UK Steel welcomes Government consultation on Carbon Border Adjustment Mechanism

30 March 2023

Commenting on today’s announcement that the Government is consulting on a UK Carbon Border Adjustment Mechanism (CBAM) and other carbon leakage measures -

UK Steel Director General, Gareth Stace, said:

“The vast majority of the world’s steel producers face no carbon costs, whereas UK steel producers faced an estimated £120m last year in carbon costs, dealing a damaging punch to our competitive position. We need a level playing field where imported and domestically produced steel face similar carbon costs, and a Carbon Border Adjustment Mechanism (CBAM) can deliver just that.“

"As the UK steel industry moves in its transition to green steel production, it is essential that it will not be continually outcompeted by high emission, imported steel. Europe is implementing its own CBAM, and the UK risks a damaging trade barrier with our biggest trade partner if we don’t quickly develop and implement our own measures. Failure to do so, could mean steel made here in the UK is blocked from being sold into the EU.“

"For over 20 years, our industry has been damaged by carbon leakage because our global competitors did not and do not pay carbon costs. This has, year after year, chipped away at our competitiveness and resulted in the UK producing less than half the tonnes of steel we did 20 years ago. The UK has been too slow to react on carbon leakage, so implementing a UK CBAM alongside other carbon leakage measures can put this right, and the Government must urgently act to inject a competitive boast so we can compete in a fierce global steel market.”

Notes:

• The UK steel industry is very trade- and carbon-intensive, putting it at significant risk of carbon leakage.
• The sector’s vulnerability to high carbon pricing means that the current UK Emission Trading Scheme and carbon pricing policies are harming the industry and its ability to operate in the UK.
• It is estimated that the industry faced UK Emissions Trading Scheme (UK ETS) compliance costs of £120m in 2022, compared to the annual capital investment for the sector of £200m. The costs will erode the thin margins UK producers operate with and are so substantial that companies consider them an existential threat to their ability to operate in the UK.
• A Carbon Border Adjustment Mechanism (CBAM) policy offers the opportunity to provide a level playing field between imported steel and domestically produced steel in terms of carbon pricing while also creating an incentive to decarbonise production.
• Europe is rapidly introducing its own CBAM policy, which threatens the UK steel industry by introducing potential trade barriers and diverting trade towards the UK, which could profoundly damage the domestic industry.
• The UK imports about 2.6 million tonnes of steel (40% of imports) from countries that do not face comparable carbon costs.
• The Government has today launched a consultation on addressing carbon leakage risk to support decarbonisation

About UK Steel: UK Steel is the trade association for the UK steel industry. It represents all the country’s steelmakers and most of downstream steel processors. 

The UK Steel sector:

• Produces 7.2Mt of crude steel a year, around 70% of the UK’s annual requirement (annual demand of 10.5Mt)
• Employs 34,500 people directly in the UK and supports a further 43,000 in supply chains
• The median steel sector salary is £37,629, 45% higher than the UK national median and 59% higher than the regional median in Wales, and Yorkshire & Humberside, where its jobs are concentrated
• Directly contributes £2.4 billion to UK GDP and supports a further £3.1 billion
• Directly contributes £2.4 billion to the UK’s balance of trade
• 96% of steel used in construction and infrastructure in the UK is recovered and recycled to be used again and again.