Last updated: 09 Jan 2024 10:00 Posted in:
Goods imported into the UK from countries with a lower carbon price than the UK will have to pay a levy, known as a carbon border adjustment mechanism (CBAM), from 2027.
It will initially apply to imports of iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement.
The government said CBAM will ensure that products from overseas are subject to a comparable carbon price to those produced in the UK, reducing the risk of ‘carbon leakage’.
The EU defines carbon leakage as a situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints.
The amount of the CBAM charge applied will depend on the amount of carbon emitted in the production of the imported goods.
The proposed introduction of the UK CBAM follows the EU CBAM entering its transitional phase on 1 October 2023. The EU CBAM is currently due to take full effect for importers into the EU from 1 January 2026.
The design of the UK CBAM will be the subject of a further consultation in 2024.