Posted on 31 Oct 2024
The UK government has confirmed that its Carbon Border Adjustment Mechanism (CBAM) will start from January 2027, it says in a published consultation document dated 30 October.
It says the mechanism will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Within these sectors, the CBAM will only apply to specific imported “CBAM goods”, determined by the product level scope of the CBAM and identified by commodity code.
The document confirmed, as previously announced, the mechanism will be applied to “direct”, “indirect” and select “precursor” product emissions embodied in imported CBAM goods, Kallanish notes.
The consultation, which launched back in March, proposed that imported scrap, identified via commodity codes, within relevant sectors will not be within the scope of the UK CBAM.
The government adds that the January 2027 start date would balance the need to give businesses time to prepare, while also taking action on carbon leakage amid its ambition to decarbonise the country.
Companies who responded to the consultation include British Steel, Celsa Steel UK, Electrosteel UK Ltd, Hyundai Steel, Jaguar Land Rover, Mughal Steel, Salzgitter Mannesmann UK, Stemcor, Tata Steel Europe and UK steel.
The UK’s current main measure to mitigate carbon leakage risk is the system of free allocation under the UK ETS. Reforms to the UK ETS, as set out by the UK ETS Authority in July 2023, will reduce the number of permits available for purchase from government by 45% between 2023 and 2027, and the number of free allowances will also decrease.
The document also notes that in September 2024 the UK ETS Authority consulted on moving the start of the second free allocation period from 2026 to 2027 and extending the current allocation period to include 2026.
A move to 2027 would enable the government to align the implementation of the Free Allocation Review with the introduction of the UK CBAM, ensuring a holistic policy approach to carbon leakage, authorities observe.
The UK ETS Authority will make a final decision and respond to the consultation in due course.
Source:Kallanish
