The £800 Million Carbon Tax Countdown: What UK Businesses Need to Know
Why the EU’s Carbon Border Tax Could Hit Your Bottom Line—and What to Do About It
Starting January 2026, UK businesses could face up to £800 million annually in costs due to the EU’s Carbon Border Adjustment Mechanism (CBAM), a levy on carbon-intensive imports into the EU. This development arises as the UK and EU work towards linking their carbon emissions trading systems (ETS), a process fraught with technical and bureaucratic challenges that may delay implementation until 2028 or later.
Industries such as steel, cement, and aluminium are particularly vulnerable, as they may be required to purchase EU carbon permits unless a linkage is established. While the UK plans to introduce its own carbon border tariff in 2027, this may not align with EU measures, potentially leading to competitive disadvantages and increased costs for exporters.
What Can Businesses Do Now?
- Assess Exposure: Identify products and supply chains that may be affected by CBAM.
- Engage in Dialogue: Communicate with industry groups and policymakers to advocate for timely solutions.
- Plan Strategically: Consider the financial implications and explore options to mitigate potential costs.
Proactive planning is essential to navigate the impending changes. By understanding the potential impacts and preparing accordingly, businesses can better position themselves to manage risks associated with the EU’s carbon border tax.