Government announces UK CBAM consultation

Potential for significant impacts on UK importers of carbon intensive products. Businesses have until 22 June 2023 to respond.

Businesses have until 22 June 2023 to respond.

On 30 March 2023, the UK Government announced a new consultation, ‘Addressing carbon leakage risk to support decarbonisation’. Carbon leakage – broadly, the risk that businesses will shift their carbon intensive activities offshore – can significantly undermine domestic efforts to decarbonise. This consultation aims to mitigate this risk by seeking views on a range of proposed policy measures to tackle carbon leakage, including the introduction of a UK Carbon Border Adjustment Mechanism (CBAM) and Mandatory Product Standards (MPS).

The proposed UK CBAM would apply a carbon price to UK imports with high embodied emissions and is expected to apply to sectors covered by the UK Emissions Trading Scheme (UK ETS), such as cement, chemicals, iron and steel, paper and pulp, glass, refining and fertiliser. Further details on the proposed in-scope activities can be found in Table C of the Greenhouse Gas Emissions Trading Scheme Order 2020. Timelines for implementation are still to be determined, but a UK CBAM would not be introduced until 2026 at the earliest.

Whilst the initial proposed outline has similarities to the EU CBAM (which will impact UK exporters of EU covered goods), the proposed UK CBAM would have a potentially significant impact on UK importers of UK covered goods. Businesses caught by both sets of rules could face further complications of having to comply with two similar, but distinct, regimes.

Organisations that have been closely following the EU CBAM will already be familiar with the implications of a carbon border adjustment mechanism: higher operating costs, new compliance and reporting obligations and carbon accounting challenges. UK importers of goods that fall under the UK ETS are therefore encouraged to review and respond to the consultation document, given the likely impact on their business. Interested parties can access the consultation document on the GOV.UK website and submit their views until 22 June 2023.