Question to the HM Treasury:

To ask the Chancellor of the Exchequer, with reference to paragraph 5.81 of the Autumn Budget 2024, published on 30 October, what assessment she has made of the potential impact of the carbon border adjustment mechanism on the cost of imported fertiliser.

The government will introduce the UK Carbon Border Adjustment Mechanism (CBAM) on 1 January 2027, as first announced in December 2023.

The UK CBAM will ensure highly traded, carbon intensive products from overseas face a comparable carbon price to those produced here, making sure that UK decarbonisation efforts lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas.

UK manufacturers already face a carbon price via the UK Emissions Trading Scheme (ETS). The UK CBAM rate that is charged on imports will reflect the final carbon price paid by domestic industries after support mechanisms (such as free allowances within the UK ETS) have been taken into account. As a result, we expect initial liabilities arising from the UK CBAM to be modest whilst encouraging the supply and use of fertiliser with lower levels of embodied carbon than would otherwise have been the case.

The Government expects that there will be no material impact on UK food prices, as a result of the UK CBAM.

Over the course of the last year, His Majesty’s Treasury and His Majesty’s Revenue and Customs have undertaken significant and comprehensive engagement on the design and implementation of the UK CBAM. This includes discussions with stakeholders in the farming and fertiliser sectors.

The Government Response to the recent consultation on the introduction of a UK CBAM, including a summary of responses, can be found at: https://www.gov.uk/government/consultations/consultation-on-the-introduction-of-a-uk-carbon-border-adjustment-mechanism