brexit.

Options include introducing an independent carbon tax or remaining in the European Union Emissions Trading Scheme.

Strategy proposed

“Staying in the EU Emissions Trading Scheme has not entirely been ruled out, but may end up being unpalatable to the Government due to the wider political compromises that may entail,” the think tank said.

Policy Exchange outlined a strategy for an independent UK carbon tax that included implementation of border carbon adjustments to ensure the UK can raise its own carbon price without businesses offshoring their emissions.

The think tank suggested recycling the revenue of rising and expanding carbon taxation directly to voters to ensure continued cross-party political support in the fight against climate change.

> Watch an online video of the launch of the report