Department for Business and Trade Advises UK Exporters to Prepare for EU Carbon Rules

The Department for Business and Trade is urging British exporters to prepare for compliance with European Union carbon border documentation requirements after the government’s attempt to secure a pre-Christmas exemption proved unsuccessful. Government insiders are advising businesses to adopt a prudent approach and ready themselves for the carbon border adjustment mechanism’s implementation from January, with support and guidance available from the department.
The mechanism requires comprehensive carbon emission documentation throughout manufacturing processes, affecting approximately £7 billion in UK exports to the EU. Products subject to these requirements span numerous categories including steel and aluminium goods, washing machines, car parts, fertilizer, cement, and energy. Brussels has confirmed the anticipated carve-out will not be implemented by year-end, with industry sources predicting no relief until at least Easter 2025.
The unsuccessful negotiation reflects political realities within the European Union. The negotiation mandate received approval only in early December, making any rapid agreement impossible without comprehensive political coordination across all 27 member states—many with varying degrees of interest in UK-specific trade arrangements. Manufacturing trade body Make UK has characterized the forthcoming paperwork as “extensive” and warned of significant impacts on businesses, particularly smaller operations with limited administrative resources.
Industry representatives have highlighted serious concerns about both the administrative burden and competitive implications. UK Steel’s Frank Aaskov describes the situation as having a “significant negative impact” on the industry, with documentation representing “quite a burden” especially for small and medium-sized enterprises. The financial dynamics of competitive markets like steel mean even modest taxes can prove critical—the €13 per tonne levy on hot rolled wire costing approximately €650 per tonne might seem negligible, but in the ruthless steel business where Chinese imports are highly competitive, cost differences as small as €5 per tonne frequently determine contract outcomes.
These new requirements compound existing challenges for British manufacturers, particularly in steel where 50% EU import tariffs already create substantial obstacles. Negotiations will proceed through two distinct stages: establishing terms of reference, followed by discussions on emissions trading system compatibility. While actual tax payments won’t be required until 2027 and could potentially be cancelled through successful negotiations, the immediate administrative requirements take effect in January. EU Climate Commissioner Wopke Hoekstra has indicated constructive discussions with UK counterparts and suggested immediate costs should be limited given Britain’s decarbonization progress, but emphasized the necessity of proceeding methodically. British government representatives maintain that securing a carbon linking agreement to protect the £7 billion export market remains their priority.