The UK government announced that it will introduce a carbon border adjustment mechanism (CBAM) by 2027, establishing a carbon tax on imported goods targeted at a series of key emissions-intensive industries.
The move is aimed at equalizing the carbon price paid by UK producers with those outside the UK, and avoiding “carbon leakage,” or shifting of production of carbon-intensive goods to jurisdictions with less stringent emissions reduction policies.
The CBAM will initially apply a carbon price to imported goods from sectors including fertilizers, as well aluminum, cement, ceramics, glass, hydrogen, iron, and steel.
The new carbon tax follows a review by the UK government launched earlier this year on potential measures aimed at mitigating carbon leakage, with UK producers in several emissions-intensive sectors subject to the country’s Emissions Trading Scheme (ETS), one of the key tools used by the UK to decarbonize industry.
The European Union (EU) in August also adopted a CBAM to equalize carbon prices on imports with its own ETS system (GM Aug. 25, p. 29; April 28, p. 30).