UK Unveils Ambitious Plan: Carbon Levy on Imported Raw Materials Set to Kick in by 2027

Aayushi Sharma

The British government announced that it will impose a carbon levy on imported raw materials, including aluminum, iron, steel, and cement from 2027. This move is aimed at keeping businesses in the UK from being undercut by foreign producers. Since the plan will take effect a year after identical European Union (EU) suggestions are put into force, the body representing British steel has criticized it as being too slow.

According to the government, carbon-intensive items in the cement, iron, steel, aluminum, fertilizer, hydrogen, ceramics, and glass industries will be subject to the carbon border adjustment mechanism (CBAM). The amount charged will be determined by the quantity of carbon released during the manufacturing of the imported goods and, if any, by the difference between the carbon price that UK producers must pay and the carbon price that is applied in the country of origin.

UK Treasury chief 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.” 

In an effort to accomplish its aim of having net zero emissions by 2050, Britain implemented an emissions trading system (ETS) in 2021 that levies fees on manufacturers, power plants, and airlines for each tonne of carbon dioxide they release.

The first-ever global system of CO2 emissions tariffs on imported steel, cement, and other items was introduced by the European Union in September. It won’t start collecting CO2 emission fees at the border until 2026. Trading partners are uneasy about this proposed price, and China’s top climate envoy, Xie Zhenhua, advised nations not to use unilateral actions like the EU levy at a recent summit.

References:

https://www.reuters.com/world/uk/uk-government-implement-carbon-levy-by-2027-2023-12-18/

https://www.ft.com/content/c3ea19ff-537b-4708-865e-8d2a1ec58051

https://www.theguardian.com/business/2023/dec/18/uk-carbon-tax-steel-imports-iron-ceramics-cement