In December 2023, the UK government announced that it will implement a UK Carbon Border Adjustment Mechanism (UK-CBAM) by 2027.
This is part of the UK’s strategy to minimise carbon leakage and follows the implementation of such a mechanism in the EU by October 2026, which is threatening UK firms with an uneven playing field if there is no similar scheme in the UK.
To date, the Government has confirmed that the UK CBAM will apply a carbon price to imported goods from the following sectors: aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron, and steel; and will apply to Scope 1, Scope 2, and select precursor product emissions embodied in imported products.
The Government’s announcement is good news for UK manufacturers of the above goods in scope, and selected semi-finished goods and articles, as it will create a level playing field between domestic industry, which already faces the carbon price compliance burden, and imported products.
It is fair that imported raw materials and semi-finished products face similar carbon costs as UK industry, in order to avoid the deindustrialisation of the UK manufacturing industry. However, the CBAM does not provide a ‘complete’ solution to carbon leakage and would need accompanying measures, the details of which, along with more information on the UK-CBAM, are covered in full in Make UK’s helpful briefing document below.