UK CBAM Roll Out Announced

HM Treasury has confirmed that carbon-intensive goods imported into the UK from nations with a lower carbon price will be subject to a climate levy from 2027. The levy will apply on a sliding scale which will depend on the greenhouse gas (GHG) emissions generated in the production of carbon-intensive goods, as well as the gap between the UK’s carbon price and the price applied in countries supplying these products. The UK’s delayed Carbon Border Adjustment Mechanism (CBAM) was originally meant to enter a reporting phase in 2024 ahead of a 2026 launch. The government will now design product standards for measuring the carbon footprint of goods, which will initially be applied voluntarily. Additional products may be added to the scope of the CBAM, depending on consultation outcomes over the course of 2024. Chancellor of the Exchequer Jeremy Hunt said: “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.” The Treasury is also intending to consult on the UK’s post-Brexit Emissions Trading Scheme (ETS) with the industries it currently covers, such as aviation, to identify mechanisms for tackling carbon leakage and to ensure participants are suitably incentivised to decarbonise.

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