The European Union and the United Kingdom are preparing to finalize an agreement on a temporary border carbon management mechanism (CBAM) that will exempt British exporters from paying carbon taxes at the EU border during 2026, the Guardian newspaper reports. Officials plan to sign the agreement at the end of spring this year, on the scheduled date of the next EU-UK summit.
The EU CBAM agreement will enter into force on January 1, 2026 and will apply to imports of carbon-intensive goods such as steel, glass and fertilizers. Its goal is to limit carbon leakage and ensure fair competition for EU producers.
The UK, meanwhile, plans to introduce its own carbon tax in 2027, leaving a year-long regulatory gap that has raised concerns among businesses about unequal treatment and potential market distortions.
The planned exemption aims to temporarily protect British exporters from additional costs during the interim period until both carbon pricing systems are fully aligned. For sectors such as steel and manufacturing, which are deeply integrated into EU supply chains, the deal is expected to provide regulatory certainty and lower costs.
Industry representatives warned that without such an exception, British consumers could face higher prices, and the British market could face an influx of cheaper carbon-intensive steel supplies, especially from China, being redirected from the EU.
The interim CBAM deal is in the context of a broader political rapprochement between London and Brussels. At the EU-UK summit in May 2025, Prime Minister Keir Starmer and President of the European Commission Ursula von der Leyen agreed to link the UK and EU emissions trading systems and signed a formal defense and security pact.
Business groups generally welcomed the negotiations on exemption from CBAM. Naomi Smith, CEO of Best for Britain, stressed that a discrepancy between the EU and UK carbon pricing regimes could lead to job losses and investments, making reconciliation a priority for both sides.
Steelorbis.com
