The UK government has said it will implement a new carbon pricing mechanism by 2027, mirroring moves made by the EU earlier this year to start taxing carbon intensive products like iron, steel, aluminium, ceramics, glass, and others.

The charge applied will depend on the amount of carbon emitted in the production of the imported good, and the gap between the carbon price applied in the country of origin – if any – and the carbon price faced by UK producers.

Goods imported from countries with a lower or no carbon price will have to pay a levy as part of decarbonisation efforts.

“This levy will make sure carbon intensive products from overseas – like steel and ceramics – face a comparable carbon price to those produced in the UK, so that our decarbonisation efforts translate into reduction in global emissions,” said finance minister, Jeremy Hunt.

“This should give UK industry the confidence to invest in decarbonisation as the world transitions to net zero.”

The British government stated it would help reduce the risk of ‘carbon leakage’, avoiding emissions being displaced to other countries because they have a lower or no carbon price. The Carbon Border Adjustment Mechanism will work alongside the UK Emissions Trading Scheme.

The European Union launched the first phase of its own system to impose CO2 emissions tariffs on imported steel, cement, and other goods back in October this year. It will not begin collecting any CO2 emissions charges, however, until 2026.

Like the UK’s version, the EU system will target the imports of six carbon-intensive industrial sectors – iron and steel, cement, fertilisers, aluminium, electricity generation, and hydrogen.