UK plans to introduce a tax on imports of carbon steel by 2027

The UK plans to introduce a tax on imports of carbon-intensive products, including steel, by 2027 as an attempt to protect domestic producers from cheap imports from countries with less stringent climate policies. This was reported by Reuters.

The planned carbon border adjustment mechanism (CBAM) will be applied to carbon-intensive products in the production of iron, steel, aluminum, fertilizers, hydrogen, ceramics, glass and cement. The amount of the tax will depend on the amount of emissions from the production of the imported product, as well as the difference in the carbon price between the country of origin and the UK.

“This tax is designed to ensure similar prices for carbon-intensive products from abroad, particularly steel and ceramics, compared to those produced in the UK itself. In this way, our decarbonisation efforts will reduce global emissions,» Chancellor of the Exchequer Jeremy Hunt said.

The UK is aiming to achieve zero emissions by 2050 and has already launched an emissions trading system (ETS) in 2021. Many other regions of the world also have similar schemes, but carbon prices may differ. The introduction of a tax on imports of carbon-intensive goods is aimed at reducing the risks of increasing carbon emissions due to the export of such products from countries with less control over this to countries that are trying to limit emissions.

In September 2023, the European Union launched a system of CO₂ emission tariffs for imported suppliers of steel, cement and other goods, which will be fully effective from 2026.

British steelmakers believe that domestic measures are essential to prevent the flow of high-emitting products to the UK once carbon tariffs are in place in the EU.

«Since more than 90% of the world’s steel production does not face carbon tariffs, it is quite right to introduce a policy of limiting the import of carbon-containing goods. However, the introduction of the UK scheme a year after the start of EU CBAM is hugely concerning,” commented Gareth Stace, CEO of UK Steel.

In April 2023, the UK government launched consultations on a number of potential policy measures, including CBAM, to reduce the risks of future carbon emissions and provide the domestic industry with an optimal policy environment for decarbonization.

As GMK Center reported earlier, the British government agreed on a £500 million ($620 million) support package for Tata Steel to secure the future of its Port Talbot steel mill. The company is expected to invest £1.25 billion, including a grant from the government, in new electric arc furnaces to make steel production at the plant more environmentally friendly. The EAFs are to replace the existing blast furnaces, which are reaching the end of their useful life. The transition to sustainable steel production at Port Talbot is expected to reduce carbon emissions in Wales by 22% and on-site emissions by 85%.