Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps her Department has taken to ensure that the UK’s Carbon Border Adjustment reduces carbon leakage in relevant sectors.

The UK government is introducing a carbon border adjustment mechanism (CBAM) to address the risk of carbon leakage, which occurs when production and associated emissions shift from one country to another due to different levels of decarbonisation effort (for example through carbon pricing and climate regulation).

The UK CBAM will place a charge on the carbon emissions embodied in certain highly traded, carbon intensive goods imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron & steel sectors. By placing a carbon price on imported goods, the UK aims to ensure that these goods face a carbon price that is comparable to that which the goods would have faced, if they had been produced in the UK.

Therefore, the UK CBAM will ensure highly traded, carbon intensive products from overseas face a comparable carbon price to those produced here so that UK decarbonisation efforts lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas.