Under the EU’s Carbon Border Adjustment Mechanism, or CBAM, fees will be added to imports of emissions-intensive goods such as steel and cement from countries deemed to have weaker carbon markets. That may include the UK, whose own pollution rights plunged to an all-time low earlier this month after the government overhauled its emissions trading system.
The UK shipped about £5.6 billion of steel to the EU in 2022, or three quarters of its total export volume of the metal.BloombergNEF estimates that an EU carbon tariff would rise to about €166 million a year once CBAM is fully implemented, based on a UK carbon price about 20% below the EU’s. It’s currently almost 35% weaker, with UK benchmark emission futures trading at about £49 a ton. Citigroup Inc. said earlier this month the permits may eventually decline toward £22.
“We want to ensure a smooth transition to the net zero cap allowing the market and participants time to adapt,” a spokesperson for the UK’s Department for Energy Security and Net Zero spokesperson said by email.