Association criticises Government over Carbon Border Adjustment Mechanism

Fuels Industry UK is deeply disappointed by Government’s decision to not include the refining sector in the UK Carbon Border Adjustment Mechanism (CBAM) announced today.

Trade body says the exclusion of refiners will increase carbon leakage risk.

“A well-designed carbon levy, in the form of a CBAM, is needed,” the trade body states. “To ensure importers face equivalent costs for carbon emissions as UK manufacturers, while enabling exports to compete in international markets.”

Fuels Industry UK CEO Elizabeth de Jong comments: “It is vital that Government includes the UK refining sector in the CBAM so the nation can achieve its net zero ambitions and maintain the UK’s energy security.

“The UK’s six refineries have the size and scale needed to help decarbonise UK industry. They are crucial to producing the UK’s conventional fuels as well as the low carbon liquid fuels and hydrogen the country needs to achieve its climate ambitions.

In its response to the Government’s decision, Fuels Industry UK calls for the Government to ‘seek urgently to mitigate against future carbon leakage risk’ identifying the central role for the sector ‘in enabling a Net Zero future by leading deployment of at-scale decarbonisation technologies’.

Highlighting the sector’s expertise in delivery of large scale, complex and capital-intensive projects the association goes in to suggest that, to maintain and accelerate the investment, the UK needs to be a globally competitive place to invest but that the UK is now at risk of being left behind, due to domestic disadvantages and international incentives saying: “The UK has higher carbon and energy costs than most competitor countries, poorer incentives to develop low carbon technologies, and a policy environment that does not offer sufficient investor certainty.

Increasing risk of carbon leakage

The assessment from Fuels Industry UK concludes that the risks of carbon leakage and deindustrialisation are increasing steadily.

“I am very concerned that without a CBAM, investment in refineries vital to achieve the UK’s net zero targets will go to countries with weaker climate regulations,” Elizabeth continues suggesting that this will “lead to more imports of products with a higher carbon footprint and a reduction in UK manufacturing. UK refineries could close with thousands of jobs lost and an increase in overall emissions.

“Government must include the refining sector in its further consultation on the design of the CBAM in 2024.”