UK carbon pricing levy by 2027

The UK is to introduce a new import carbon pricing mechanism by 2027 to support its decarbonisation drive. Among the products subject to the new levy will be cement, along with steel, iron, aluminium and ceramics. Imports of these goods from overseas will face a comparable carbon price to those produced in the UK, helping to reduce the risk of carbon leakage. 

According to the UK Government, the charge applied by the carbon border adjustment mechanism (CBAM) 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. This should give UK industry the confidence to invest in decarbonisation as the world transitions to net zero,” said UK Chancellor of the Exchequer, Jeremy Hunt. 

The design and delivery of the CBAM will be subject to further consultation in 2024, including the precise list of products involved. The government also plans to engage with trade partners, including developing countries, and affected businesses and organisations, to minimise the impact on trade and the necessary compliance steps. Alongside the CBAM, the government is intending to work with industry to establish voluntary product standards that businesses could choose to adopt to help promote their low carbon products to customers; and to develop a framework which measures the carbon content of goods, that could support other decarbonisation policies in future.