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UK Government Unveils Carbon Border Tax Plan by 2027: Aims to Prevent Carbon Leakage in Key Industries

ESGUK Government Unveils Carbon Border Tax Plan by 2027: Aims to Prevent Carbon Leakage in Key Industries

The UK government has announced plans to implement a Carbon Border Adjustment Mechanism (CBAM) by 2027, introducing a carbon tax on imported goods from emissions-intensive industries. The CBAM aims to equalize the carbon price paid by UK producers with those outside the UK, preventing carbon leakage or the shift of production to jurisdictions with less stringent emission reduction policies. Initially applied to sectors such as aluminum, cement, ceramics, fertilizers, glass, hydrogen, iron, and steel, the carbon tax is part of efforts to decarbonize UK industry while avoiding an increase in emissions abroad. The design of the CBAM, including the list of products in its scope, will be subject to ongoing consultation, with engagement planned with trade partners and affected businesses to minimize the impact on trade. The move follows a review earlier this year on potential measures to mitigate carbon leakage. The European Union has also adopted a CBAM to align carbon prices on imports with its Emissions Trading System.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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