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UK to propose carbon border tax as part of aid package for steel industry

by SuperiorInvest

The UK is to propose a carbon border tax that would impose a tax on imported steel as part of a A £600 million support package to help Britain’s two biggest steelmakers invest in greener technologies and prevent thousands of job losses.

Jeremy Hunt, the chancellor, has agreed to consult on ways to level the playing field for British Steel and Tata Steel UK compared to competitors based in regions with lower environmental standards or lower operating costs.

One option will be to introduce a Carbon Boundary Adjustment Mechanism (CBAM) similar to this agreed by the EU last year, it will force importers to cover the cost of foreign steel’s carbon emissions, two people familiar with the situation said.

The government has previously signaled it would consult on the introduction of such a mechanism, but has not specifically linked it to taxpayer support for the industry.

Hunt also agreed to offer bespoke help to the steel industry for its electricity bills on top of what the Treasury announced for the industry earlier this month, the same people confirmed. The aid will include compensation for a range of existing charges to help reduce the electricity price differential faced by UK steelmakers versus European competitors.

Ministers hope the package will be enough to encourage the two companies, which jointly run Britain’s four remaining blast furnaces, to invest in lower-carbon electric arc furnaces. These would recycle the large amount of scrap steel that the UK produces and could be powered by electricity from renewable sources.

More than 4,000 jobs are at stake at Tata Steel’s Port Talbot plant in Wales and another 4,000 at British Steel, most of them at the Scunthorpe plant, with thousands more at risk in the supply chain.

Jingye, the Chinese owner of British Steel, has warned it will be forced to close one of its two blast furnaces and import steel from China to be processed at the company’s UK plants unless it receives government aid.

But industry executives warned on Monday that the £600m of grant funding was less than expected. Together, the two companies have applied for up to £2 billion in government support, according to one person familiar with the situation. Analysts estimate that decarbonising Port Talbot alone could cost between £2bn and £3bn.

Alun Davies, national director of the Community Steelworkers’ Union, said the announced £600m offer was “a step in the right direction” and called on the government and employers to “agree a package that will protect our vital industry”.

The steel sector is the UK’s biggest industrial producer of carbon dioxide and the Climate Change Committee, the government’s independent advisory group, has said emissions must be “close to zero” by 2035 if the government is to meet its commitment for the UK to reach net zero by the year 2050.

The Commerce Department declined to comment on the details of the support package, but said the government “recognizes the vital role that steel plays in the UK economy, supporting local jobs and economic growth, and is committed to ensuring a sustainable and competitive future for British steel.” sector”.

“The Business Secretary considers the success of the steel sector a priority and continues to work closely with industry to achieve this.”

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