UK CBAM confirmed

A lot has happened this week on the topic of CO2 pricing in international trade. On the one hand, the European Commission has published the first drafts for two important implementing acts of the EU CBAM. On the other hand, the United Kingdom has also confirmed its own UK CBAM. The latter will therefore be briefly introduced.

UK CBAM comes into force in 2027

The UK's budget plans have already revealed that the revenue from the UK CBAM will be included in the future budget. This was followed shortly afterwards by a comprehensive publication of the government's responses to the consultation process.

Objectives of the UK CBAM

The aim of the UK CBAM is quite similar to that of the EU CBAM. This also aims to prevent carbon leakage, i.e. the relocation of greenhouse gas emissions. The introduction of the mechanism is to be accompanied by diplomatic efforts at international level in order to achieve the most global approach possible.

Scope of application

The scope of application initially starts with the sectors that are particularly energy-intensive and exposed to international trade. These are cement, fertilizers, iron and steel, aluminium and hydrogen. It is therefore no coincidence that these are very similar to the scope of the EU CBAM. In contrast, however, the UK CBAM does not take imported electricity into account. The glass and ceramics sectors are mentioned as the first possible extension of the scope of application.

Exception to the scope of application

Unlike the European CBAM, the UK CBAM is not intended to apply to all companies that import the goods concerned. Instead, it contains a company-specific exception. Under the UK CBAM, companies that import UK CBAM goods worth less than 50,000 pounds in a 12-month period will benefit from this. The EU CBAM, on the other hand, uses a goods-related exemption that excludes shipments of low value, i.e. less than €150.

My opinion and outlook

Reliable information on the UK CBAM is now available for the first time. There are still many similarities and differences between the UK and EU mechanisms that need to be worked out. At first glance, the exception of the scope of application of 50,000 pounds sounds promising. However, as the scope of the regulations will continue to grow, it remains to be seen whether this will be a dynamic exception. Otherwise, more and more companies will exceed this threshold. However, the political signal is clear with the publication of the consultation results: the European mechanism has significantly changed climate policy. This is gradually being adopted by more and more countries. For companies, this means that they will have to pay for CO2 emissions - and not only on the European market.

Support in cost analysis

If you need support in analyzing the impact of CO2 costs on your purchasing decisions, but also on your strategic corporate orientation, you can of course contact us directly at any time (helge@kolum.earth). We will be happy to tackle the project together with you. Best regards Helge Wieggrefe