ICAEW.com works better with JavaScript enabled.


Government publishes consultation on addressing carbon leakage


Published: 14 Apr 2023 Update History

The consultation by HM Treasury and the Department for Energy Security and Net Zero includes proposals for a UK carbon border adjustment mechanism.

On 30 March 2023, the UK government launched a consultation on addressing carbon leakage risk to support decarbonisation. Carbon leakage refers to businesses moving their operations overseas to countries with less stringent carbon emissions regulations. 

The consultation aims to gather feedback on the government's proposed measures to tackle the risk of carbon leakage. This includes the introduction of a carbon border adjustment mechanism (CBAM) and a carbon pricing regime. The CBAM would impose tariffs on imported goods based on their carbon footprint. The carbon pricing regime would place a price on carbon emissions. 

These measures may have a significant impact on businesses, particularly those in high-emitting sectors such as steel, cement and chemicals. The consultation seeks feedback on how these measures can be implemented in a way that minimises the impact on businesses and ensures a level playing field. 

The consultation also considers the possible introduction of a carbon credit scheme, which would reward companies for reducing their emissions below a certain threshold. The scheme would provide an incentive for companies to invest in low-carbon technologies. 

The UK government's proposals are part of an international trend towards addressing the risk of carbon leakage. The European Union is implementing a CBAM, which will begin to come into force on 1 October 2023. Other countries are considering similar measures.  

The government is seeking feedback from a wide range of stakeholders, including businesses, industry bodies, non-governmental organisations with an interest in trade, and academics, to ensure that its proposals are robust and effective. The consultation will run until 22 June 2023.  

ICAEW’s Tax Faculty intends to respond to the consultation. It welcomes views from members. If you have comments, please contact Ed Saltmarsh by 22 May. 

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter

Practical guidance

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.