The Carbon Border Adjustment Mechanism (CBAM) is a climate policy tool designed to reduce the risk of carbon leakage when businesses move production to countries with weaker climate policies to avoid carbon costs.
CBAM works by imposing a carbon price on imported goods produced in countries with lower environmental standards, ensuring these imports face equivalent carbon costs to those made within the UK or the EU. This creates a “level playing field” for domestic industries subject to carbon pricing, while also encouraging cleaner production globally.
When was CBAM introduced?
The concept of a CBAM originated in the European Union’s Green Deal. The EU CBAM entered its transitional phase in October 2023 and will take effect in 2026. The UK CBAM will follow, coming into force on 1 January 2027, as confirmed by HM Treasury in December 2023.
What is the Carbon Border Adjustment Mechanism in the UK?
The UK CBAM is a government initiative that will apply a carbon price to imports of goods from sectors with high emissions intensity and significant trade exposure.
It will operate alongside the UK Emissions Trading Scheme (UK ETS), which already applies to domestic producers. This ensures imported and UK-made goods face comparable carbon costs, discouraging the outsourcing of emissions abroad.
Which Products Fall Under CBAM?
The UK CBAM will initially apply to eight key sectors known for high greenhouse gas emissions:
- Aluminium
- Ceramics
- Glass
- Iron
- Cement
- Fertilisers
- Hydrogen
- Steel
The government may expand this list as monitoring capabilities improve.
Who Is Affected by CBAM?
CBAM affects:
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- Importers of covered goods into the UK (the liable party).
- Manufacturers abroad exporting to the UK.
- Customs brokers and logistics operators are involved in trade declarations.
- End users may face higher prices as costs are passed through supply chains.
Domestic producers are not directly taxed under CBAM but benefit from a fairer competitive environment.
How will a Carbon Border Adjustment Work?
Under CBAM, importers of certain emission-intensive goods must:
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- Report the embedded carbon emissions of imported products using verified data from the producer or country of origin.
- Purchase CBAM certificates equivalent to those emissions, priced according to the UK ETS carbon price (usually expressed in £/tonne of CO₂).
- Submit annual declarations confirming the volume and emissions of imported goods.
If accurate data cannot be obtained, default values, based on global averages or similar products, will be applied to avoid underreporting.
What carbon emissions scopes does CBAM cover?
Embedded carbon is calculated based on:
- Direct emissions (Scope 1): From manufacturing processes such as fuel combustion and chemical reactions.
- Indirect emissions (Scope 2): From electricity, steam, heating, or cooling used in production.
Scope 3 emissions (e.g. transport or upstream supply chain) are excluded to keep calculations straightforward. Calculations must use verified emissions factors and comply with UK ETS monitoring and reporting guidelines.
What Is the Difference Between the EU and UK CBAM?
| Feature | EU CBAM | UK CBAM |
| Start Date | Transitional: 2023; Full: 2026 | Full implementation: 2027 |
| Covered Goods | Cement, iron, steel, aluminium, fertiliser, hydrogen, electricity | Aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron, steel |
|
Scope of Emissions
|
Scope 1 and 2 | Scope 1 and 2 |
|
Certificate Price
|
EU ETS price (€/tonne) | UK ETS price (£/tonne) |
| Revenue Use | EU budget (Green Deal funding) | UK Exchequer and decarbonisation funding |
| Verification | Third-party verification mandatory | Expected to mirror EU standards |
The UK’s version is designed to remain compatible with EU mechanisms to support smooth trade relations.
Is CBAM a Tariff?
CBAM is not a traditional customs tariff. It is a climate policy instrument linked to carbon pricing. While both tariffs and CBAM create import costs, CBAM is designed to reflect emissions intensity rather than trade protectionism. Its objective is environmental fairness, not trade restrictions.
How can iCOR support organisations with CBAM preparation?
iCOR helps organisations to reduce reliance on spreadsheets, save time, and feel more confident about legal and operational risk and legal compliance. The platform includes a self-audit tool that maps applicable environmental, health, and safety legislation into a tailored legal register, and allows you to track compliance actions, assign responsibilities, and present your progress.
Book a demo here to learn how iCOR can help you prepare your organisation for the upcoming CBAM regulations, turning compliance into an integrated and continuous process that is accessible to everyone.
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