the UK Carbon Border Adjustment Mechanism: a Framework

The implementation of a UK CBAM is a crucial step toward improving the competitiveness and sustainability of the steel industry amid the challenges posed by carbon pricing differentials.

UK Steel is firing the starting gun on the UK CBAM and sets out how the Government can ensure robust carbon leakage protection and create a level playing field on carbon costs.

What is the UK CBAM?

Creating a level playing field for all steel

A Carbon Border Adjustment Mechanism (CBAM) creates a level playing field by applying carbon prices at the border that are equivalent to those faced by domestic producers.

The EU is implementing a CBAM policy

The European Union is implementing a CBAM policy, initially phasing in reporting requirements from October 2023 before the CBAM compliance carbon costs apply from 2026 onwards.

Steel could flood the UK market

If the UK CBAM policy is not designed correctly, we will see steel flooding into the UK, displaced from the EU, that didn't face a carbon price and therefore undercuts our domestic market with high-emission steel, making a mockery of the Government's Net Zero ambition.

What does a CBAM do?
  • CBAM aims to prevent carbon leakage, where higher national carbon prices increase domestic production costs, leading to high-emission, cheap, imported steel outcompeting and replacing domestic steel supply.
  • A CBAM policy will support the decarbonisation of steel production, allowing steelmakers to produce low-emission steel without being outcompeted by high-emission, imported steel.

European and UK steelmakers face higher carbon prices than any other part of the world

Who currently pays carbon costs?

Only the UK, EU, Canada, and New Zealand apply comparable carbon pricing (£30-£70/tCO2e), responsible for 155 million tonnes of steel or 8.2% of global steel production in 2022.

Do any other countries pay similar levels?

Japan and South Korea apply carbon pricing of around £10/tCO2e and produce 155 million tonnes of steel or 8.2% of global steel production in 2022.

Nearly 92% of the world doesn't pay carbon costs?

The rest of the world either applies carbon pricing of less than £3/tCO2 or no carbon pricing at all. This means that 91.8% of global steel production does not face carbon pricing comparable to the UK, if at all.