UK Floats Carbon Tax While United States Wants Exemption From Similar EU Levy

The United Kingdom’s government announced last week that it will begin 12 weeks of consultations regarding whether to impose penalties on global producers of iron and steel, aluminum, cement, fertilizers, electricity, hydrogen, and of some chemicals if their production mechanisms harm the environment.

According to Reuters, one option UK leaders will consider is a carbon border adjustment mechanism (CBAM), or tax, that would be applied on imports. The amount of the tax would reflect both the carbon emitted in their production along with any gap between the carbon price already applied in the country of origin and the price in the UK.

Other measures policymakers could consider include a standards requirement on emissions caused by imported products or demand-side policies, such as public procurement initiatives to expand markets for lower-carbon products. Policymakers are considering the measures in response to concerns that investment could move to the United States after U.S. lawmakers approved legislation last year that incentivizes development of green industry.

In related news: The U.S. government asked the European Union (EU) to exempt U.S. operations from its carbon border levy. As noted above and as Aluminum Insider explained last week, the EU will assess a carbon price on some imported goods to offset the expense to EU companies for producing their goods with fewer carbon emissions. As a result, imported aluminum, steel, cement, and fertilizers, and steel will begin reporting their carbon footprint to the EU this fall, and imports will be assessed a tariff based on that number.

The U.S. request is unlikely to be approved, Aluminum Insider said, since the EU’s regulations make such an agreement all but impossible and an agreement of that nature also runs counter to World Trade Organization rules.