The Government has recently published its policy for the new Carbon Border Adjustment Mechanism (CBAM), which aims to reduce the risk of carbon leakage in the bid to decarbonise UK industry from 2027.
David Hooper, managing director of Hooper & Co, reflects on how this could impact manufacturers, importers and supply chains in general, and what firms should do to prepare for the changes.
As the UK pushes towards its net-zero goals, there has been growing concern about carbon leakage – where businesses move production to countries with lower environmental standards to avoid carbon costs.
To address this, the UK is introducing the CBAM in 2027. This groundbreaking policy will ensure imported goods face similar carbon costs to those produced in the UK, creating a level playing field while supporting global climate action.
The CBAM is the first major UK initiative to put a price on imported carbon emissions, and while aligning with similar measures being introduced by the EU, aims to protect UK businesses as they invest in decarbonisation.
Crucially, the protocol will apply to businesses importing over £50,000 of aluminium, cement, fertiliser, hydrogen, and iron and steel annually, requiring them to report all carbon emissions relating to these imported products.
The goal is to encourage global suppliers to reduce their carbon emissions, but this will of course affect supply chain costs and choices, and require businesses to implement new systems for tracking and reporting.
While initially a domestic solution, CBAM has international implications, forcing business to think about emissions and the global trade picture, while encouraging international climate cooperation.
To put themselves in the best possible position ahead of its introduction, I would advise businesses to take the following steps:
After its launch in 2027, quarterly reporting will begin the following year, with the first returns due in May 2028.
It’s important that businesses make themselves aware of these changes now, and seek advice if there are elements they are unsure about. Aligning with global trend toward carbon pricing, the CBAM will be part of a broader decarbonisation strategy for the UK, which could see it expanded to other sectors in the future.