The UK announced it will join the EU in adopting a Carbon Border Adjustment Mechanism (CBAM). The UK law will introduce a carbon levy on certain goods if they are imported from countries with a lower cost of carbon than the UK, or no carbon price at all. Like the EU law, the UK’s CBAM is designed to protect domestic businesses that face the costs of compliance with domestic carbon pricing. Akin published a memo on the new law and points out the following key points:
- “The UK announced that it will require importers to pay a carbon levy on certain goods imported from countries with a lower or no carbon price.
- Covered goods under the UK’s carbon border adjustment mechanism (CBAM) likely will include imports from the iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement sectors, but the final list of covered sectors has not been determined.
- The UK CBAM’s scope and design will be finalized in 2024, with opportunities for consultation next year. The CBAM will enter into force in 2027.
- The UK also announced its intention to establish voluntary product standards for low carbon products.”
The memo notes that the UK’s CBAM is slated to apply to different types of goods than the EU’s CBAM, so compliance with the EU version of the law will not necessarily mean compliance with the UK. Akin also notes that it is unclear if the UK law will face a similar phase-in period as its EU counterpart or if it will skip the reporting phase altogether and be fully implemented in 2027.
Companies that export goods to the UK should take note of the developing law, but even those outside of its scope should consider its implications. In line with the new EU-Canada ‘Green Alliance’, similar legislation could emerge in North America and potentially on a global scale. Companies should examine these laws and assess potential impacts should CBAM laws become the global norm.
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