UK Chancellor of the Exchequer Jeremy Hunt missed a major opportunity by not confirming a Carbon Border Adjustment Mechanism (CBAM) in his Autumn Statement this week, says trade association UK Steel.
“The country is now in danger of playing catch-up with the EU on timetables, leaving a critical, trade-exposed industry at risk,” the association observes.
A UK CBAM would ensure that imported steel pays the same carbon costs as UK steelmakers. This will prevent deindustrialisation – or carbon leakage – where high carbon costs and climate change regulations are placed on domestic producers, but not foreign producers which then export high-emission steel to the UK.
The EU will implement its own CBAM in full from 2026. Without confirming a UK CBAM, high-emission steel currently exported to the EU could be diverted to the UK, which may “completely drown” the UK steel market, UK Steel warns.
“Lack of clarity and mutual recognition between the UK and European Union CBAM policies and Emission Trading Schemes could mean new trade restrictions,” it continues. “75% of the UK steel industry’s exports – totalling 2.55 million tonnes of steel (£3.5 billion in value) – goes to European markets. Without mutual recognition and linked emission trading schemes, UK-made steel will face a financial trade barrier when trading with its biggest export market from 2026.”
In a statement sent to Kallanish, UK Steel director general Gareth Stace says: “As UK steelmakers are announcing plans for green steelmaking, a UK CBAM will be essential to these investments, making sure that low-emission, green, UK-made steel is not undercut by high-emission, imported steel, which has not faced carbon costs.”
Adam Smith Poland