UK CBAM — the UK’s carbon border adjustment mechanism
The UK Carbon Border Adjustment Mechanism (UK CBAM) will be launched on 1 January 2027. This will ensure that imported carbon-intensive industrial goods are charged a comparable price for their carbon emissions to that which would be paid for similar goods produced in the UK.
This applies to goods from sectors at risk of “carbon leakage”, including aluminium, cement, fertiliser, hydrogen and iron & steel. Overall, the UK CBAM has a very similar underlying logic to the EU CBAM.

Relevant imported emissions
The UK CBAM will apply to both direct and indirect emissions embodied in imported goods that fall within the scope of the mechanism. This also applies to emissions contained in relevant precursor materials used in the production process.
It is important that the UK CBAM covers indirect emissions to ensure comparability with goods produced in the UK, where electricity emissions are subject to both the UK Emissions Trading Scheme (UK ETS) and Carbon Price Support (CPS).
Liable person and registration
The liable person for the UK CBAM charge will either be the person responsible for the goods when they are released into free circulation if there are customs controls, or the person on whose behalf the goods are moved into the UK if there are no customs controls.
The liable person will not need to register or account for the CBAM if the total value of their CBAM goods passing a tax point falls below a minimum registration threshold of £50,000 over a rolling 12-month period. This is to ensure that the costs of complying with the CBAM are more proportionate to the carbon leakage risk the government is seeking to address.
Determining embodied emissions
The person liable for the carbon charge can choose between using independently verified actual emissions data or default values.
From 2027, the government will proceed with a single default value set per product. The government will confirm the methodology to be used for their calculation and publish default values in advance of the introduction of the CBAM in 2027. Post-2027, the government is considering the viability of moving to an alternative approach for default values.
Setting the UK CBAM rate
The UK CBAM rate will be applicable per tonne of embodied emissions attributed to CBAM goods and will be comparable to the carbon price faced in the UK by domestic producers, net of reductions.
As a result, the UK CBAM rate will reflect the UK ETS, CPS, and free allowances. As the UK ETS and CPS place a carbon price on indirect emissions, these costs will be reflected in the rate.
Adjusting for overseas carbon prices
The CBAM liability can be reduced if the embodied emissions in the imported CBAM goods are subject to a deductible carbon price overseas, and the importer provides evidence of this.
Only deductible carbon prices will be accounted for in this adjustment. Deductible carbon pricing schemes are those which place a price directly or indirectly on emissions in the form of a tax or an emissions trading scheme.
Further details and guidance will be published in advance of the UK CBAM’s commencement.
Payments
As the UK CBAM will operate as a tax, liable persons will need to account for all CBAM goods that pass a tax point during an accounting period.
Following the end of each accounting period, liable persons will have to submit an online tax return and pay their CBAM liability.
Payments for the first annual accounting period (1 January 2027 to 31 December 2027) will be due at the end of May 2028.
Interaction with the UK Emissions Trading Scheme (UK ETS)
The UK Emissions Trading System (UK ETS) sets a price for greenhouse gases emitted by domestic producers.
The UK ETS is a cap-and-trade system, where the market determines the price of permits. Total emissions and permits under the scheme are capped and reduced over time to incentivise decarbonization.
The UK CBAM will work cohesively with the UK ETS. That includes free allowances, where the methodology to determine the UK CBAM rate will reflect the availability of free allowances in the domestic market. To put the UK ETS on a net-zero consistent trajectory, the UK ETS Authority will reduce the number of ETS allowances available for purchase from the government by 45% between 2023 and 2027. The number of free allowances will also decrease.
In 2025, the issue of potential linking of the EU ETS and the UK ETS has taken on new significance in the context of political agreements and the desire to minimise cross-border divergences in carbon prices. Linking the ETS involves the acceptance of permits from one system within the framework of the other, leading to a unified carbon price and increased market liquidity.
Such integration allows for emission reductions to be achieved where it is economically cheaper, reducing the total costs of decarbonization for both jurisdictions. An EU-UK ETS linkage would also facilitate cross-border CO2 storage between the EU and UK.
The EU ETS and UK ETS share many similarities, including their cap-and-trade design and coverage of key sectors such as energy, industry, and aviation. However, there are also some notable differences between the two systems, such as sectoral scope, market instruments, and price levels. For example, the EU ETS could include the GHG emissions from road transport and heating of buildings (ETS2) in the future, while the UK ETS does not include a similar system. Despite these differences, the UK ETS should fulfil the obligations for linkage with the EU ETS, and analysis suggests that the benefits of linking the two systems could be significant.
The Council of the EU has to request the European Commission to kick off formal negotiations with the UK, following the adoption of the Common Understanding. Afterwards, the UK and EU will conduct technical negotiations, led by DG CLIMA for the European Commission and DESNZ for the UK, to operationalise the conditions of the EU-UK ETS linking agreement. Once a final agreement is reached, the Council will have to formally adopt it, subject to approval by the European Parliament under the consent procedure, without the possibility of amendments. No formal deadline or timeframe has been announced, and a final date will depend on the success of the negotiations.
The UK’s decarbonisation efforts will lead to real reductions in global emissions, not just a shift of emissions overseas.
In April 2025, the UK government already published the main legislation for the UK CBAM for technical consultation. In addition, the implementation of this mechanism will require the development of secondary and tertiary legislation. The scope of the CBAM at the sector and product level will remain under review after 2027 as new evidence becomes available to reflect changes in the risk of carbon leakage, as well as methodological and technological advances.
More details about UK CBAM
More details on the linking of the UK and EU emissions trading systems
The publication was prepared within the framework of the project “Technical Assistance for CBAM good exports from UA to EU“, which is implemented with the support of the Ministry of Foreign Affairs of the Kingdom of the Netherlands and the Netherlands Enterprise Agency. Funding is provided by the Private Sector Development Program of the Netherlands Enterprise Agency/The Netherlands Enterprise Agency.
The project “Technical Assistance for CBAM good exports from UA to EU” began on November 25, 2024, and will last until February 28, 2026. This project is implemented with the support of the Ministry of Foreign Affairs of the Kingdom of the Netherlands and the Netherlands Enterprise Agency.