The UK government has confirmed it will introduce a Carbon Border Adjustment Mechanism (CBAM) in January 2027, mirroring a similar policy launched by the European Union. The UK CBAM will impose tariffs on imported goods with high carbon emissions, initially targeting aluminium, cement, fertilisers, iron, steel, and hydrogen. Glass and ceramics are excluded from the first phase, giving these industries more time to adapt.
Visual of a cargo truck transporting imported goods along scenic UK countryside roads. AI generated image.
This mechanism is designed to encourage global producers to reduce fossil fuel use. Products verified as produced with renewable energy will be exempt from the CBAM charge, creating an incentive for greener manufacturing practices. The CBAM will cover both direct (Scope 1) and indirect (Scope 2) emissions, as well as certain emissions embedded in imported products, aligning it with the UK’s Emissions Trading Scheme (ETS).
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The UK is also considering ways to link the CBAM framework with its existing ETS, managed jointly by the UK and devolved governments. A consultation is scheduled for December to discuss free allocations within the ETS, which could influence CBAM costs.
While the UK and EU share similar goals in their CBAM designs—addressing carbon leakage by discouraging emissions-intensive production outside their borders—the two systems have key differences. Notably, the EU requires emission certificates for compliance, a measure the UK has chosen not to implement. Talks of potential alignment between the UK and EU carbon schemes continue, as both regions aim to create cohesive carbon policies.
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