UK Carbon Border Adjustment Mechanism Fact Sheet

 Agile Advisors is where we work as a CBAM, the government has confirmed that it will adopt a UK CBAM by 2027. It has released a summary of comments and government response to the consultation, following rigorous study and careful assessment of the potential ramifications. The intensity of greenhouse gas emissions from the imported good and the difference (if any) between the carbon price in the country of origin and the carbon price that would have been applied had the good been made in the UK will determine the obligation imposed by the CBAM. Based on the emissions included in imported goods, the importer of products falling under the UK CBAM's purview shall be directly liable for CBAM obligation. Emissions certificates will not be traded or purchased under this scheme.

 

In our capacity as Agile Advisors' CBAM regulations, in 2024, a consultation will be held on further specifics regarding the design and implementation of a UK Camtho UK CBAM will apply a carbon price to some of the most emissions-intensive industrial items imported into the UK from the aluminum, cement, ceramics, fertilizer, glass, hydrogen, iron, and steel sectors. Additional details, such as the exact list of products included in the scope, will be discussed in 2024 during consultations. For example, when fuels are used on-site during manufacturing or other processes, the people making the product have direct control over these emissions. Emissions falling under scope two pertain to the amount of power, heat, steam, and cooling an organization purchase. Indirect emissions are not within the direct control of a product's maker.

For your benefit as an Agile Advisors Carbon Border Adjustment Mechanism, Scope 3 covers other emissions generated as a result of an organization's activity and occurring at sources that the organization does not own or control. It also includes indirect emissions produced either upstream or downstream, such as when finished items are transported by air by following entities or when precursor commodities are produced by a different producer in the supply chain. To achieve equivalent coverage with the UK Emissions Trading Scheme, the UK CBAM will apply to Scope 1 and 2 and select precursor product emissions embedded in imported items. These often come in the form of a carbon tax with a set price or an emissions trading plan with a price determined by the market.

 

As an CBAM, the amount that producers pay after deducting the effects of free allowances and other support programs is known as the effective carbon price. To account for domestic free allowances, the UK CBAM will apply an effective carbon price to imports that are substantially lower than the headline explicit UK ETS price. Because of how the UK CBAM is set up, commodities in other nations with their own explicit carbon pricing will have their CBAM responsibility adjusted correspondingly. As a result, the price that a CBAM applies will be determined by considering the specific carbon price difference between the UK and the nation where the products were manufactured. The government will hold more thorough consultations over the standards by which the UK CBAM will accept carbon prices from other parts of the world.

In our understanding as CBAM regulations, The UK ETS prices domestic producers' greenhouse gas emissions. It uses a cap-and-trade mechanism, meaning the market sets allowance prices. The program caps total carbon emissions and reduces allowances over time to encourage decarbonization. In doing so, it preserves the economic incentive for decarbonization and the emissions cap across all ETS sectors while lowering exposure to the carbon price for operators that receive free allowances. In July of this year, the UK ETS Authority declared that in keeping with the country's net zero goals, the amount of ETS allowances that could be purchased from the government would decrease by 45% between 2023 and 2027. This move would put the UK ETS on a consistent path toward net zero.