New data from climate think-tank E3G has found that UK manufacturers would be in support of the introduction of a domestic Carbon Border Adjustment Mechanism (CBAM) similar to that coming into effect in the EU in the new year. The poll of business leaders in UK manufacturing, surveyed 400 respondents in upper management roles within the sector. It found that the vast majority- 73%, would support the implementation of a similar scheme to CBAM, with fewer than one in ten (8%) opposing it[i].
Essentially, the EU’s CBAM will ensure that foreign producers pay the same carbon price as EU manufacturers. Companies importing certain polluting products will be required to buy certificates to cover their embedded CO2 emissions. The scheme is designed to mirror the EU’s own domestic carbon pricing, thus protecting domestic EU industries from outside competition in the form of cheaper and more polluting products[ii].
According to the European Commission: “The CBAM will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. With this enlarged scope, CBAM will eventually – when fully phased in – capture more than 50% of the emissions in ETS covered sectors.”[iii]
When shown details of the CBAM policy, almost half (49%) of UK manufacturers said they thought it would have a positive impact on their business. E3G noted respondents felt these measures “would create a level playing field, ensuring that their business would not be undercut by cheaper products from countries with less stringent environmental regulations”[iv].
The study by E3G also revealed that UK manufacturers strongly back policy alignment with the EU. Seven in ten respondents (70%) believe any future UK carbon border measure should be aligned with the European scheme. The CBAM is due to enter a reporting phase from January and will become fully operational from 2026. Firms outside the EU in certain sectors have already been tasked with collecting emissions data and reporting to a transitional registry hosted by the European Commission. This is a requirement should they wish to continue exporting to the UK. Last month at ZCA we set out implementation advice for CBAM, as well as analysis of the opportunities and headwinds ahead of January. You can read more in our insight here.
As the CBAM reporting phase approaches, Energy UK is already warning that the UK could face hefty tax bills for exporting to the EU as a result. It had been thought that the Autumn Budget would see delivery of a commitment to the UK’s own version of CBAM[v], however that was not the case, leaving many manufacturers concerned. The Mineral Products Association (MPA) went as far as stating that they were “deeply disappointed by the lack of commitment to a UK CBAM” in the Autumn Statement, adding: “This missed opportunity should be urgently followed by publication of the promised consultation response announcing introduction of a CBAM”.[vi]
As one potential solution, E3G’s study found strong levels of agreement (67% of respondents) to the idea of linking the UK’s ETS (Emissions Trading Scheme) with the EU’s, with only 13% expressing a dissenting view (net agreement: +54%). The study also found that support was highest among respondents embedded within a business that already participated in the UK ETS. This is a sentiment shared by Energy UK who believe that higher and more stable carbon prices could be delivered by linking the two schemes and would see UK manufacturers exempt from the EU CBAM. Indeed, three-quarters of E3G’s respondents (75%) whose business already participates in the UK ETS stated that they agree the UK should link its ETS with the EU.
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”