The UK government unveiled plans on Monday to implement a carbon price on imported goods from 2027, including iron, steel, aluminium, ceramics, and cement, to ensure they face a carbon price comparable to domestically produced goods.
The move is intended to address the risk of “carbon leakage,” where production and associated emissions are shifted to countries with lower or no carbon pricing. Industries such as steel have criticised the move as coming too slowly, while one campaigner branded the policy “economically illiterate.”
Chancellor of the Exchequer Jeremy Hunt highlighted that the levy would guarantee that “carbon-intensive” products from overseas encounter a carbon price equivalent to those manufactured in the UK.
“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 decarbonization efforts translate into reductions in global emissions,” said Mr. Hunt.
The carbon border adjustment mechanism (CBAM) will be applied to highly traded, carbon-intensive products in sectors such as iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.
The charge will be contingent on the carbon emissions associated with the production of the imported goods and the discrepancy between the carbon price in the country of origin and that faced by UK producers.
The implementation of CBAM is part of the government’s broader efforts to tackle carbon leakage and ensure the efficacy of its decarbonization policies.
Policy Labelled ‘Economically Illiterate’
Lois Perry, the director of Car26, a prominent climate-focused pressure group advocating for an “informed rational analysis of Climate matters,” has criticised the UK government’s decision to implement a CBAM style policy.Ms. Perry expressed scepticism about the effectiveness and economic rationale behind the policy.
Speaking to The Epoch Times, she argued that making foreign imports more expensive could have detrimental effects on trade relationships, potentially harming countries that will no longer trade with the UK.
“The government, in their wisdom, have decided to make foreign imports more expensive in order to ’save the planet,' and most likely many of those countries which we will no longer be importing from will lose out by not trading with us,” said Ms. Perry.
“Surely it would be more helpful not to have a carbon tax, buy from them so they can afford to do what they need to save themselves whilst also making goods cheaper for UK consumers. It’s an idiotic, economically illiterate policy.”
Ms. Perry further criticised the government’s approach, suggesting that rather than imposing carbon taxes, the UK should support other nations in their efforts to address climate change while simultaneously making goods more affordable for UK consumers.
She also raised concerns about the broader impact of the UK’s climate policies, pointing out the challenges faced by local industries forced to shut down to meet Net Zero targets.
Ms. Perry argued that the country’s key industries closing down has resulted in the replacement of local production with goods from countries like China and India, which may rely on coal-fired factories.
“You couldn’t make it up. Our wise masters force our own key industries to close down to meet pointless net zero targets, losing local jobs as China and India replace our production with coal-fired factories. Now having killed our local producers, they add taxes to make these imports even more expensive for our consumers, fueling inflation,” she added.
The government’s decision follows a consultation where 85 percent of respondents expressed concerns about carbon leakage being a risk to their decarbonization efforts.
Expert Questions Practicality of Failing to Align With EU
Paul Fennell, an expert researcher on carbon capture and Professor of Clean Energy at Imperial College London, expressed concerns about the UK’s decision.Mr. Fennell emphasised the importance of collaboration with the European Union (EU) in shared legislation and border controls.
Speaking to The Epoch Times, Mr. Fennell questioned the wisdom of the UK replicating legislation and border controls independently rather than sharing the burden with the EU.
He suggested that the UK’s solo approach might lead to duplication of efforts or, in a worst-case scenario, result in the EU imposing sanctions.
“It underlines the stupidity and waste of the UK trying to replicate perfectly good legislation and border controls that we could easily share the burden of producing with the EU, and that we will likely simply copy in any case or risk the EU applying sanctions,” said Mr. Fennell.
Mr. Fennell suggested that there were merits to the carbon levy concept but raised concerns about the timing of its implementation.
He pointed out that there would be a year when the UK applies the levy while the EU does not. This time gap, according to Mr. Fennell, creates a risk of high-carbon goods being dumped in the UK, potentially disadvantaging local manufacturers and producers when exporting to the EU.
Support From Industry
In addition to CBAM, the government plans to collaborate with industry to establish voluntary product standards for low-carbon products and develop a framework to measure the carbon content of goods.Stakeholders, including the Carbon Capture & Storage Association, British Chambers of Commerce, Hydrogen UK, and others, have expressed support for the introduction of CBAM, considering it a means to encourage investment in low-carbon technologies, prevent carbon leakage, and provide certainty for investors in low-carbon sectors.
However various technical challenges, including the linkage of the UK and EU Emissions Trading Schemes, will need to be addressed to avoid trade and fiscal barriers for UK goods exports.
