Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of the introduction of CBAM in January 2027 on defence imports.

The UK government is introducing a carbon border adjustment mechanism (CBAM) on 1 January 2027 to address the risk of carbon leakage. The UK CBAM is a new tax which will ensure that highly traded, carbon intensive goods which are imported from overseas face a comparable carbon price to what is paid by manufacturers producing the same goods in the UK.

The CBAM will only initially be applied to specific imports from a small number of production sectors (aluminium, cement, fertiliser, hydrogen and iron & steel) at risk of carbon leakage. This encompasses less than 3% of total UK imports.

A draft tax information and impact note is publicly available at the following link: https://www.gov.uk/government/consultations/draft-legislation-carbon-border-adjustment-mechanism/draft-tax-information-and-impact-note