British exporters could be hit with more than $1 billion in annual carbon taxes under the European Union’s Carbon Border Adjustment Mechanism (CBAM), news agency Reuters reports. This looming cost has sparked urgent calls from industry leaders for the government to fast-track carbon pricing reforms.
The EU’s CBAM, due to take full effect in January 2026, is designed to level the playing field for European companies by placing tariffs on imports of carbon-intensive goods like steel, aluminium and cement, unless the exporting nation enforces comparable climate regulations. Without a formal link to the EU’s emissions trading system (ETS), UK manufacturers will face steep charges to access the single market.
While the UK and EU announced plans in May to explore connecting their carbon markets, a timeline for implementation remains uncertain. Technical hurdles, ranging from aligning emissions caps and trading rules to reconciling market stabilization measures, mean full integration may not happen before 2028, industry experts say.
In the meantime, British businesses are warning that the lack of clarity could undermine competitiveness. “It’s probably still likely to take many years before linkage takes effect. The earliest is 2028, but it’s more likely to be 2029 or even 2030,” Ben Lee, senior emissions analyst at Energy Aspects told Reuters.
The UK is preparing its own carbon border policy to begin in 2027, but industry figures argue this will not protect them from near-term CBAM exposure. Some are calling for transitional exemptions or a rapid bilateral agreement with the EU to safeguard trade in the short term.
