The EU CBAM: Exposure for UK ETS Covered Industry

The EU CBAM will soon require importers to pay for their embedded emissions. With products to the EU making up the majority of the exports under CBAM sectors, UK industry’s exposure to the import levy will depend on the design of their own ETS. Currently the price gap between the EU and UK systems provides appx. EUR 20/t exposure, though this may narrow as UK reform processes conclude. Continued free allocation to UK installations may add CBAM exposure to exporters – costs that the proposed UK CBAM and changes to free allocation are unlikely to fully mitigate.