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The UK, after the EU, would be the second financial system to implement CBAM. It calls the mechanism because the import carbon pricing mechanism. The CBAM will initially concentrate on sectors like iron, metal, aluminum, fertilizer, hydrogen, ceramics, glass, and cement.
“The tax will likely be calculated primarily based on the estimated carbon emissions concerned within the manufacturing of those imported items. Nations with carbon pricing schemes equal to the UK’s will likely be exempt from this tax,” mentioned Ajay Srivastava, co-founder, World Commerce Analysis Initiative (GTRI).
For the EU, the tax vary is 20-35%. Each the UK and the EU have carried out emissions buying and selling techniques (ETS) to cap and cut back greenhouse fuel emissions. These techniques work by setting a restrict on the whole quantity of carbon dioxide emissions allowed after which issuing permits to emitters. Corporations should buy permits for every ton of carbon dioxide they emit, and the worth of those permits is decided by provide and demand.
The primary purpose of UK CBAM is to make sure that imports are topic to the identical charge of carbon tax because the UK producers pay by way of UK’s ETS.
Srivastava mentioned that the UK CBAM will result in a rise in costs in UK as a result of increased prices of imported items. Nonetheless, costly imports could assist native manufacturing and funding in low-carbon applied sciences.Whereas the UK CBAM follows the EU mannequin, the UK can be contemplating implementing voluntary product requirements and creating a framework to measure the carbon content material of products. These initiatives are geared toward selling low-carbon merchandise and supporting different decarbonization insurance policies.
