The UK government is implementing a new carbon tax to charge emissions of imports. Raw materials such as iron, steel, aluminum, ceramics and cement, imported from countries with a lower or no carbon price will have to pay a carbon tax from 2027 in order to face a fair price compared to materials made in the UK that pay a carbon tax.
The new policy will aim to address the risk of ‘carbon leakage’, avoiding emissions being displaced to other countries due to cheaper prices stemming from the lack of government interventions on carbon emissions.
The charges will depend on the amount of emissions that were generated in the manufacture of the imported product, as well as the gap between the carbon price applied in the country where it is produced and the price paid by equivalent UK manufacturers.
“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,” said Chancellor, Jeremy Hunt.
As the first country to reduce emissions the fastest compared to other G7 countries, the UK is ramping up with plans to reach net zero. It is still catching up with the EU though where a similar mechanism – The Carbon Border Adjustment Mechanism (CBAM), will be put in place a year earlier in 2026. The mechanism was legislated as part of the European Green Deal to address emissions of imported products from hard-to-abate industries.
Even though the move is welcomed by industry groups, they warn the proposed starting date of 2027 is late as the EU carbon tariff will be implemented sooner. That means high-carbon steel from countries such as China will be dumped into the UK market for a year until the tax comes into force.
“However, implementing the UK scheme one year after the EU CBAM starts is hugely concerning. Despite the steel sector repeatedly warning officials how exposed the UK would be if it did not mirror the EU implementation timetable, government today seems to be actively planning for just that scenario,” commented the UK Steel director general, Gareth Stace.