Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps her Department plans to take to help ensure that the carbon border adjustment mechanism will support a reduction in carbon leakage in all the sectors in scope of the legislation.

The carbon border adjustment mechanism (CBAM) will be introduced on 1 January 2027 to address the risk of carbon leakage.

Carbon leakage occurs when production and associated emissions shift from one country to another due to different levels of decarbonisation effort, for example, as a result of carbon pricing and climate regulation.

The CBAM will place a carbon price on specific industrial goods imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron & steel sectors that are at risk of carbon leakage, to ensure they face a comparable carbon price to those produced in the UK.

This will support UK decarbonisation efforts to lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas, and give industry confidence to invest in the UK knowing their decarbonisation efforts will not be undermined.