The UK government is introducing a new import levy on carbon-intensive products and raw materials across the iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement sectors, from 2027.
The carbon border adjustment mechanism (CBAM) will reduce emissions and protect domestic businesses against cheaper imports from abroad. It has been designed to address ‘carbon leakage’, where UK manufacturers are undercut by foreign business who do not face levies on carbon emissions.
Charges applied will vary depending on the amount of carbon emitted during production and any difference between the carbon price in the country of origin and that faced by UK businesses.
“This levy will make sure carbon intensive products from overseas – like steel and ceramics – face a comparable carbon price to those produced in the UK, so that our decarbonisation efforts translate into reductions in global emissions,” said chancellor Jeremy Hunt.
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Hunt also said the import announcement “should give UK industry the confidence to invest in decarbonisation as the world transitions to net-zero”.
However, in taking effect from 2027, the UK’s CBAM is being implemented one year later than was originally expected and is likely to be one year later than the EU, which launched the first phase of its carbon border tariff system in September. It will not begin collecting any charges until 2026.
UK businesses remain concerned that the 12-month gap between the two import levy systems will allow high-emission products to come to the UK once the EU’s carbon levy begins.
The Treasury also confirmed today that it would be consulting on the UK’s post-Brexit Emissions Trading Scheme (ETS) across sectors including aviation, manufacturing and power generation. Launched in 2021, it charges businesses for emitting carbon dioxide; prices are currently between £35 and £40 per tonne.
The ETS will be aligned with the UK’s 2050 net zero goal by decreasing carbon allowances by as much as 45% by 2027, compared to this year. It will continue to run beyond 2050.
