UK manufacturers are to be hit with mountains of Brexit-style paperwork in January on £7bn worth of exports to the EU after the government failed to secure an expected exemption from new green taxes.
The UK had hoped to secure a carve-out by Christmas on the carbon border adjustment mechanism (CBAM), but EU commissioners have confirmed this is not going to happen.
UK Steel says the exemption is unlikely to be in place before Easter, resulting in new detailed paperwork for exporters, in a repeat of Brexit when they were hit with new paperwork on customs and standards of their goods.
The new documentation requires exporters to provide a detailed paper trail of carbon emissions generated during the manufacturing process.
It will apply to scores of products made with steel and aluminium, including washing machines and car parts, under plans Brussels unveiled on Wednesday. It will also apply to fertiliser, cement and energy exports.
While the UK privately expressed hopes of a deal before Christmas, industry insiders say that was an “ambition” that was never in the realms of political reality.
The EU only signed off the mandate on negotiations in early December, making any deal outside a high-level political agreement involving all 27 member states, some of which have little interest in the UK, impossible.
A government insider said it would now be “prudent for businesses to prepare on the basis that the EU CBAM will be in force” from January, with support and information available from the Department for Business and Trade.
Make UK, the manufacturing trade body, said the paperwork would be “extensive” and hit businesses badly.
“It is going to have significant negative impact,” said Frank Aaskov, the director of energy and climate change policy at UK Steel.
‘The paperwork is definitely significant. It will be quite a burden on SMEs [small and medium-sized enterprises].”
Aaskov said the taxes would be significant for the steel industry, set, for example, at €13 (£11) a tonne for “hot rolled wire”, a raw material for construction, fencing and engineering.
“That kind of steel costs about €650 per tonne, so it seems like a small cost, but the steel business is ruthless, with imports from China very competitive, and anything up to €5 per tonne can be the difference between getting a contract and losing a contract.”
While the taxes do not have to be paid until 2027 and could be cancelled until a potential deal next year, it adds to the nightmare the UK steel is already facing with the EU.
Under the bloc’s rules, talks will now proceed in two stages, the first a formal discussion to decide the terms of reference and the second on emissions trading systems.
Months ago the EU announced it would match Donald Trump’s tariffs on steel, doubling levies on imports from third countries such as the UK to 50%, in a decision condemned as an “existential threat” to the beleaguered British steel industry.
“We are in very good conversations with our UK friends,” the EU’s climate commissioner, Wopke Hoekstra, said at a press conference on the new rules in Strasbourg on Wednesday.
He played down the significance of the 1 January deadline, saying “the price [the UK] will be paying is actually minimum” because decarbonisation efforts in Britain were well under way.
Pressed on the UK talks, Hoekstra said negotiations on the two opposing emissions trading systems had to take place first. “This is really a matter of doing things in the right order, step by step, chiffre par chiffre, pas à pas,” he said.
A government spokesperson said: “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.”
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