The UK’s carbon border tax plans: another reason for APAC distributors to invest in ESG monitoring

The UK’s carbon border tax plans: another reason for APAC distributors to invest in ESG monitoring

The UK’s carbon border tax plans: another reason for APAC distributors to invest in ESG monitoring

UK chancellor Jeremy Hunt recently announced a new carbon border tax, to take effect in 2026. This follows a similar scheme currently rolling out in the EU. APAC Channel should take note. It could both accelerate plans for similar measures closer to home, and increase the pressure from manufacturers and end–customers for more environmentally friendly products. It signals a need for more granular insight into sustainability metrics.

How the border tax will impact the APAC channel

The UK’s proposals work in a similar way to those on the European continent. It aims to reduce carbon emissions by imposing duty on imports based on a product’s carbon footprint generated during production. Take this Lenovo ThinkSystem product as an example. According to the manufacturer, each unit generates 2.7 tonnes of carbon emissions during production. The price per tonne in the UK will be around £40, so the importer is liable to pay £110 in carbon tax per unit. This could raise the cost of ownership of this particular product by around 5%.

So how might this new tariff impact APAC Channel? Consider three scenarios:

Market dynamics: EU/UK carbon taxes may force some European manufacturers to look for new sources of components where higher environmental standards apply, in order to reduce the tax burden. APAC countries with lower standards may find their component manufacturers lose out as a result.

Customer pressure: Carbon border taxes in the EU/UK could lead to decreased global demand for less sustainable products, by driving up their cost. That could also have a knock–on impact on APAC suppliers. APAC Vendors and Distributors would over time need to diversify their portfolio to include more sustainable options.

Political pressure: APAC governments might look to the EU and UK as a model for introducing similar policies–not only to help meet climate change commitments, but also to make their country a more attractive place for Western manufacturers to source components from. Japan launched a carbon pricing scheme this year, for example. A regional shift towards carbon taxing would pressure distributors to prove the sustainability credentials of the products they offer.

How CONTEXT is helping

The bottom line is that APAC Channel will increasingly need to scrutinise the carbon footprint of the products they sell. This requires market data they can trust. Fortunately, CONTEXT is using its 30+ years’ experience of channel market analysis and reporting to build a new Product ESG portal. In time, this could offer useful metrics such as:

·   Carbon tax per product, calculated using real time or delayed carbon pricing

·   Regulatory compliance insight, which links carbon footprint data to sales data to estimate the financial impact of carbon tax per category or potentially per vendor category. The portal could also be tuned to provide the total potential carbon tax payable by the APAC IT distribution channel per year

To find out more about this product, get in touch with the CONTEXT Sustainability team:

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