RenewableNI in partnership with A&L Goodbody recently delivered the latest in its energy seminars, examining the pressing issue of the UK and EU’s upcoming Carbon Border Adjustment Mechanisms (CBAMs).
A packed room of delegates heard from Micaela Diver, Partner at A&L Goodbody, who shared expert insights into the legal intricacies of the potential implications of CBAM. They also listened with interest as Energy UK Policy Manager, Robert Birch delved into the detail of what CBAM could mean for Northern Ireland and GB more broadly – exploring the many unknown unknowns still left to be answered.
For Policy Unpacked, Steven Agnew, RenewableNI Director shares his takeaways from the seminar and sheds some light on what can reasonably be considered a challenging area – even for the experts.
First thing’s first – what is CBAM?
A CBAM – or Carbon Border Adjustment Mechanism – is a way to ensure goods coming into your jurisdiction pay the same carbon price they would have paid had they been produced in your country.
The idea is that companies will face more of a challenge in getting around levies on carbon simply by moving production to a different country with lower carbon taxes, only to send their goods back to your jurisdiction.
In essence, it’s about creating a fair playing field across different countries when it comes to carbon costs, with the ultimate goal of reducing harmful emissions and preventing carbon leakage between jurisdictions.
Micaela Diver, Partner at A&L Goodbody, Robert Birch, Policy Manager at Energy UK and Steven Agnew, Director RenewableNI
When are changes due to come into effect?
The EU CBAM is currently scheduled to come into effect from 1st January 2026, with the UK CBAM to follow exactly a year later.
What could the EU CBAM mean for Northern Ireland and GB more broadly?
The reality is that the potential impact is unclear. Again, as a result of Brexit and the Windsor Framework, Northern Ireland finds itself in a unique – and potentially tricky – position.
Since 2023, the EU CBAM has been underway, albeit in a transitional phase where companies have to report but are not yet subject to the levy. But from 1st January next year, the mechanism is scheduled to come into effect in earnest, which would leave countries subject to the changes, subject to the charges.
A recent report from Energy UK, Borderline Confusion, Carbon Border Adjustment Mechanisms in Northern Ireland, showed the EU CBAM, if implemented as planned, could lead to payments of as much as £200 million per year on trade between GB and NI – equal to £1billion over the course of a single Parliament.
The same report warned of the potential for disrupted trade in goods and supply chains, more expensive electricity trading between GB and other markets and the possibility of costlier renewables deployment in Northern Ireland. These are things we must do our best to avoid.
Has any progress been made?
The recent UK-EU Summit, dubbed the ‘Reset Summit’, provided some sense that CBAM arrangements can be negotiated.
The delegates agreed to work towards linking the UK and EU Emissions and Trading Schemes – something that is broadly supported across the renewables industry. If carbon pricing was the same in each jurisdiction, there would be no need to apply the CBAM.
Not only would it avoid the inherent confusion CBAM would bring, we believe it would also improve carbon market functioning in the UK and EU.
As well as that, negotiators at the London meeting on 19th May also agreed to explore possible GB participation in the EU internal electricity market – so the mood music was good.
But time is of the essence, and while the UK and EU have agreed to look at these things, discussion needs to progress towards agreement – and quickly. The EU CBAM is just months away from its scheduled start date. If agreement isn’t in place by then, it is vital that the UK is exempt from the EU CBAM while negotiations continue.
Uncertainly is a friend to no-one, particularly with ambitious and crucial green energy goals hurtling towards us in the years ahead. We cannot afford for developers to face a lack of confidence at the very time they should be investing in renewables.
