UK to Impose Carbon Tax for Steel and Aluminum Production


HM Treasury recently announced that the UK plans to enact a carbon tax on certain metals and natural resource imports into the country by 2027. The December 19 announcement said that steel, aluminum, and iron ore will be subject to the tax. This tax is currently known as the Carbon Border Adjustment Mechanism (CBAM).

“Goods imported into the UK from countries with a lower or no carbon price will have to pay a levy by 2027, ensuring products from overseas face a comparable carbon price to those produced in the UK,” HM Treasury said of the carbon tax.

Carbon Tax

“The new rules will tackle ‘carbon leakage,’ reducing the risk of production and associated emissions being displaced to other countries because they have a lower or no carbon price,” the organization added. “Carbon leakage undermines the country’s efforts to decarbonize as the world transitions to net zero.”

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Carbon Tax Charges Dependent on Volume Emitted

The latest information states that charges applied under the plan will depend on the volume of emitted carbon in the imported goods’ production. CBAM will also operate with the UK Emissions Trading Scheme (UKETS). That came into effect on January 1, 2021, after the country departed the European Union. The mechanism was originally part of the EU Emissions Trading Scheme, which started in 2005 and covers about 45% of the bloc’s carbon emissions.

HM Treasury quoted The Carbon Capture & Storage Association’s Chief Executive, Ruth Herbert, as saying, “A key issue will be the linkage of the UK and EU ETS, so that we avoid unnecessary trade and fiscal barriers for UK goods exports.”

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