The UK government has published the outcome of its consultation Addressing carbon leakage risk to support decarbonisation. The consultation looked at potential ways to mitigate against ‘carbon leakage’ where production of carbon or energy-intensive materials is moved to a country where carbon pricing or other climate change regulation is less stringent.
Following consideration of responses to the consultation, the government has decided to implement a carbon border adjustment mechanism (CBAM) by 2027 (and after further consultation in 2024). The CBAM will apply a carbon price on certain imported products, reflecting the carbon emitted in their production and also addressing any gap between the carbon price applied in the country of origin and the carbon price that would apply were the goods to be produced in the UK.
Liability for the charge will fall on the importer of imported products which are within scope of the CBAM, which is expected to cover the aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel sectors. More precise detail is expected to be made available following the forthcoming further consultation in 2024.
The government’s response document highlights an interesting additional point around the three emissions scope categories that are routinely used to allocate and measure an organisation’s carbon footprint. It notes that the UK CBAM will be applied to Scope 1 and Scope 2 emissions only (i.e. emissions directly resulting from the organisation’s activities and those resulting from its consumption of energy). Scope 3 emissions which are generally those created up or downstream in the supply chain (for example, where a business outsources certain functions to a supplier) will not be included automatically, although the government response says that ‘select precursor product emissions embodied in imported products’ will be within scope.
Meanwhile, the European Commission has published Default values for the transitional period of the cbam between 1 October 2023 and 31 December 2025, where importers of goods subject to the CBAM are required to maintain additional records and submit quarterly reports to the Commission regarding ‘embedded emissions’ in the imported goods. The first report covering the period 1 October 2023 to 31 December 2023 is due 31 January 2024.
The UK government has published the outcome of its consultation Addressing carbon leakage risk to support decarbonisation. The consultation looked at potential ways to mitigate against ‘carbon leakage’ where production of carbon or energy-intensive materials is moved to a country where carbon pricing or other climate change regulation is less stringent.
Following consideration of responses to the consultation, the government has decided to implement a carbon border adjustment mechanism (CBAM) by 2027 (and after further consultation in 2024). The CBAM will apply a carbon price on certain imported products, reflecting the carbon emitted in their production and also addressing any gap between the carbon price applied in the country of origin and the carbon price that would apply were the goods to be produced in the UK.
Liability for the charge will fall on the importer of imported products which are within scope of the CBAM, which is expected to cover the aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel sectors. More precise detail is expected to be made available following the forthcoming further consultation in 2024.
The government’s response document highlights an interesting additional point around the three emissions scope categories that are routinely used to allocate and measure an organisation’s carbon footprint. It notes that the UK CBAM will be applied to Scope 1 and Scope 2 emissions only (i.e. emissions directly resulting from the organisation’s activities and those resulting from its consumption of energy). Scope 3 emissions which are generally those created up or downstream in the supply chain (for example, where a business outsources certain functions to a supplier) will not be included automatically, although the government response says that ‘select precursor product emissions embodied in imported products’ will be within scope.
Meanwhile, the European Commission has published Default values for the transitional period of the cbam between 1 October 2023 and 31 December 2025, where importers of goods subject to the CBAM are required to maintain additional records and submit quarterly reports to the Commission regarding ‘embedded emissions’ in the imported goods. The first report covering the period 1 October 2023 to 31 December 2023 is due 31 January 2024.
