man wearing welding helmet welding metal near gray brick wall

UK Steel Industry Faces Carbon Tax Threat in EU Trade

The UK steel industry finds itself at risk of encountering a new hurdle in its trade relationship with the European Union (EU) due to potential carbon emissions fees. These fees, associated with the Carbon Border Adjustment Mechanism (CBAM), could amplify post-Brexit trade barriers for the United Kingdom.

The CBAM proposes the imposition of supplementary charges on imports of high-carbon commodities such as steel and cement from nations that uphold less rigorous carbon regulations, including the UK. Despite the anticipated minimal tax magnitude, this move could compound challenges for the UK, which has consistently emphasized the trade benefits following Brexit.

Designed as a safeguard against companies shifting operations to countries with lenient climate policies, the CBAM aims to exert an added level of control on importers.

Candido Garcia Molineux, a solicitor at Covington & Burling, cautioned, “If the EU remains the primary export market for UK steel, it might indicate a significant misstep by the government.

“In the preceding year, the UK dispatched approximately £5.6 billion ($7.2 billion) worth of steel to the EU, constituting three-quarters of its total metal exports.

Bloomberg NEF (BNEF) has projected that under full CBAM implementation, the EU’s carbon tax could ascend to roughly €166 million ($181 million) annually. This projection hinges on the UK’s carbon price, which currently stands approximately 20% lower than that of the EU. Presently, the UK’s carbon price is nearly 35% lower.

Citigroup’s recent analysis revealed that British carbon emissions futures are presently priced at roughly £49/tonne, a figure that might see a decline to £22 in the foreseeable future.

As the UK navigates post-Brexit trade dynamics amid increasing global emphasis on carbon emissions reduction, the potential ramifications of the CBAM underscore the intricate challenges at the intersection of trade and environmental commitments.

Leave a Reply

%d bloggers like this: