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Enock Ebbah

Will New UK Carbon Law Clamp Down on Imported Goods?

April 2024

Navigating laws on carbon emissions can be difficult as legislation is quite fragmented across different industries and countries. The UK government is taking rapid strides in reducing industrial decarbonisation to meet Net Zero.

In April 2023, the UK government announced its intention to introduce new carbon tax legislation in 2027. Understanding how these changes will affect your organisation is vital to staying adaptive and avoiding heavy fines or costs. That is why we have distilled the changes down into their core elements so you can begin to make practical decisions.

What Is the New UK Carbon Tax Legislation?

The UK government is to implement a new import carbon pricing mechanism known as the Carbon Border Adjustment Mechanism (CBAM) by 2027 to promote decarbonisation and level the playing field for carbon-intensive products imported into the UK.

The mechanism will ensure that carbon-intensive products imported from overseas countries face a comparable carbon price to products made in the UK. Some of the products facing levies include:

  • Steel.
  • Iron.
  • Aluminium.
  • Ceramics.
  • Cement.

Using the CBAM, a levy will be applied based on the carbon emissions associated with imported goods, and the gap between the carbon price faced by UK producers and that from the country of origin will be considered in its final fee.

Why Has The Government Introduced the Carbon Border Adjustment Mechanism?

The UK has significantly reduced its greenhouse gas emissions by phasing out coal and other carbon-intensive resources and implementing legislation prior to the CBAM. To achieve Net Zero 2050, the UK must close the carbon leaking loophole that’s been exploited for so long. Introducing and enforcing the proposed 2027 UK Carbon Tax Legislation is a pivotal step in this process, and businesses should adapt to these changes or risk falling behind.

Net Zero has had a huge impact on businesses across the globe. If this is the first time you've heard of Net Zero, we have previously explained what it is and why it's so important. We have also looked at how you can achieve Net Zero for your own organisation to reduce costs and protect the planet.

What Are the Aims of the Carbon Border Adjustment Mechanism?

Reducing Carbon Leakage

Carbon leakage is a spill-over effect from aggressive emission reduction policies in one country that causes local production costs to rise and increases emissions in other countries with less stringent emissions reduction policies.

The CBAM aims to minimise the severe risks of carbon leakage so that the UK's significant efforts to reduce greenhouse gas emissions do not result in increased emissions in other countries as organisations try to utilise low-cost and heavily polluting shipping processes.

Levelling the Carbon Pricing Field

The levy will create a fair, competitive environment for domestic industries in the UK. It will ensure that imported goods face a carbon price comparable to those produced in the UK, eliminating the cost benefits of importing from foreign countries.

Reducing Global Emissions

This levy will encourage other countries to implement similar carbon pricing approaches supporting worldwide decarbonisation of carbon-intensive products and markets.

Increasing Industry Confidence and Investment

The government is optimistic that the imposed levy will give industries confidence to invest in the decarbonisation of their value chain, knowing there isn’t a cheaper, higher carbon option available elsewhere.

Enhancing Decarbonisation Drive In the UK

The UK is reducing greenhouse gas emissions faster than any other G7 country. It is the first major economy to legislate Net Zero emissions by the mid-century – leading by example. Nonetheless, the carbon leaking issue is introducing carbon emissions into the UK economy from overseas, threatening decarbonisation efforts. The new levy aims to deliver a net reduction in the UK's carbon footprint.

How Will the New UK Carbon Law Clamp Down on Imported Goods?

Since the industrialisation era, low-wage and cheap polluting shipping systems have made manufacturing abroad more cost-effective. However, with the new carbon tax levy, British manufacturers must consider the economic and environmental implications of purchasing outside the UK. The new carbon tax will level the playing field and incentivise British consumers to select locally sourced, environmentally friendly products.

How Should Businesses Adapt to the Carbon Border Adjustment Mechanism?

In order to adapt to legislation changes, businesses must invest in new approaches for the value chain's plant, design, and production stages. The carbon tax will affect the security of supply for the business supply chain. Companies must have a program to trial or bring on new suppliers when the carbon tax comes into effect. Failure to do so could prove very costly, and competitors will have the upper hand if they have already done the necessary preparations.

Our IEMA Pathways to Net Zero course gives practical guidance on developing your own decarbonisation plan so you can adapt to any changes in carbon legislation, and we strongly recommend organisations consider enrolling on the course. If you're curious about the other benefits of the IEMA Pathways to Net Zero course, we have previously written about why it's an absolute necessity for all organisations

What Other Carbon Tax Legislation Should Businesses Know About?

In the lead-up to the CBAM, businesses should be aware of the UK Emissions Trading System (UK ETS) if they haven’t already familiarised themselves with it. Unlike the impending UK Carbon Tax Legislation, the UK ETS is a market-based approach implemented to control greenhouse gas emissions from energy-intensive industries and power stations within the UK. The features of the UK ETS are as follows:

  • Cap and Trade - An annual cap on the yearly greenhouse gas emissions of the in-scope operators, allowing the buying and trading of emission allowances within the cap.
  • Allowance Surrender – A feature that requires in-scope operators to surrender adequate allowances for their annual emissions and applies fines for non-compliance.
  • Flexibility – Spare allowances from in-scope operators can be used against future emissions or sold to other entities.

The UK made a legally binding pledge to achieve Net Zero greenhouse gas emissions by 2050, and the UK ETS plays a critical role in achieving this goal by encouraging emission reductions within the country.

How Can Organisations Learn About Decarbonisation?

Achieving Net Zero is a sure-fire way to bulletproof your business and adapt to any future legislation changes. Our IEMA Pathways to Net Zero course provides clear, consistent guidance on best practices and provides supervisors and leaders with a strategic and operational overview of environmental sustainability as it affects their specific industry and work area.

Upon successful completion of the IEMA Pathways to Net Zero, you will know the exact steps to work towards decarbonisation and reduce greenhouse gas emissions. If you want to collaborate with your supply chain to set targets and safeguard against any future legislation changes, visit our course page below. You can access a course guide and see all the answers to the most frequently asked questions.




About the Author 

Enock Ebbah MSc has a wealth of combined experience, having spent 13 years developing and delivering energy, environment and sustainability projects, energy research and responsible engineering. His specialist expertise in strategic Net Zero solutions, energy transition, decarbonisation initiatives, and sustainable approaches to using energy, materials, and resources for sustainable development. As an Environment and Sustainability Consultant at Astutis, Enock helps organisations deliver ambitious environment, sustainability, and Net Zero outcomes by providing environmental assessments, environmental and sustainability training, ESG materiality assessments, and sustainability reporting and strategy.


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