The UK Carbon Border Adjustment Mechanism (UK CBAM) comes into force on 1 January 2027. For businesses importing aluminium, steel, cement, fertilisers, or hydrogen into the UK, this creates new reporting and payment obligations. The time to prepare is now — not after the deadline passes.
What is UK CBAM?
CBAM is a carbon pricing mechanism applied at the border. Its purpose is to prevent "carbon leakage" — where UK manufacturers face carbon costs through the UK Emissions Trading Scheme (ETS) but their foreign competitors do not, making imports artificially cheap by externalising environmental cost.
Under UK CBAM, importers of covered products from countries without equivalent carbon pricing must pay a levy based on the embedded carbon in those goods — the CO₂ emitted during their production.
This is a direct levy paid to HMRC — not a certificate purchase system like the EU CBAM. You report, calculate, and pay HMRC quarterly. There is no secondary market or certificate trading.
Which products are in scope?
From 1 January 2027, UK CBAM covers:
- · Aluminium — primary and secondary aluminium, certain downstream aluminium products
- · Iron and steel — crude steel, bars, rods, wire, sheet, profiles, tubes
- · Cement — clinker and finished cement products
- · Fertilisers — nitrogen-based fertilisers including ammonia, urea, and ammonium nitrate
- · Hydrogen — electrolytic and other production routes
Not in scope for UK CBAM (unlike EU CBAM):
- · Glass
- · Ceramics
- · Electricity
If your imported goods fall outside these five categories, you have no UK CBAM obligation. If you import downstream steel products such as fabricated structural components, check the specific HS codes — the scope includes certain processed goods beyond primary materials.
What is the threshold?
UK CBAM applies when annual imports of covered goods exceed £50,000 in value. Below this threshold, no obligation arises.
For most volume importers of steel or aluminium, this threshold is easily exceeded. Small or occasional buyers should calculate their annual spend against covered goods specifically to confirm whether they are in or out of scope.
What will it cost?
The CBAM levy is linked to the UK ETS carbon price, which fluctuates with the market. As of mid-2026 the UK ETS price sits at approximately £45–£55 per tonne of CO₂.
The levy per import is calculated as:
Levy = Embedded carbon (tonnes CO₂) × UK ETS carbon price
For steel, embedded carbon intensity is typically 1.5–2.5 tonnes CO₂ per tonne of steel, depending on production method (blast furnace vs. electric arc furnace). For primary aluminium, it ranges from 4–12 tonnes CO₂ per tonne depending heavily on the electricity grid mix in the producing country — aluminium smelted with coal power carries far higher embedded carbon than aluminium from hydroelectric sources.
Illustrative example: 500 tonnes of hot-rolled steel sheet imported from India, embedded carbon 1.8 tCO₂/t, ETS price £50/t:
> Levy = 500 × 1.8 × £50 = £45,000
This is a material additional cost that needs to be built into landed cost calculations from January 2027.
Using default versus actual carbon values
You have two options for calculating embedded carbon:
1. HMRC default values — HMRC will publish default embedded carbon factors by product category and country of origin. You can use these without supplier data. Defaults are typically set conservatively higher than actual production emissions, so using them may overstate your liability.
2. Supplier-verified actual data — if your supplier can provide independently verified production emissions data, you may use their actual figure. This requires third-party verification of the supplier's carbon accounting and appropriate documentation.
For most UK importers in 2027, HMRC defaults will be the practical starting point. As supplier data quality improves, switching to actual values may reduce your liability.
UK CBAM vs EU CBAM: key differences
If you also sell into the EU, you are already dealing with EU CBAM. The UK and EU systems are similar in purpose but differ in important ways:
| UK CBAM | EU CBAM | |
| Start date | 1 January 2027 | 1 January 2026 (financial) |
| Payment | Direct levy to HMRC | Purchase of CBAM certificates |
| Covered products | Aluminium, steel, cement, fertiliser, hydrogen | Same, plus glass, ceramics, electricity |
| Import threshold | £50,000 annual | No de minimis threshold |
| Reporting frequency | Quarterly | Annual (with quarterly provisional) |
If you are EU CBAM compliant, you have a head start on supplier data collection — but the payment mechanism and scope differ enough that you need a separate UK compliance process.
What to do before January 2027
Now (Q3 2026):
- · Identify which imports fall within CBAM scope by HS code and annual value
- · Estimate your CBAM liability using HMRC's forthcoming default carbon factors
- · Review supplier contracts — who absorbs the CBAM cost?
Q4 2026:
- · Register with HMRC for CBAM (registration window expected October–November 2026)
- · Set up tracking for import volumes by product, origin country, and HS code
- · Request supplier carbon data if you intend to use actual rather than default values
From January 2027:
- · Report imports quarterly to HMRC
- · Pay the levy with each quarterly return
- · Retain documentation for HMRC audit
Get ahead of it now
CBAM is new territory for most UK importers. Businesses that prepare early will avoid the compliance scramble and have accurate landed cost projections built into their pricing before the deadline.
If you import aluminium or steel from India, China, or other non-ETS countries, contact our customs team for a preliminary CBAM exposure assessment. We will map your covered imports, estimate your liability, and identify what supplier documentation you need to collect before January 2027.