CBAM could cost the British industry 800 million pounds annually, as the EU rules out the exception
According to media reports, the European Union will not grant the UK an exemption from its Carbon Boundary Regulation Mechanism (CBAM) until the two sides have formally linked their emissions trading systems.
This decision means that British manufacturers will face a significant increase in administrative requirements from January 2026.
Annual expenses of 800 million pounds and administrative burden
The UK government estimates that CBAM can cost the British industry about 800 million pounds per year. In addition to the carbon costs themselves, exporters will face extensive new administrative requirements, including emissions reporting, verification and certification, which can be compared to the increase in paperwork after Brexit.
The UK-based UK Steel trade association has indicated that an exception is unlikely to be made as early as possible before Easter, meaning companies must prepare to fully comply with CBAM rules from early 2026.
EU position: first the binding, then the withdrawal
Vopke Hoekstra, the European Commissioner for combating climate change, said the EU's position was clear. "We are not absolving anyone of responsibility, but the moment we fully link these two factors, it is likely that an exception will be made at this point," he said.
Hoekstra acknowledged that the UK government would prefer a different sequence of actions, but stressed that the EU would not change its approach. He added that negotiations with the UK will continue to achieve an official link between the two carbon markets.
Possible benefits for exporting electricity from the UK
Some limited benefits may be provided for the export of electricity from the UK. Electricity, along with steel, cement, fertilizers, aluminum, and hydrogen, is within the scope of CBAM. However, the Commission pointed out that UK electricity exports should in principle not be subject to CBAM charges, as UK electricity generators already face higher carbon costs than their EU counterparts. The UK Government welcomed this position.
Industry warns of risks to competitiveness
Industry groups continue to warn that CBAM will undermine the competitiveness of British exports. Frank Aaskow, director of energy and climate change policy at UK Steel, said CBAM creates an additional barrier to UK steel exports at a time of heightened uncertainty in global trade.