Britain’s government has announced the imposition of a new carbon import levy on carbon-intensive products from 2027. The planned CBAM will help protect businesses against cheaper imports from countries with less strict climate policies.
Dec 18, 2023
The government of Britain is set to impose a new carbon import levy on products such as the iron, steel, aluminium, fertilizer, hydrogen, ceramics, glass, and cement sectors from 2027. The planned carbon border adjustment mechanism (CBAM) will help protect businesses against cheaper imports from countries with less strict climate policies. The new rules will tackle ‘carbon leakage’, reducing the risk of production and associated emissions being displaced to other countries because they have a lower or no carbon price. Carbon leakage undermines the country’s efforts to decarbonize as the world transitions to net zero. The charge applied by the CBAM will depend on the amount of carbon emitted in the production of the imported good, and the gap between the carbon price applied in the country of origin and the carbon price faced by UK producers. The United Kingdom, one of the first countries to declare a target of reaching net zero emissions by 2050, launched an emissions trading system (ETS) in 2021 to charge power plants, factories, and airlines for each tonne of carbon dioxide they emit as part of efforts to meet that goal. The UK’s planned CBAM has been widely welcomed by the key stakeholders.
Mr. Jeremy Hunt, Chancellor of the Exchequer, said, “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 decarbonization efforts translate into reductions in global emissions.”
Mr. Gareth Stace, Director General of UK Steel, said, “With over 90 percent of global steel production facing no carbon cost, it is only right that a new carbon border policy is put in place. Despite the steel sector repeatedly warning officials how exposed the U.K. would be if it did not mirror the EU implementation timetable, government today seems to be actively planning for just that scenario.”
Mr. William Bain, Head of Trade Policy, the British Chambers of Commerce, said, “News of a carbon border adjustment mechanism (CBAM) for the UK is very much welcome. It is a logical and key enforcement element of lowering carbon emissions in the UK economy and tackling greenhouse gas releases elsewhere in the world.”