Britain will introduce a new carbon import levy on certain products from 2027 to protect local businesses against cheaper imports from countries with less strict climate regulations, the government announced on Dec. 18.
The UK’s carbon border adjustment mechanism (CBAM) will apply to carbon-intensive products in the iron, steel, aluminum, fertilizer, hydrogen, ceramics, glass, and cement sectors.
The charge applied will depend on the amount of carbon emitted in the production of the imported products and any gap between the carbon price applied in the country of origin and the carbon price faced by UK producers.
Port of Liverpool in England. (Photo: Peel Ports)
Jeremy Hunt, the finance minister, 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 decarbonization efforts translate into reductions in global emissions."
The government said the levy would help to lower the risk of carbon leakage, avoiding emissions being displaced to other nations because they have a lower or no carbon price.
Britain, which has a goal of reaching net zero emissions by 2050, implemented an emissions trading system (ETS) in 2021 to charge power plants, factories, and airlines for each ton of carbon dioxide they emit as part of efforts to meet that target.
Many other regions such as the European Union and China run such systems, but prices within the schemes vary and many regions have no carbon pricing at all.
UK’s benchmark ETS carbon contract currently trades around 36.60 pounds ($46.34) per metric ton while contracts in China's ETS trade around 71.60 yuan ($10.04) a ton.