The UK refining sector is beyond a tipping point. Since the beginning of 2025 the UK has lost one-third of its refineries, slashing the nation's refining capacity to just four operating sites - the lowest number in modern history. The closures of Lindsey and Grangemouth represented around 20% of UK capacity; prior to their closure, demand already exceeded domestic refining capacity.
This crisis is a direct consequence of the Government's failure over many years to provide a level playing field with importers: While UK refiners face high domestic carbon costs, imported fuels from countries with lower or non-existent carbon pricing are allowed to undercut them.
Without a strong domestic refining base, Britain risks becoming dangerously exposed to instability abroad and losing control of its energy future.
UK fuels sector – Facts at a glance:
- 4 operating refineries left (down from 9 in 2000).
- Supplies 47% of UK final energy demand, including 100% of aviation and 97% of road transport.
- Supports 100,000+ jobs across the UK.
- Collects £37 billion annually in tax revenues (duty + VAT).
- Among the lowest-carbon refineries globally: 80% of the UK’s top 10 import partners have higher carbon intensity.
The Competitive Challenge: Carbon Costs and Policy Gaps
British refiners currently pay hundreds of millions of pounds each year in carbon costs (peaking at £400m in 2022). By allowing higher-carbon imported fuels to bypass the costs paid by UK producers, the Government is allowing carbon leakage: exporting British jobs and pushing emissions overseas to less regulated parts of the world.
Current policy omissions are costing surviving refineries every day and threatening the last of our "Made in Britain" fuel supply. Furthermore, plans to link the UK and EU carbon markets known as "dynamic alignment" risk reducing free allocations and increasing compliance costs significantly. Reducing UK policy autonomy while increasing upwards cost pressure is a serious misstep.
The Ask: Securing the Future of UK Manufacturing
To safeguard energy supply and stop the continued loss of jobs, the Government must act decisively:
- Confirm inclusion of refined products in the UK CBAM from January 2028: A Carbon Border Adjustment Mechanism (CBAM) is the essential safeguard to ensure domestic industry is not exposed to inadequately managed carbon leakage.
- Ensure an effective mechanism for exports: Any CBAM framework must protect the competitiveness of UK-produced fuels in global markets.
- Retain policy sovereignty: In negotiating potential carbon market linkage, the Government must retain the ability to make independent policy decisions to encourage investment.
Refineries are strategic national assets and platforms for the future. They are the foundation for sustainable aviation fuel, hydrogen, and carbon capture. The time for "consideration" has passed; the time for action is now.