UK will impose carbon levy on imported goods by 2027

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On Monday Britain said it would implement a new import carbon pricing by the year 2027, with goods from countries with a lower or no carbon price having to pay a levy as part of decarbonisation efforts.

The carbon border adjustment mechanism(CBAM) is set to apply in carbon-intensive products in the iron, steel, aluminum, fertiliser, hydrogen, ceramics, glass and cement sectors said the government.

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.

The minister of finance Jeremy Hunt said, the levy will ensure that carbon-intensive products from overseas like steel and ceramics face a comparable carbo price to those produced in the UK, so that the decarbonisation efforts translate into reductions in  global emissions.

As the world transitions to net zero, this should give UK industry enough confidence to invest in decarbonisation.

Britain said it would help reduce the risk of ‘carbon leakage’, avoiding emissions being displaced to other countries because they have a lower or no carbon price. The CBAM will work alongside the UK Emissions Trading Scheme.

In September, the European Union launched the first phase of a system to impose CO2 emissions tariffs on imported steel, cement and other goods, the world’s first. It will not begin collecting any CO2 emission charges at the border until 2026. That planned tariff has caused disquiet among trading partners and at a recent forum, China’s top climate envoy XieZhenhua urged countries not to resort to unilateral measures such as the EU levy.