British steel and manufacturing exporters are bracing for a fresh wave of complex, Brexit-style bureaucracy from January, after the UK government failed to secure a crucial exemption from the European Union's new green levy system.
Exemption Hopes Dashed, Paperwork Mountain Looms
The UK had been pushing for a carve-out from the EU's Carbon Border Adjustment Mechanism (CBAM) by Christmas. However, EU commissioners have now confirmed this will not happen, with industry body UK Steel stating an exemption is unlikely before Easter at the earliest.
This failure means that from 1 January, UK companies exporting around £7bn worth of goods to the bloc will be required to complete extensive new documentation. The paperwork demands a detailed record of carbon emissions produced during the manufacturing process.
The rules will apply to a wide range of products made from steel and aluminium, such as car parts and washing machines, as well as fertiliser, cement, and energy exports. A government insider has advised it is now "prudent for businesses to prepare" for the CBAM to be in force.
Industry Warns of 'Ruthless' Competitive Threat
Trade groups have reacted with alarm. Make UK warned the paperwork would be "extensive" and damaging. Frank Aaskov, energy and climate change policy director at UK Steel, was blunt about the consequences.
"It is going to have a significant negative impact," Aaskov said. "The paperwork is definitely significant. It will be quite a burden on SMEs."
He illustrated the financial threat using the example of hot-rolled wire, a steel product used in construction. The CBAM tax on this would be around €13 (£11) per tonne. While this may seem small against a price of €650 per tonne, Aaskov stressed the steel market is "ruthless", where a difference of just €5 can decide who wins a contract.
A Complex Path to a Potential Deal
Although the actual tax payments are not due until 2027 and could be cancelled if a deal is struck next year, the immediate administrative burden is another blow for UK industry. It compounds existing tensions, including the EU's recent move to match US tariffs and double levies on UK steel imports to 50%.
EU Climate Commissioner Wopke Hoekstra sought to downplay the 1 January deadline, stating the immediate financial cost to the UK would be "minimum" due to its decarbonisation progress. However, he explained that formal negotiations must follow a two-stage process, first aligning the UK and EU emissions trading systems.
A UK government spokesperson reiterated: "Our priority remains securing a carbon linking agreement as soon as possible, which would save UK industry from paying the charge on £7bn worth of UK exports." For now, British manufacturers must gear up for another arduous round of cross-border paperwork.
