On the 18th of December, the UK government announced the UK Carbon Border Adjustment Mechanism (CBAM) as a measure to address the carbon leakage risks. The UK CBAM is foreseen to be implemented from 2027.
Here are some of the key takeaways from this latest announcement:
UK CBAM implementation:
- Will be implemented from 2027
- Will cover imports of aluminium, cement, ceramics, fertilizer, glass, hydrogen, iron and steel
- Will apply to Scope 1 & 2 emissions
It is worth a mention here that some of the main differences of the UK CBAM approach from the EU CBAM include:
- Sectoral differences where UK CBAM does not cover electricity like the EU CBAM, but covers ceramics and glass, which are both not covered under EU CBAM (yet).
- Scope of the emissions in the UK CBAM are already advanced to scope 1 and 2, plus select precursor product emissions
Furthermore, we observe that:
- Price paid in the UK will take the carbon price already paid in the exporting country into account, as with EU CBAM as well;
- Currently, the free allocations under the UK ETS are confirmed until 2026, and coming months will bring more clarity on how the UK CBAM will work in parallel with the UK ETS.
As the detailed consultation is expected in 2024, we can also already note two key differences between the CBAM initiative of the EU and the UK:
- The EU CBAM begins from 1 Jan 2026, when the transition phase ends while UK CBAM is to be implemented from 2027.
- The EU CBAM works with the CBAM declarants required to purchase and surrender the CBAM certificates where as the UK CBAM appears to rule out the emission certificates.
Although the details of UK CBAM are not yet finalised, if you have any questions or would like to discuss what this entails for your business, please feel free to reach out to one of our experts. We are happy to guide you further.
Contact your PwC trusted advisor for more in-depth CBAM discussions: