UK Mulls Rolling out Carbon Border Tax in 2026

UK Chancellor Jeremy Hunt is considering implementing tariffs on imported carbon-intensive goods from countries with less stringent environmental rules starting in 2026, as reported by the Financial Times on November 13. The move intends to mirror the European Union’s (EU) carbon border adjustment mechanism (CBAM), a landmark tool aimed at protecting local producers from unfair competition from regions with lower carbon costs. By imposing its own carbon border taxes in 2026, aligning with the EU’s CBAM implementation timeline, the UK seeks to prevent becoming a dumping ground for carbon-intensive products circumventing levies imposed by the EU.

 

The proposed carbon border tax has garnered widespread support from domestic manufacturers in the UK. According to a survey conducted by think-tank E3G, 75% of 400 senior managers in the UK manufacturing industry favored the introduction of a UK CBAM, while only 8% opposed it. The survey also suggested that seven out of 10 British manufacturers believe any future carbon border measure in the UK should be in alignment with the European scheme. However, achieving this alignment requires matching the UK’s carbon pricing with that of the EU. As long as the UK’s carbon prices remain lower than those in the EU, British exports might be subject to levies by its largest trade partner. Currently, the UK carbon price stands at approximately GBP41 per ton, compared with GBP66 per ton in the EU.

 

Sources:

https://www.ft.com/content/f9c824e4-6f3d-4aaa-94da-6b95b63e1512

https://www.e3g.org/publications/uk-businesses-overwhelmingly-back-carbon-border-tax/