Philip Dunne writes for ConservativeHome.

I would like to think that all ConHome readers support the role of the free market in allocating resources efficiently. But for a market to work, there needs to be a sharing of information to allow for exchange.

At the most basic level, when we buy a product we pay for the raw materials, the cost of production, other overheads, and (with a bit of luck) some profit. What we are not paying for are the costs of climate damaging emissions associated with production.

Instead, they are simply emitted into the atmosphere from wherever around the globe that manufacture takes place.

Yet a moment’s reflection tells us – and you do not have to be a climate zealot to know – that there are real costs associated with these emissions, payable both now and in the future, even if you just limit those costs to societal adaptation to climate changes that we are already seeing.

The result of this failure of exchange is that, as consumers, we have no idea which products are expensive in carbon terms, and which are relatively cheap. It is for this reason that consumerism is seen as part of the problem and not the solution when it comes to climate change, since imports make up 43 per cent of the UK’s consumption emissions.

As a long-standing proponent of both free markets and the need to cut emissions, I don’t want to rely on government edicts to decide how we should decarbonise our economy. Instead, I want a price for carbon that unlocks the power of the free market to help solve some of the problems that our collective, historic indifference to damaging emissions has helped to cause.

If price actually reflected the true cost of production, then every consumer would unconsciously reward lower-carbon innovations and punish industrial laggards; less a case of Whitehall knows best and more that the consumer does.

So, what’s stopping us? For the market to work, it has to apply to imports as well as to our domestic businesses. If it didn’t then the only signal would be that of consumers flocking to buy imports in preference to our domestic manufacturing base – the last thing that we want.

This is why there is growing support for a Carbon Border Adjustment Mechanism (CBAM): a mechanism that applies the same carbon price signal to imports as is applied to domestic businesses, ensuring a level playing field.

With a CBAM in place a price for carbon can be applied economy wide without favouring (or penalising) imports.

The result will be a renaissance of manufacturing in the UK focussed in the Midlands and the North as we benefit from our increasingly decarbonised energy market – the very best kind of levelling up. It is for this reason that British manufacturers, including Make UK and UK Steel, are strongly supportive of a CBAM: they can see the growth opportunities.

Given the impeccable free market credentials of the policy, it is surprising that some free marketeers have argued against it. In order to champion lowest consumer prices at all costs in the short term, they have taken issue with a structure that empowers the free market.

But the alternative is a bigger state taking inaccurate decisions on carbon emissions. There is nothing Conservative about that.

Now is the time to prepare for a CBAM; the EU has moved to implement its own version from 2026. This is important for two reasons.

The first is that, without a comparable version of carbon accounting in the UK, our exporters to the EU will be exposed to increased costs to access the European market from 2026 onwards.

This is not a theoretical imposition but a very real economic threat to the competitiveness of our domestic industries which cannot be ignored.

The second is that, even if our exporters come to terms with these increased costs, high-carbon exports from the Far East, diverted away from the EU market, are likely to be dumped on the UK, doing huge damage to our domestic economy.

While some may welcome the short-term price reductions that this may bring, it will likely be just that, short-term, with less competition and increased costs in the future. Surely we can see further than that?

The cross-party committee that I chair put forward the case for work to begin on a unilateral British CBAM in our report published in April last year. This was to try and ensure our manufacturers are not adversely impacted by the EU, and in due course by the US, who are actively working to introduce their own proposals.

We argued that it would be much better to introduce schemes in a multi-lateral way. The Government responded positively and consulted on a British scheme.

Now is the time for Jeremy Hunt to encourage his officials to get a CBAM on the stocks, so it can be in place in tandem with those of our main trading partners in the EU and, in due course, the US. This will help avoid carbon leakage, allow our manufacturers to compete on a level playing field, and give our consumers the means to value the benefit from lowering greenhouse gas emissions in the goods we consume.