Carbon Emissions: Taxation
The question
To ask the Chancellor of the Exchequer, when her Department plans to publish its response to proposals submitted by the fuels sector on the inclusion of refined oil products in the scope of the UK Carbon Border Adjustment Mechanism.
Answered by Dan Tomlinson
From 2027, the Carbon Border Adjustment Mechanism (CBAM) will apply to imported goods from the aluminium, cement, fertiliser, hydrogen, and iron & steel sectors. When considering which sectors should be included in the scope of the CBAM, the government looked primarily at three factors: inclusion in the UK Emissions Trading Scheme (ETS), carbon leakage risk, and feasibility and effectiveness of applying the CBAM.
Whilst the refining of fuel is within scope of the UK ETS and is considered at risk of carbon leakage, there are concerns about the sector’s ability to ascertain the carbon content of imported goods at a product level due to high levels of co-production in the sector. Therefore, refined oil products will not be included in the scope of the CBAM from January 2027.
The sectoral scope of the CBAM will be kept under review beyond 2027 as new evidence comes to light to reflect methodological and technological advances.
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