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March 5, 2026, admin

UK Carbon Border Adjustment Mechanism: What You Need to Know

Draft secondary legislation published. The clock to January 2027 is ticking. Here is everything importers and customs professionals need to understand — and act on.

On 10 February 2026, the UK government published the first tranche of draft secondary legislation for the UK Carbon Border Adjustment Mechanism (CBAM), marking a pivotal step toward one of the most significant trade policy shifts since Brexit. The mechanism is scheduled to take effect on 1 January 2027, giving importers less than a year to prepare.

For businesses importing carbon-intensive goods into Great Britain, this is not a distant regulatory abstraction. It is an imminent compliance obligation with real cost implications, new registration requirements, and substantial record-keeping duties. Understanding the framework — and acting early — is the difference between a smooth transition and a disruptive scramble.

 

💡 What is the UK CBAM?

The Carbon Border Adjustment Mechanism is a carbon pricing instrument that applies to imports of specific carbon-intensive goods entering the UK. Its purpose is to prevent “carbon leakage” — the risk that UK businesses shift production abroad to avoid domestic carbon costs, only to import those same goods back without any carbon price attached.

In practical terms, importers of in-scope goods will pay a charge that reflects the carbon price that would have been paid had those goods been produced under UK domestic carbon pricing rules. The charge is based on the embedded carbon content of the imported goods and the prevailing UK Emissions Trading Scheme (ETS) carbon price.

⚠️ Reporting obligations begin before the charge does
Businesses are likely to face data collection and registration requirements in advance of the 1 January 2027 charge date. Early engagement with the CBAM framework is strongly advised — waiting until launch day will not be feasible for most importers.

Legislative Timeline

The Three Draft Regulations Explained

The February 2026 publication comprises three distinct instruments. Together, they form the administrative and financial backbone of the UK CBAM. Click each to explore what it covers.

Regulation 1 — CBAM Administrative Provisions Regulations 2026

This regulation establishes the procedural framework businesses must follow. It is the most operationally significant instrument for importers, as it directly dictates the compliance steps required before and after the CBAM charge applies.

  • Registration requirements: Who must register, when, and with which authority — expected to be HMRC. Businesses should identify whether they import in-scope goods and begin pre-registration assessments now.
  • Tax returns and required content: What must be declared in CBAM returns, including embedded carbon content, country of origin, and applicable carbon price paid in the country of production.
  • Reimbursement arrangements: How importers may claim relief where a carbon price has already been paid in the country of origin, avoiding double taxation on the same carbon emissions.
  • Weight calculations for CBAM goods: Methodology for calculating the net weight of goods for CBAM purposes — important for sectors such as steel, aluminium, and cement where volume calculations affect the charge base.
  • Record-keeping obligations: The types of records businesses must maintain to demonstrate compliance, including carbon content documentation from non-UK suppliers. Likely to mirror HMRC’s standard six-year retention requirement.

Regulation 2 — CBAM Rate and Carbon Price Relief Regulations

This regulation addresses the financial mechanics of CBAM: how the charge is calculated and under what circumstances it can be reduced. This is the instrument that will most directly affect landed cost planning and financial modelling for procurement teams.

  • Carbon price calculation: The CBAM charge will be linked to the UK ETS carbon price. The regulations are expected to establish a reference period and averaging methodology to prevent excessive volatility in CBAM liabilities.
  • Carbon price relief: Where an exporting country has its own carbon pricing mechanism (such as the EU ETS), importers may be entitled to a deduction. This prevents goods from being taxed twice and creates an incentive for trading partners to price carbon domestically.
  • Embedded carbon methodology: Default values will be available for businesses unable to obtain actual carbon content data from their suppliers, ensuring that the system remains workable in practice — though actual values, where available, are expected to be used.

Regulation 3 — Updated CBAM Policy Summary

The updated policy summary accompanies the two statutory instruments and provides a narrative explanation of how the full legislative framework operates as a coherent system. It is the primary document for businesses seeking to understand the policy intent behind the technical rules.

The summary covers the complete regime arc: from scope determination and registration, through to return filing, carbon price calculation, and the audit and enforcement powers available to HMRC. It also explains the government’s intentions around future sector expansion and interaction with the UK ETS reform roadmap.

Importers and their customs teams should treat this document as essential reading alongside the two statutory instruments.

 

ℹ️ These are draft regulations — consultation is open

The February 2026 publication represents draft secondary legislation, not final law. Businesses have the opportunity to engage with the consultation process and provide feedback on the administrative and financial provisions before they are finalised.

Which Sectors Are in Scope?

The UK CBAM initially applies to imports of carbon-intensive goods in the following sectors. If your supply chain includes any of these, your business is likely to have CBAM obligations from 1 January 2027.

Sector coverage aligns broadly with the EU CBAM, though specific commodity codes and thresholds may differ. Businesses should verify in-scope status against the final published regulations and HMRC guidance.

Key Implications for Importers

New Registration Obligation

Businesses importing in-scope goods must register with HMRC under the CBAM regime. This is a separate registration to your existing EORI or VAT registration and will carry its own reference number and account structure.

Registration is expected to be required before the first importation of in-scope goods after 1 January 2027. Businesses should not wait until the charge goes live — HMRC is likely to open a registration window in advance, and early registration will be essential for administrative readiness.

Landed Cost Modelling Must Be Updated

The CBAM charge represents an additional cost of importation that must be incorporated into landed cost calculations alongside customs duty, import VAT, freight, and insurance. For carbon-intensive goods with high embedded emissions, the CBAM charge could be material.

Procurement and finance teams should begin modelling the CBAM cost under different scenarios: high and low ETS carbon price assumptions, with and without carbon price relief from origin countries, and using both default and actual embedded carbon values. This analysis will inform sourcing strategy and contract negotiations.

Record-Keeping: Six Years, New Data Categories

The CBAM administrative provisions include record-keeping obligations that go beyond standard customs declaration retention. Importers will need to maintain evidence of the carbon content of their goods, the basis on which any carbon price relief was claimed, and the methodology used to calculate weight for CBAM purposes.

This documentation should be retained alongside your existing six-year customs record archive. Integrating CBAM records into your existing declaration management system — rather than maintaining a separate, disconnected set of files — will materially simplify future HMRC audits.

Interaction with the EU CBAM

Businesses trading with both the EU and the UK face a dual CBAM compliance landscape. While the two mechanisms share common design principles — embedded carbon basis, carbon price relief for origin-country pricing, sector alignment — they are distinct legal regimes with separate registration, reporting, and return obligations.

A key strategic consideration is whether carbon content data collected for EU CBAM purposes can be reused for UK CBAM compliance. In practice, much of the underlying supplier data should be transferable, but the precise methodologies and default values differ. Early engagement with both regimes in parallel is strongly advisable for businesses affected by both.

How Customs Declarations UK Supports Your CBAM Readiness

While the CBAM charge is a new obligation, it sits squarely within the broader customs compliance ecosystem that Customs Declarations UK already supports. Businesses that manage their customs declarations accurately and efficiently today are inherently better positioned for CBAM compliance tomorrow.

 

🔗File your import declarations today on Customs Declarations UK

Managing your customs declarations through a validated, CDS-integrated platform ensures your commodity codes, origin data, and valuation are accurate and audit-ready — the same foundations CBAM compliance will demand. Visit customs-declarations.uk to explore the platform and get started.

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