Cracks in UK CBAM risk hanging UK cement out to dry

The EU’s Carbon Border Adjustment Mechanism (CBAM) is now in full swing, while the UK’s own CBAM remains almost a year away – allowing imports to bypass the bloc’s carbon taxes and enter the UK at no cost for the next 12 months. This gap between carbon border legislation in the UK and EU has left our domestic industry high and dry. Without action, there’s a real danger that domestic cement manufacturers, who are already facing a host of competitiveness challenges, risk being priced out of the market.

Exacerbating the issue, the EU has set steep default values for those importers that are unable to measure emissions data, raising the cost of sending cement to the EU and providing an incentive to divert cement away from it and towards the UK.

So, the government needs to keep a close eye on imports this year – preferably committing to transparent tracking and information sharing – and be ready to act quickly if increases occur.

While we await the introduction of the UK CBAM, we need to iron out some kinks in the armour, making sure that it’s fit for purpose when it arrives. This could act as a deterrent for those considering sending cement with potentially higher carbon content to the UK to think again.

The direct impact of indirect emissions

At present, indirect emissions are being excluded from the scope of the UK’s CBAM until January 2027– leaving domestic producers with a £30 million cost that importers can avoid.

To offset the exclusion of indirect emissions, the government continued its Energy Intensive Industries (EII) compensation for heavy industry in the UK.

There’s one problem – cement, along with hydrogen, are the only two CBAM sectors that don’t receive the support. This is despite cement meeting the current thresholds.

To solve this issue, the government urgently needs to make cement eligible for compensation to avoid output dropping further than it already has – in 2024, domestic production fell to a 75-year low.

One charge fits all approach

As it stands, the UK’s policy will apply a single charge to each CBAM sector, making no distinction between the different products under each umbrella, whose embodied carbon and trade exposure vary significantly. If the charge isn’t set correctly, it won’t match the cost paid by domestic producers or the prices paid by importers to the EU, meaning the UK CBAM simply won’t work.

The government should use 2026 as a trial run period, continuing to collaborate with the industry, so it can ensure its rate setting methodology works.

The damage of default values

The government’s plan to use default values if verified emissions aren’t available, based on a global average, is another major concern. By definition, this will allow half of imports to underpay for the embodied carbon of their products, and given the high defaults applied by the EU CBAM, the playing field won’t be levelled, and there will be little incentive for importers to measure, report or reduce their carbon impact.

It’s within the government’s gift to follow the EU’s lead and align with EU CBAM default factors which include a mark up that prevents underreporting.

A choice to be made

When it comes to CBAM and EII compensation, the government needs to make a choice. It can either plug the gaps in its plans or leave the cement sector exposed to competitors not paying the same costs. Doing the latter will jeopardise well paid, highly skilled jobs and an industry that has sustained regional communities and underpinned the backbone of the country’s infrastructure for decades. However, with the right tweaks made to the CBAM policy and EII compensation reinstated, the cement industry will have the support it needs to play its part in helping Britain build and the government reach its ambitions.

By Diana Casey, executive director, energy and climate change, cement and lime at the MPA