The UK has announced plans to implement a carbon tax on imported steel and cement starting in 2027. This measure aims to boost local producers and decrease emissions. However, the government is being criticized for its slow pace in implementing this policy.

The Treasury announced that the tax would assist in tackling the issue of “carbon leakage”. This refers to the situation where UK manufacturers are at a disadvantage in terms of pricing due to foreign competitors whose governments do not impose taxes on businesses with high carbon emissions.

The outcome is that emissions are shifted to different nations, while environmentally-friendly producers in the UK suffer losses due to their obligation to pay carbon-related fees.

The UK’s chancellor, Jeremy Hunt, stated that this fee will ensure that products with high levels of carbon from other countries, such as steel and ceramics, will have a similar carbon cost as those produced within the UK. This will help to effectively reduce global emissions through our decarbonisation efforts.

This should provide reassurance to UK businesses to invest in reducing carbon emissions as the global community moves towards achieving net zero.

The CBAM implemented by the Treasury would incur fees based on the level of emissions involved in producing the imported goods, and also take into account the difference between the carbon price in the country of origin and the UK’s carbon price for comparable manufacturers.

The proposal was met with approval by industry organizations, however they cautioned that the suggested beginning date of 2027 was too far in the future.

UK Steel, a trade organization, noted that the EU will also be implementing a similar system in 2026. This could potentially lead to high-carbon steel from countries like China being unloaded onto the UK market for one year until the CBAM takes effect.

According to Gareth Stace, director general of UK Steel, since the majority of global steel production does not have a carbon cost, it is necessary to implement a carbon border policy in order to ensure fair competition in terms of carbon pricing.

“Nevertheless, the implementation of the UK program one year following the initiation of the EU CBAM raises significant concerns.”

The steel industry has continuously alerted government officials about the potential consequences if the UK does not follow the same timetable as the EU. However, it appears that the government is currently making preparations for this possibility.

Source: theguardian.com