Question proposed, That the clause stand part of the Bill.

The clause will enable the commissioners for HMRC to prepare for the introduction of the UK carbon border adjustment mechanism and allow information to be disclosed for the purposes of developing the CBAM.

The Government are committed to reaching net zero by 2050. As we make progress to decarbonise, we must ensure that the effect of our efforts is not undermined by carbon leakage. I am sure that hon. Members know this, but for the benefit of the Committee, let me define carbon leakage: it is the movement of production and its associated emissions from one country to another to avoid higher decarbonisation efforts and costs. The best solution to carbon leakage risk would be international co-ordination on decarbonisation and carbon pricing. However, many countries do not yet have domestic carbon pricing mechanisms. Consequently, introducing the UK CBAM will reduce the risk of carbon leakage by placing a carbon price on carbon-intensive goods imported into the UK from 2027.

The new tax will enable a charge to be placed on the carbon emissions found in highly traded carbon-intensive goods imported into the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. A comparable carbon price will be placed on those goods, based on what they would have incurred if they had been produced in the UK under our domestic emissions trading scheme.

I understand the principle of CBAM. However, in practice, if we import fertiliser to increase our food production here, for example, we will reduce our imports of food from elsewhere. It might not balance out exactly, but we would not be changing how much carbon we sent abroad, because we would just be taking it from another mechanism that is not included in the CBAM.

I thank the hon. Lady for her intervention, but I am not entirely sure that I follow the logic. The purpose of CBAM, as I have said, is to ensure that if a product is produced using carbon in another country, we do not have leakage across the border. The overall impact will vary depending on the sector’s exposure to CBAM imports relative to the overall input costs and the extent to which it can substitute them. CBAM imports make up only a small proportion—about 1%—of average UK industry input costs. CBAM liabilities are expected to be small initially, and reliance on inputs of goods within scope across the economy is limited overall. I am not sure that I follow the logic that imposing CBAM on imported fertilisers will somehow have the effect that the hon. Lady suggests.

The UK emissions trading scheme is the UK’s primary carbon pricing mechanism. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses. The UK CBAM will be implemented only in sectors where it will effectively mitigate carbon leakage risk and where delivery is deemed feasible. Other sectors that give rise to carbon leakage will be considered for future inclusion.

The Government announced in the Budget that legislation would be introduced in the Finance Bill—this Bill—to enable HMRC and HM Treasury to prepare for a new tax. Clause 83 will specifically enable the commissioners for HMRC to prepare for the introduction of the UK CBAM. The clause will also allow a national authority or the UK Emissions Trading Scheme Authority to disclose information requested by HM Treasury or HMRC for purposes connected with the tax, in particular preparing for it, developing it, implementing it and putting it into operation.

The clause forms the first part of the legislation needed to introduce the UK CBAM in January 2027. I commend it to the Committee.

As we heard from the Minister, the clause will enable commissioners for HMRC to prepare for the introduction of the CBAM, which will be charged on specific emissions-intensive imports into the UK from 1 January 2027. We will not oppose the measure, but I do want to raise a couple of points.

As the Minister said, the CBAM is a tax on emissions embodied in certain goods imported into the UK for which a carbon price has not been incurred overseas at a rate at least equivalent to the UK. While I appreciate that this is an enabling power, the Chartered Institute of Taxation, which I do not think has yet had a mention today, as opposed to Tuesday—I will get that on the record—has expressed some surprise at how basic the detail of the clause is, as it simply grants authority to introduce a CBAM and to request information from the UK Emissions Trading Scheme Authority or other national authorities. Will she give us a bit more of a flavour of when more detail about the CBAM’s operation will be forthcoming?

As well as queries about the CBAM’s implementation, I have heard concerns about the impact that it may have on businesses and consumers. The National Farmers Union has raised concerns about the impact that it may have on vital sectors. In particular, it may push up the cost of fertilisers, as my hon. Friend the Member for Gordon and Buchan said. That is a particular concern for the arable sector, where fertiliser makes up 12% of total farm costs. Higher costs could not come at a worse time when they also face the impact of the family farm tax.

The NFU has also raised concerns that such a tax could create an unlevel playing field for British farmers and growers. Consequently, a bit like for the changes to inheritance tax, the NFU will be developing its own impact assessment to fully understand the impact of this tax policy on the industry. I hope that the Minister will keep this measure under close scrutiny in the coming months. We will not oppose the clause, but I look forward to her response.

I thank the shadow Minister for his questions. I think from his comments that he knows this, but the clause is a paving measure for legislation that will be introduced. There will be further detail in draft legislation that will come in a future Finance Bill, so I cannot give him that detail today, but I take into account what he said. Draft legislation will be published so that affected industries can comment on it. I therefore reassure him that some of the issues he raised will be taken into account.

Question put and agreed to.

Clause 83 ordered to stand part of the Bill.