In the News

UK to introduce a Carbon Border Tax in 2027

Geoff Riley

18th December 2023

A key environmental intervention is set to come into force in 2027, a year later than the planned EU carbon border tax which will start in 2026. The news is reported here in the Guardian.

According to HM Treasury, imports of iron, steel, aluminium, ceramics and cement from overseas will face a comparable carbon price to those goods produced in the UK. A carbon border tax reduces the risk of ‘carbon leakage’, avoiding emissions being displaced to other countries because they have a lower or no carbon price

A carbon border tax (also known as a carbon border adjustment mechanism) is a proposed tax on goods imported into a country, based on the amount of carbon emitted during their production. The idea is that this tax would discourage the production and consumption of goods with high carbon footprints, and encourage more sustainable production methods. The tax would be applied to imports from countries that don't have equivalent carbon pricing policies in place, so as to avoid "carbon leakage" - where manufacturers shift their production to countries with less stringent environmental regulations to avoid carbon pricing. The goal is to level the playing field and ensure that all countries are taking action to reduce their carbon emissions. It's an interesting idea, but it's also a pretty complex one, with a lot of details to be worked out in terms of how it would be implemented and enforced.

The new carbon border tax is designed to work alongside the UK's Emissions Trading Scheme (ETS)

Here is now the EU scheme is designed

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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