UK announces CBAM rules that will come into force in 2027

Starting in 2027, the United Kingdom plans to implement a carbon tax on imported goods, ensuring an adjustment of carbon prices.

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The UK will impose a carbon levy on imported products such as hydrogen, fertilisers and steel from 2027, ensuring products from overseas face a comparable price to UK-produced alternatives.

Under the rules, highly traded, carbon intensive products from overseas including iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement will face comparable carbon pricing to those domestically produced.

Slated to tackle ‘carbon leakage’, the new carbon border adjustment mechanism (CBAM) rules are intended to reduce the risk for production and associated emissions being displaces to other countries with no for lower carbon prices.

According to the UK Government, the charge applied by CBAM will depend on the amount of carbon emitted during 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.”

Jeremy Hunt, Chancellor of the Exchequer, said, it “should give UK industry the confidence to invest in decarbonisation as the world transitions to Net Zero.”

The design and delivery of the CBAM will come under further consultation next year. The government has said it will engage trade partners, including developing countries and affected businesses to “minimise the impact on trade.”

It follows similar moves from the EU. The EU CBAM was formally adopted by the European Commission in August (2023), allowing for a two year transition period before full implementation at the start of 2026.

Source: https://www.h2-view.com/