Industry reacts to Government plans for new UK carbon pricing levy

News that the UK Government is to introduce a new UK carbon pricing levy by 2027 on imports of carbon-intensive goods has met with a chilly reaction from KBB industry bodies.

Following a period of consultation on addressing carbon leakage that ran between March 30 and June 22 this year, the Treasury announced yesterday a new Carbon Border Adjustment Mechanism (CBAM), which will apply a levy to imports of ceramics, iron, steel and aluminium goods from counties that have a lower, or no, carbon price, in order to ensure that level the playing field and ensure that they face a comparable carbon price to goods produced in the UK.

The new rules are meant to tackle the problem of ‘carbon leakage’, reducing the risk of production and associated emissions being displaced to other countries because they have a lower or no carbon price, such as under an emissions trading scheme (ETS) or a carbon tax.

The charge will be based on the amount of carbon emitted in the production of the imported goods and the gap between the carbon price in the country of origin and that faced by UK manufacturers.

Ceramics industry association Ceramics UK – formerly the British Ceramic Federation ­­– believes that the levy will in practice only serve to increase the administrative burden and cost for UK manufacturers, as high-carbon countries such as India and China are believed already to have identified loopholes to get around any proposed CBAM.

Rob Felio, chief executive of trade body Ceramics UK, believes that the CBAM is not the right solution. He said: “While it is good to see the UK Government finally accepting that unfair imports are damaging both domestic industry and resulting in higher global carbon emissions, a CBAM is almost certainly not the answer.”

Felio added: “A system of identifying high-carbon countries and imposing suitable tariffs on them is much more likely to address the problem without burdening UK manufacturers for no gain.”

Commenting on the announcement, Tom Reynolds, chief executive of The Bathroom Manufacturers Association, said: “Different countries have different approaches to decarbonising their industries. It is really important that, despite these differences, there is a level playing field globally, otherwise we could see a wholesale loss of manufacturing to the countries with the weakest industrial decarbonisation rules.

“Today’s announcement about a UK carbon border adjustment mechanism (CBAM) is the Government’s attempt at creating a level playing field in the UK marketplace. It’s not a surprise, as the EU has recently introduced a very similar system. Some industrial groups are worried that both the UK and EU CBAM will fail in its mission, and in fact only add administration burdens to domestic manufacturers.”

Commenting on others manufacturing sectors affected by the CBAM, Reynolds added: “Although imports of finished taps and showers are not covered by the EU’s CBAM, European-based brassware manufacturers are already grappling with more paperwork for imported materials covered by the scheme.

“The few companies manufacturing brassware in the UK may need to prepare for a similar burden once the UK scheme comes on line. It also looks like imported ceramic sanitaryware will be covered by UK CBAM from the very start. We’ll know more when further details are published next year.”

Reynolds concluded: “BMA is working closely with allied industrial groups to understand the implications for bathroom manufacturers and to encourage a pragmatic approach from Government.”

For more information on the CBAM, visit the website.

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