The UK CBAM is coming – What do you need to know? 

The UK Carbon Border Adjustment Mechanism (CBAM) takes effect from 1 January 2027, requiring importers of certain carbon-intensive goods from countries with a lower or no carbon price to pay a levy on imports. 

What is CBAM?

The UK CBAM will place a carbon price on the emissions embodied in imports of specified goods in the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors.  

Within these sectors, CBAM will only apply to specific ‘CBAM goods’ that are imported into the UK.

The CBAM will apply to both the direct and indirect emissions embodied in imported CBAM goods.  

Direct emissions refer to Scope 1 and 2, which are emissions directly within an organisation’s control. Indirect emissions are covered by Scope 3 and include emissions associated with an organisation’s actions but outside their direct control, including transportation of finished products or the production of precursor goods earlier in the supply chain.  

Why is CBAM being introduced?

The government is introducing CBAM to address carbon leakage, which is where production is shifted to other countries due to costs associated with carbon and greenhouse gas (GHG) emission regulations. This results in GHG emissions increasing in one country due to emissions reductions in a second country driven by climate change mitigation policies.  

The UK’s primary carbon pricing mechanism is the UK Emissions Trading Scheme (ETS). However, imported goods are not subject to the UK ETS.  

This means that where goods have not been subject to a similar carbon price in the jurisdictions in which they are produced, there is disparate carbon pricing across goods available on the UK market. 

Therefore, introducing a levy seeks to ensure that imported carbon-intensive goods are subject to a similar carbon price as those produced domestically. 

Who is likely to be impacted?

• Businesses importing a total value of £50,000 or more of specified goods from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors over a 12-month period will be directly impacted, while businesses that use these goods in their supply chain will be impacted indirectly by rising costs.  
• Overseas businesses that produce these goods for supply to the UK will also be affected if they need to supply information about the embodied emissions within their goods or about the carbon prices already incurred in relation to their goods. 

How can Inspired help?

Understanding the data required for the CBAM regulation has become a challenge for many businesses.  

Inspired is here to help – our ESG experts can assist you in understanding the potential impacts of CBAM on your business, whether you are a purchaser, producer, or importer of CBAM goods.  

For companies that produce goods captured by CBAM, Inspired can help to gather the data and quantify the emissions associated with the relevant lifecycle stages of your products.  

For importers of CBAM goods, Inspired can support in gathering the data required from your suppliers using our bespoke Supplier Engagement Tool.  

In addition, we can help all businesses understand the impact of CBAM on their business by reviewing in-scope products related to your business and assessing the cost that will be imposed on these products through CBAM taxation.​ 

What happens next?

The UK CBAM will require secondary and tertiary legislation. The government intends to publish all the legislation in draft ahead of introducing it before Parliament. 

The sectoral and product scope of CBAM will be kept under review beyond 2027, as well as changes to the feasibility of implementing a CBAM for further sectors or goods.