Following the publication of the UK Government’s draft legislation for a Carbon Border Adjustment Mechanism (CBAM), the Aluminium Federation (ALFED) has formally requested confirmation on whether an aluminium-specific impact assessment has been carried out under the UK CBAM policy framework. As of today, no formal response has been received.
In response to the draft Tax Information and Impact Note published alongside the CBAM legislation, ALFED has welcomed the Government’s recognition of expected shifts in trade patterns. The note states:
“CBAM is expected to increase UK trade in CBAM sectors with regions with low emissions intensive production or carbon pricing mechanisms and may decrease trade in these sectors with regions which have carbon intensive production or no carbon pricing mechanisms.”
While this acknowledges some expected market impacts, ALFED is concerned that the wording implies an assumption that UK importers will adapt by switching to lower-carbon suppliers, without fully accounting for the risks of trade diversion, circumvention through downstream products, and unintended consequences for UK producers. The Federation believes this high-level overview does not adequately reflect the unique characteristics, supply chains, and economic conditions of the UK aluminium industry. Without dedicated sector-level modelling and a transparent assessment of risk, there is growing concern that the CBAM could undermine cost competitiveness, deter investment, and increase the risk of carbon leakage.
Nadine Bloxsome, Chief Executive Officer of ALFED, commented: “The UK aluminium industry is fully committed to decarbonisation and supports well designed policies that drive sustainability. However, we are increasingly concerned that without a robust, sector-specific assessment, the CBAM risks damaging the very industries it aims to protect. Aluminium is not just a low-carbon enabler, it is a critical material for national defence, clean energy, and economic resilience. Government must take a strategic, securitised approach to ensure aluminium competitiveness is preserved as part of a future facing, sustainable UK industrial base.”
Aluminium operates on a marginal cost and regional premium pricing structure, meaning that carbon costs are already reflected in market prices, regardless of emissions intensity. This structure creates risks that even the UK’s lowest-carbon aluminium producers could face price distortions under the CBAM, eroding their global competitiveness. ALFED is therefore calling for:
• A full aluminium-specific impact assessment, including analysis of material pricing, trade competitiveness, and investment impact;
• A thorough evaluation of trade diversion and CBAM circumvention risks, particularly through downstream goods;
• Transparency around whether any aluminium-focused modelling or economic assessments have already been conducted by HM Treasury or HMRC;
• Publication of any such analysis to support informed and inclusive engagement with the sector.
These concerns echo those raised by European Aluminium, whose April 2025 Position Paper warned of CBAM’s potential to increase carbon leakage and weaken Europe’s aluminium value chain if poorly implemented.
The Federation also emphasises the need for regular monitoring of CBAM’s real-world effects on industrial competitiveness and strongly supports calls for the UK Government to finalise UK-EU negotiations to link the UK and EU Emissions Trading Schemes.
Bloxsome added: “Aluminium’s strategic importance to the UK cannot be overstated, from EVs and grid infrastructure to packaging, defence and aerospace. We welcome recent engagement with officials and look forward to working in partnership to deliver a balanced approach that supports net zero, protects critical capabilities, and avoids unintended consequences for one of the UK’s most vital enabling industries.”
ALFED remains committed to providing data and insights from its members and stands ready to work with policymakers to shape a practical, fair, and forward-looking CBAM framework.