Carbon Border Adjustment Mechanism In The UK

What is it and how does it interact with the EU CBAM?

Introduction

The Department for Energy Security and Net Zero has published its response (the Response) to its consultation addressing carbon leakage risk to support decarbonization (the Consultation). The Response confirmed that a UK CBAM will be brought into force by 2027. There will be further consultations during 2024 regarding the structure and operation of the UK CBAM, although some key details were included within the Response.

Combatting carbon leakage

"Carbon leakage" is the term given to the movement of production activities, and therefore the associated carbon emissions, from one country to another, in order to avoid higher levels of carbon pricing and more stringent climate regulation. The government is seeking to reduce the level of carbon leakage from the UK as it shores up its legislative framework in an effort to accelerate industrial decarbonization, and hit the net-zero