The UK Carbon Border Adjustment Mechanism (CBAM) will tax carbon emissions on certain imports. With the Government’s response to its consultation now available, what more do we know and how can businesses prepare?
To address carbon leakage, the Government confirmed in the Budget that the UK will introduce a CBAM from 1 January 2027 and published its response to the consultation which took place earlier this year.
The UK CBAM will be a carbon tax on the embedded carbon emissions associated with certain industrial goods imported into the UK to ensure that they face a carbon price comparable to what would have been payable, had they been produced in the UK.
The CBAM will initially cover aluminium, cement, fertilisers, hydrogen, and iron & steel sectors, with potential future inclusion of glass and ceramics.
We have previously outlined the detail of the proposals and their compliance requirements in our insight article explaining the consultation on UK CBAM.
There were two key changes announced in the response to consultation:
Ceramics and glass have been excluded initially because they are less emissions intensive than other products and feasibility concerns were raised during the consultation process. The Government intends to continue working with the sector to address the feasibility concerns before considering potential inclusion of the sector at a later date.
The increase of the registration threshold to £50,000 value of imported CBAM goods over a rolling 12 month period has been made to reduce the administrative burden on business, particularly for SMEs. The Government estimates that this will remove 80% of potentially registrable businesses but still capture 99% of emissions within the scope of the tax.
The Government will continue to develop the detailed operational aspects of UK CBAM through engagement with stakeholders before publishing draft primary and secondary legislation for consultation, and a comprehensive communication package will be developed to educate affected businesses about their obligations and help them to prepare.
Our team of environmental tax specialists can help you to understand how UK CBAM will affect your business and your supply chain, as well as help you prepare for implementation.
If you would like to discuss how CBAM affects your business and what you need to do, contact our expert Jayne Harrold.
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By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2024/25.
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