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UK Steel sees ‘missed opportunity’ as government doesn’t roll out carbon border policy

The statement, one of two yearly in which the UK government lays out its economic and tax plans, only confirmed that the government “has undertaken extensive consultation on possible measures to mitigate carbon leakage risk including introducing a carbon border adjustment mechanism and will publish its response shortly,” without mentioning a timeline.

“With over 90% of global steel production facing no carbon cost, it is only right to introduce a carbon border policy to create a level playing field on carbon pricing,” UK Steel Director General Gareth Stace said. “It is a missed opportunity not to set out the government’s plans for its own carbon border policy.”

Stace said the country is now in danger of falling behind the EU timetable, leaving a critical trade-exposed industry at risk.

“As UK steelmakers are announcing plans for green steelmaking, a UK CBAM will be essential to these investments, making sure that low-emission, green, UK-made steel is not undercut by high-emission imported steel, which has not faced carbon costs,” he said. “Delaying the confirmation of a UK carbon border policy will risk the UK playing catch-up with the EU on timetables.”

A UK CBAM would create a level playing field on carbon pricing, ensuring that imported steel pays the same carbon costs as UK steelmakers, and it is key to prevent carbon leakage.

The European Union plans to implement its CBAM policy by 2026, and the UK steel association was pushing to have a similar one mirroring the EC one because “without its own one, the high-emission steel currently exported to the EU could be diverted to the UK,” the association said.

Also, according to UK Steel, “the lack of clarity and mutual recognition between the UK and European Union CBAM policies and Emission Trading Schemes could mean new trade restrictions.”

UK producers will need to comply with the EU CBAM regulation, resulting in a trade barrier to the country’s biggest export market. In 2022, the UK exported 3,399,485 mt of steel, of which 2,550,312 mt went to EU member states, constituting three-quarters of exports.

The UK produces 6 million mt of crude steel a year, around 70% of the UK’s annual requirement. Together with the EU, Canada and New Zealand, it applies comparable carbon pricing (GBP30-70/tCO2e), responsible for 155 million mt of steel, or 8.2% of global steel production in 2022, UK Steel data showed.

Author Annalisa Villa