UK Carbon Border Adjustment Mechanism (CBAM)
ENFORCEMENT TIMELINE
Introduced January 1, 2027 (the UK's own carbon border adjustment mechanism; returns and payments for 2027 are due by the end of May 2028)
Overview
Note: Although this card is placed under the EU Domain, the United Kingdom is not an EU member state. This card describes the UK's own carbon border adjustment mechanism.
The UK Carbon Border Adjustment Mechanism (UK CBAM) is a UK tax that makes carbon-intensive imports face a carbon price comparable to that paid by manufacturers producing the same goods in the UK. Under the Finance Act 2026, it is introduced from January 1, 2027.
It is similar to the EU CBAM, but its rates are set by reference to the costs incurred by UK producers under the UK Emissions Trading Scheme (UK ETS), after adjusting for free allowances and similar discounts.
It applies to specific goods from five sectors: aluminium, cement, fertiliser, hydrogen, and iron and steel. Glass and ceramics, included in the December 2023 proposal, are not in scope from January 2027. Electricity is not covered, and the inclusion of indirect emissions has been delayed until 2029 at the earliest.
Enforcement Timeline
December 2023: In its response to the consultation on addressing carbon leakage risk (March–June 2023), the UK government confirms it will introduce a CBAM.
March–June 2024: Consultation on the introduction of a UK CBAM from January 2027. The government response in October 2024 decides, among other things, that goods from the glass and ceramics sectors will not be in scope from January 2027.
March–July 2025: Technical consultation on draft legislation.
2026: The Finance Act 2026 provides for the introduction of CBAM.
January 1, 2027: UK CBAM is introduced. The first accounting period is annual (January 1 to December 31, 2027).
January 1, 2028: Registration for CBAM opens.
End of May 2028: Deadline for returns and payments for 2027. Later accounting periods are quarterly.
Business Impact
Glass and ceramics were included in the December 2023 proposal, but the October 2024 government response removed them from the scope at the start of CBAM in 2027. When CBAM is introduced on January 1, 2027, the businesses directly affected are those importing specified goods from five sectors into the UK: aluminium, cement, fertiliser, hydrogen, and iron and steel.
Businesses that import £50,000 or more of these goods over a 12-month period must register with HM Revenue & Customs (HMRC), submit returns and pay the tax. Overseas producers supplying these goods to the UK are also affected where they choose to provide information on embodied emissions or on carbon prices paid. Companies exporting to Europe need to handle the calculation rules and procedures of both the EU CBAM and the UK CBAM.