The UK has confirmed that from January 1, 2027, it will introduce a Carbon Boundary Adjustment Mechanism (CBAM) aimed at combating carbon leakage and achieving the goal of zero net emissions by 2050.
This step is in line with UK requirements. A commitment to reduce emissions by 68% by 2030 and 81% by 2035 compared to 1990 levels.
Why do I need CBAM?
The UK Emissions Trading System (UK ETS) is reducing emissions quotas by 45% between 2023 and 2027, which raises carbon prices. Free benefits are guaranteed until 2026, and their future is currently being considered. While this accelerates decarbonization, it also increases the risk of shifting production abroad, where climate regulations are weaker, a phenomenon known as carbon leakage.
To eliminate this risk, the CBAM program will cover imported high-emission products such as aluminum, cement, fertilizers, hydrogen, iron, and steel. Importers will pay a carbon price based on embedded emissions, either verified data or default values set by the government. The tax rate will also reflect the domestic carbon price that would be received if the goods were manufactured in the UK. The first tax returns and payments are due in May 2028.
Scope and coverage
CBAM will be applied to specific goods designated by the UK tariff commodity codes under the Combined Nomenclature (CN) linked to the Harmonized System (HS). While raw materials such as aluminum sheets and steel bars are included, finished products such as car doors are excluded. Both direct and indirect emissions are covered by CBAM.
Rates and allowances
CBAM rates will be set quarterly from 2027, reflecting the price of the ETS quota in the UK and Carbon Pricing Support (CPS).Importers can claim a carbon price exemption if the equivalent carbon costs have been paid abroad.The registration threshold of 50,000 pounds per year guarantees tax exemption for small importers, but they still account for more than 99 percent of imported emissions.Comparison with EU CBAM
While the UK and the EU CBAM share the same basic goal, there are key differences.:
[b]Aspect[/b]UK CBAMEU CBAMIndustries coveredAluminum, cement, fertilizers, hydrogen, iron and steel. Electricity is not included in the
