Have your say on the UK’s carbon import tax

HMRC and HM Treasury have published a consultation on the design and administration of a UK carbon border adjustment mechanism (CBAM).  

A CBAM applies a charge to imported goods based on the embedded emissions within those goods. The introduction of the UK CBAM should ensure that products from overseas are subject to a comparable carbon price to those produced in the UK. Initially, the CBAM will apply to imports into the UK of iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement. 

The consultation follows a government announcement in December 2023 that it would introduce a UK CBAM with effect from 1 January 2027. The government previously consulted on addressing carbon leakage to support decarbonisation. Carbon leakage refers to businesses moving production overseas to avoid stricter domestic environmental regulations. In its response, ICAEW expressed support for the introduction of the CBAM. 

The consultation sets out the government’s proposals for the structure and administration of the UK CBAM. This includes questions on which products should be included within the scope and what embedded emissions should be included.  

The government is also consulting on the calculation and verification of embodied emissions, and the UK CBAM rates that will apply. This considers how the rate should be adjusted for carbon prices that have already been paid overseas. 

Ed Saltmarsh, ICAEW Technical Manager for VAT and Customs, said: “The CBAM is a vital tool in the UK’s push towards decarbonisation. However, the administrative impact on businesses will be significant. ICAEW members must play a proactive role in the consultation to ensure the CBAM’s implementation is as efficient as possible.” 

ICAEW will be responding to the consultation and is keen to hear members’ thoughts. Please contact Ed Saltmarsh with any comments on the consultation questions. The consultation closes on 13 June 2024.  

Further information: 

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