- Carbon leakage is the movement of production and associated emissions from one country to another due to different levels of decarbonization effort through carbon pricing and climate regulation. This can undermine efforts to reduce global emissions and limit global warming.
- The UK is introducing a Carbon Border Adjustment Mechanism (CBAM) by 2027, which will place a carbon price on emissions-intensive industrial goods imported to the UK.
- The CBAM will apply to Scope 1, Scope 2, and select precursor product emissions embodied in imported products to ensure comparable coverage with the UK Emissions Trading Scheme.
- The UK CBAM will apply an effective carbon price to imports, which will be significantly lower than the explicit UK ETS price, to reflect domestic free allowances.
- The UK CBAM is designed to adjust the liability on goods based on the explicit carbon price differential between the UK and the country of origin.
- The government will consult on the criteria for carbon prices elsewhere in the world to be recognized by the UK CBAM.
Source gov.uk
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