Jeremy Hunt announced a new green tax to hit imports of iron, steel, aluminium, ceramics and cement to stop foreign firms undercutting UK companies meeting higher eco-standards.
The Chancellor said the UK would implement a new import carbon pricing mechanism by 2027 to support the decarbonisation drive.
Imports of iron, steel, aluminium, ceramics and cement from overseas will face a “comparable carbon price” to those goods produced in the UK.
Mr Hunt said: “This levy will make sure carbon intensive products from overseas – like steel and ceramics – face a comparable carbon price to those produced in the UK, so that our decarbonisation efforts translate into reductions in global emissions.
“This should give UK industry the confidence to invest in decarbonisation as the world transitions to net zero.”
The scheme also aims to reduce the risk of ‘carbon leakage’, avoiding emissions being displaced to other countries because they have a lower or no carbon price.
Goods imported into the UK from countries with a lower or no carbon price will have to pay the levy by 2027, ensuring products from overseas face a comparable carbon price to those produced in the UK.
The charge applied by the carbon border adjustment mechanism (CBAM) will depend on the amount of carbon emitted in the production of the imported good, and the gap between the carbon price applied in the country of origin - if any - and the carbon price faced by UK producers.
Britain emerged as a leader in the battle against global warming. But the Government has been accused of watering down net zero action by announcing the issuing of a wave of new gas and oil licences for the North Sea.
In September, the European Union launched the first phase of a system to impose CO2 emissions tariffs on imported steel, cement and other goods, the world's first. It will not begin collecting any CO2 emission charges at the border until 2026.
That planned tariff has caused disquiet among trading partners and at a recent forum, China's top climate envoy Xie Zhenhua urged countries not to resort to unilateral measures such as the EU levy
The design and delivery of the UK's CBAM will be subject to further consultation in 2024, including the precise list of products in scope.
Ministers also announced plans to work with industry to establish voluntary product standards that businesses could choose to adopt to help promote their low carbon products to customers, to develop a framework which measures the carbon content of goods, that could support other decarbonisation policies in future.
The power, aviation and industrial sectors have also been invited to offer their views on proposed changes to the UK Emissions Trading Scheme, that will ensure it continues to support the UK’s progress to net zero by 2050.
