The United Kingdom’s Strategy for Carbon Border Adjustment in a Changing Global Landscape

The United Kingdom plans to introduce a Carbon Border Adjustment Mechanism (CBAM) in 2027 to prevent carbon leakage as free allowances under its Emissions Trading System (ETS) are phased out. While similar to the EU CBAM, the UK version will cover ceramics and glass but exclude electricity, and it will lack a transition period. The report highlights risks including potential trade diversion, administrative burdens for exporters, and diplomatic tensions with developing nations who view such measures as 'environmental colonialism'. It suggests that the UK would benefit from mirroring the EU's reporting systems and exploring the linkage of their respective ETSs to reduce bureaucratic friction and economic risk.

• The United Kingdom government intends to implement its own CBAM starting in 2027, covering iron, steel, aluminum, fertilizer, hydrogen, ceramics, glass, and cement.
• The UK CBAM differs from the EU CBAM by including ceramics and glass while excluding imported electricity, and it will enter operation without a transition period.
• The UK's proposed CBAM model is operationally more complex than the EU's because it uses seven sector-specific rates based on the ETS price rather than a single prevailing ETS price.
• Divergence between UK and EU carbon prices could result in significant revenue loss for the UK, with estimates suggesting UK businesses could pay the EU over half a billion pounds annually based on 2023 price differentials.
• The EU CBAM may negatively impact UK electricity exports because it applies a carbon charge based on the emissions intensity of the entire grid, meaning even zero-carbon producers like nuclear and offshore wind must pay the levy.
• There is significant uncertainty regarding the application of the EU CBAM in Northern Ireland, which has been described as a 'political time bomb' due to the region's integration with the Republic of Ireland and the Windsor Framework.
• The UK government plans to direct CBAM revenues into general funds (the Consolidated Fund) rather than hypothecating them for energy transition support or aid for developing countries.
• Developing countries and groups like the BASIC group (Brazil, South Africa, India, and China) oppose BCAs, arguing they violate the Paris Agreement's principle of Common But Differentiated Responsibilities (CBDR).
• The report recommends that the UK and EU reconsider linking their Emissions Trading Systems (ETS) to eliminate the need for separate carbon reporting in trade between the two countries.

APA

Aylett, C., Froggatt, A., & Xie, C. (2024). The United Kingdom’s Strategy for Carbon Border Adjustment in a Changing Global Landscape. International Institute for Sustainable Development. https://www.iisd.org/system/files/2024-07/border-carbon-adjustments-united-kingdom.pdf

Chicago

Aylett, Chris, Antony Froggatt, and Chengkai Xie. The United Kingdom’s Strategy for Carbon Border Adjustment in a Changing Global Landscape. International Institute for Sustainable Development, 2024. https://www.iisd.org/system/files/2024-07/border-carbon-adjustments-united-kingdom.pdf.

Wikipedia

{{cite report |last1=Aylett |first1=Chris |last2=Froggatt |first2=Antony |last3=Xie |first3=Chengkai |title=The United Kingdom’s Strategy for Carbon Border Adjustment in a Changing Global Landscape |publisher=International Institute for Sustainable Development |date=July 2024 |url=https://www.iisd.org/system/files/2024-07/border-carbon-adjustments-united-kingdom.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aylett2024united, author = {Aylett, Chris and Froggatt, Antony and Xie, Chengkai}, title = {{The United Kingdom’s Strategy for Carbon Border Adjustment in a Changing Global Landscape}}, institution = {International Institute for Sustainable Development}, year = {2024}, month = jul, url = {https://www.iisd.org/system/files/2024-07/border-carbon-adjustments-united-kingdom.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }