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UK to implement carbon levy on imported goods by 2027
Global Banking & Finance Review®
Company
By Kylie MacLellan
LONDON (Reuters) -Britain said on Monday it would implement a new import carbon pricing mechanism by 2027, with goods imported from countries with a lower or no carbon price having to pay a levy as part of decarbonisation efforts.
The government said the carbon border adjustment mechanism (CBAM) would apply to carbon intensive products in the iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement sectors.
The charge applied 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 – if any – and the carbon price faced by UK producers.
“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,” finance minister Jeremy Hunt said.
“This should give UK industry the confidence to invest in decarbonisation as the world transitions to net zero.”
Britain said it would help reduce the risk of ‘carbon leakage’, avoiding emissions being displaced to other countries because they have a lower or no carbon price. The CBAM will work alongside the UK Emissions Trading Scheme, it added.
In September, the European Union launched the first phase of a system to impose CO2 emissions tariffs on imported steel, cement and other goods, the world’s first. It will not begin collecting any CO2 emission charges at the border until 2026.
That planned tariff has caused disquiet among trading partners and at a recent forum, China’s top climate envoy Xie Zhenhua urged countries not to resort to unilateral measures such as the EU levy.
(Reporting by Sachin Ravikumar, Writing by Kylie MacLellan; Editing by Kate Holton)
A carbon levy is a fee imposed on companies for the carbon emissions produced during the manufacturing of goods. It aims to encourage lower carbon emissions and promote sustainability.
The CBAM is a policy that imposes a charge on imported goods based on their carbon emissions. It ensures that imported products face similar carbon costs as those produced domestically.
Carbon leakage refers to the situation where businesses transfer production to countries with less stringent emissions regulations, potentially undermining global climate efforts.
Carbon-intensive products are goods that require significant energy and produce high levels of carbon emissions during their production process, such as steel, cement, and aluminum.
The UK Emissions Trading Scheme is a market-based approach to controlling pollution by providing economic incentives for reducing emissions. It sets a cap on total emissions and allows trading of emission allowances.
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