Posted on 19 Dec 2023
The UK will implement its own Carbon Border Adjustment Mechanism (CBAM) covering steel imports from 2027, the UK government says. UK Steel says failure to align with the EU’s CBAM timetable leaves the UK steel industry vulnerable.
Goods imported into the UK from countries with a lower or no carbon price will have to pay a levy. The charge applied 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.
UK Steel says the gap of 12 months in CBAM implementation between the UK and EU, whose system will be fully operational from 2026, will leave the UK sector exposed. It could mean that some of the high-emission steel currently exported to the EU will be diverted to the UK and depress prices. Moreover, trade safeguards end in 2026, leaving the UK vulnerable to imports.
“Mutual recognition between the UK and EU CBAM policies and Emission Trading Schemes (ETS) is equally crucial to avoid any restrictions to trade. 75% of the UK steel industry’s exports – totalling 2.55 million tonnes of steel (£3.5 billion in value) – goes to European markets. Without mutual recognition and linked emission trading schemes, UK-made steel will face a financial trade barrier when exported to our biggest export market,” UK Steel says.
“With a delayed timeline, the Government must now get the implementation right. If the CBAM is easily bypassed while carbon costs rapidly rise for UK industry, Britain's steel sector could suffer huge damage. The Government will need to be fleet of foot to respond in cases of unfair trading practices and take further action in 2026, if necessary,” UK Steel director general Gareth Stace comments in a note sent to Kallanish.
The design and delivery of the CBAM will be subject to further consultation in 2024, including the precise list of products in scope. The government says it will also engage with trade partners, including developing countries, and affected businesses and organisations, to minimise the impact on trade and the necessary compliance steps.
Alongside a CBAM, the government will also work with industry to establish voluntary product standards that businesses could adopt to help promote their low-emission products to customers. It will also look at a framework, which measures the carbon content of goods, that could support other decarbonisation policies in future.
A CBAM will work alongside the UK Emissions Trading Scheme to mitigate the risk of carbon leakage. The ETS Authority is consulting how to better target free allocations of carbon allowances for industries most at risk of carbon leakage under the ETS. It will also review whether free allocation should be adjusted to reflect any changes to carbon leakage risk for given sectors.
Source:Kallanish
