UK to introduce its own CBAM by 2027

The United Kingdom will introduce a levy by 2027 on the imports of iron, steel, aluminum, fertilizer, hydrogen, ceramics, glass and cement from countries without proper carbon pricing.

The UK government calls the upcoming levy the carbon border adjustment mechanism, which confirms its similarity with the European Union’s Carbon Border Adjustment Mechanism (CBAM) and the purpose.

The difference is that the EU’s scheme includes electricity but not, at least for now, glass and ceramics. October 1 has marked the start of a transitional period for the EU’s CBAM. The carbon border tax will be paid from January 1, 2026.

Goods imported into the UK from countries with a lower or no carbon price will become eligible for a CO2 tax by 2027

The British government said it would implement an import carbon pricing mechanism by 2027 to support the decarbonisation drive.

According to the press release, goods imported from countries with a lower or no carbon price will be eligible for a CO2 tax, ensuring products from overseas face a comparable carbon price to ones produced in the UK.

The CBAM will cover highly traded, carbon-intensive products shipped from abroad in the categories of iron, steel, aluminum, fertilizer, hydrogen, ceramics, glass and cement, the government added.

The design and delivery of the CBAM will be subject to further consultation in 2024

Chancellor of the Exchequer Jeremy Hunt said the levy would make sure that the country’s decarbonisation efforts translate into reductions in global emissions.

It should give UK industry the confidence to invest in decarbonisation as the world transitions to net zero, he added.

The design and delivery of CBAM will be subject to further consultation in 2024, including the determination of a list of products in scope.

A key issue will be the linkage of the UK and EU emissions trading schemes

Ruth Herbert, CEO of the Carbon Capture & Storage Association, said CBAM would help some UK manufacturers to invest in low-carbon technologies such as carbon capture, utilisation and storage (CCUS) to develop new low carbon products, without fear of being undercut by producers elsewhere.

“It is also an important step for the long-term development of the UK CCUS industry, alongside further deployment measures, which we hope to see in the government’s ‘CCUS vision to 2035’ later this week,” he added.

According to William Bain, Head of Trade Policy at the British Chambers of Commerce, a key issue will be the linkage of the UK and EU emissions trading schemes, so that the UK avoids unnecessary trade and fiscal barriers for its goods exports.

John Egan, Peak Cluster Project Director, announced it would decarbonise 40% of the UK’s cement and lime production by 2030, while Stephen Phipson, CEO of Make UK, stressed the importance of rolling out CBAM as soon as possible to align with EU timescales and ensure a level playing field to prevent potential carbon price discrepancies.