The disparity in compliance infrastructure between small and large manufacturers is creating particular concerns about impacts from new carbon documentation requirements. While major manufacturers often maintain dedicated compliance teams and sophisticated monitoring systems, smaller operations typically lack this infrastructure, making the European Union’s carbon border adjustment mechanism especially challenging for them.
Brussels has confirmed that the anticipated carve-out will not be implemented by year-end, leaving British exporters to face detailed paperwork requirements from January. UK Steel’s Frank Aaskov describes the documentation as “quite a burden” particularly for small and medium-sized enterprises, highlighting the infrastructure gap between larger and smaller manufacturers. Industry experts predict no relief before Easter 2025, creating an extended period during which smaller operations must develop capabilities their larger competitors may already possess.
The mechanism requires comprehensive documentation of carbon emissions throughout manufacturing processes, affecting approximately £7 billion in UK exports. Larger manufacturers may already track emissions as part of sustainability reporting, corporate responsibility initiatives, or existing environmental compliance programs. They often employ dedicated staff for regulatory compliance and have budgets for specialized monitoring equipment and data systems. Smaller operations typically lack these resources, potentially needing to invest significantly in new capabilities specifically to meet the EU requirements.
Manufacturing organizations emphasize that this infrastructure gap could impact competitiveness. Make UK describes the forthcoming requirements as “extensive,” while noting that businesses of all sizes compete in the same markets. In sectors like steel where margins are razor-thin and Chinese imports are aggressive competitors, the proportionally larger burden on smaller operations could affect their market position.
Government representatives are advising businesses to prepare for implementation from January, with support available through the Department for Business and Trade. The unsuccessful attempt to secure a pre-Christmas exemption reflects political realities within the European Union. Negotiations will proceed through two stages: establishing terms of reference, then addressing emissions trading system compatibility. Although actual tax payments won’t be required until 2027 and could potentially be cancelled through successful negotiations, smaller operations must immediately begin developing documentation capabilities in January. EU Climate Commissioner Wopke Hoekstra has suggested immediate costs will be minimal given Britain’s decarbonization progress, potentially indicating many businesses already have relevant infrastructure, though smaller operations may be less likely to fall in this category. The UK government continues prioritizing a carbon linking agreement to eliminate requirements that could disproportionately burden smaller manufacturers.
