UK CBAM 2027: how Britain's carbon border tax will work
Two carbon regimes to manage, not one
You ship hot-rolled coil from an Indian mill to a stockholder in Sheffield, and aluminium extrusions from the same group to a customer in Rotterdam. Since January 2026 the European leg has been under the EU's definitive regime: authorised declarant, verified emissions, certificates. You assumed Britain would stay the simpler market. From 1 January 2027 it will not — the UK applies its own carbon border adjustment.
What matters commercially is that the two schemes are not twins. Same policy intent, near-identical sector list, but a different fiscal mechanism, a different entry threshold and a different reporting calendar. Treating the UK scheme as a copy of the European one is the fastest route to missing a registration deadline.
This guide sets out the announced scope, the calculation, the GBP 50,000 threshold, three worked examples and the gaps that actually change decisions.
A direct tax, not a certificate market
This is the headline structural difference. The EU scheme requires importers to buy certificates on a platform, keep a running balance and surrender annually. The UK scheme — announced by HM Treasury and HMRC in December 2023 and fleshed out in draft legislation published in 2025 — is an ordinary declarative tax: calculate the liability, file the return, pay.
The operational consequences are concrete:
- No working capital locked up in advance. Nothing to pre-purchase, no over-buying, no exposure to a certificate squeeze.
- A rate known ahead of time. It is set quarterly and per sector in pounds per tonne of CO2 equivalent, adjusted for the level of free allocation in the UK trading system. Budgeting becomes possible, which is harder on the EU side where the price simply follows the market.
- The charge falls on the person responsible for the goods when they are released into free circulation — in practice the importer, or their representative depending on how the entry is structured.
The filing rhythm eases in gradually: 2027 forms a single twelve-month accounting period with one return filed during 2028, after which the scheme moves to quarterly periods. That first-year grace does not remove the need to capture data from the very first January 2027 consignment, because the return covers the whole year retrospectively.
Scope: five sectors, and what dropped out
The launch scope covers aluminium, cement, fertilisers, hydrogen, and iron and steel. Glass and ceramics, examined during the 2024 consultation, were excluded from the first wave. Electricity, in scope for the EU, is not covered in the UK.
| Criterion | UK scheme | EU scheme |
|---|---|---|
| Start date | 1 January 2027 | Transitional 10/2023, definitive 01/2026 |
| Sectors | Aluminium, cement, fertilisers, hydrogen, iron and steel | Same, plus electricity |
| Mechanism | Direct tax on an HMRC return | Purchase and surrender of certificates |
| Entry threshold | GBP 50,000 over a rolling 12 months (by value) | 50 tonnes net mass per importer per year |
| Carbon price | Quarterly sector rate set by the authority | Market price of emission allowances |
| Reporting | Annual for 2027, quarterly thereafter | Annual declaration |
| Glass and ceramics | Out of initial scope | Out of scope |
Two traps. Scope is set by commodity code, not by product family, so the only reliable test is to start from the tariff classification exactly as you would for an anti-dumping measure. And precursor goods — the pig iron inside a steel product, the clinker inside a cement — feed into the finished item's embodied emissions, which pushes data collection one tier further up the supply chain than most buyers expect.
How the bill is worked out
The formula is short: embodied emissions × sector rate − carbon price already paid abroad. Embodied emissions capture direct production emissions, certain indirect emissions from electricity consumed, and the share attributable to precursors.
The 2027 rate has not been published. The examples below use a working assumption of GBP 60 per tonne of CO2e: UK allowances traded in a band of roughly GBP 35 to 55 through 2025, and the applied rate will be net of free allocation. Treat the figure as an illustration of magnitude, not an official number. For US readers, GBP 60 per tonne is roughly $75 per tonne, or about $68 per short ton at 2026 exchange rates.
Example 1 — primary versus recycled aluminium
Imported volume = 100 t of billets
Primary route, carbon-heavy grid = 11 tCO2e/t → 1,100 tCO2e
Charge = 1,100 × 60 = GBP 66,000
Same volume, recycled = 0.6 tCO2e/t → 60 tCO2e
Charge = 60 × 60 = GBP 3,600
An eighteen-fold spread between two products sold under the same commercial description. That is the real message of the scheme: on metals, carbon intensity becomes a sourcing criterion alongside price per tonne.
Example 2 — rolled steel, two production routes
Volume = 300 t of hot-rolled coil
Blast furnace route ≈ 2.1 tCO2e/t → 630 tCO2e → GBP 37,800
Electric arc furnace route ≈ 0.7 tCO2e/t → 210 tCO2e → GBP 12,600
Gap on the order = GBP 25,200
Against the material cost, that gap is typically 5 to 8 percent of the purchase price depending on where steel is trading. It is enough to move a tender from one mill to another, which is precisely the intended effect. Indian exporters, whose blast-furnace share remains high, and US mills, whose electric-arc share is among the world's highest, sit on opposite sides of this line.
Example 3 — the rolling GBP 50,000 threshold
Cement imported over rolling 12 months = GBP 42,000 → below threshold
Additional order = GBP 15,000
Rolling total = GBP 57,000 → registration required
This is the most underestimated case. The threshold does not reset on 1 January: it is measured across the last twelve months, at any point in time. A business bringing in two or three pallets of covered goods per quarter can fall into scope without changing anything about how it operates. A monthly review of the running total, aligned with declared customs value, prevents the surprise.
Dual exposure and the linkage question
An exporter in India, Turkey or the Gulf supplying both the continent and the British Isles ends up with two sets of documentary obligations covering the same plants and the same emissions. The measurement work, at least, is reusable: one verified footprint produced under a recognised methodology feeds both filings, even though the reporting formats differ.
Then there is linkage. At the UK–EU summit of May 2025 both sides signalled an intention to connect their emissions trading systems. If that lands, trade between the two would logically fall outside each other's border adjustment. As things stand it is a political direction rather than an applicable text, so the prudent plan is to prepare for 2027 as though both schemes stay separate, and simplify later if linkage arrives.
For the wider post-Brexit framework — CDS declarations, UKCA marking, rules of origin — see our UK import guide. Our EU CBAM briefing covers the certificate mechanism on the European side, and the India sourcing guide is useful background for the mills most exposed to this spread.
Put numbers on your own flows
Enter origin, destination, commodity code and value: the TRADE-COST calculator returns duty, taxes and landed cost — the baseline you need before comparing two suppliers with different carbon intensities.
Run a calculation →What to start on now
Three tasks, in order. Check whether your part numbers fall in scope, working from the tariff classification rather than the supplier's description. Measure the rolling total of covered purchases so you know whether the GBP 50,000 threshold reaches you. And open the emissions data conversation with your plants, because a verified footprint typically takes several months to produce and almost always beats the default value on cost.
The scheme only bites in 2027, but supply contracts signed during 2026 will already carry its effects. The supplier trade-off is being made now.
Frequently asked questions
Does the UK mechanism work the same way as the EU one?+
No, and assuming otherwise is the most common planning error. The EU model is a market: the importer buys certificates priced off the emissions trading system, holds a sufficient balance and surrenders them annually. The UK model is a direct tax declared and paid to HMRC on a periodic return — no certificates to buy, no balance to manage, no risk of running short. The cash-flow profile is therefore very different: the EU ties up working capital upfront, the UK bills you after the fact.
Which goods are in scope on 1 January 2027?+
Five sectors are covered at launch: aluminium, cement, fertilisers, hydrogen, and iron and steel. Glass and ceramics, considered during the 2024 consultation, were left out of the initial scope. Electricity, which the EU mechanism covers, is not included on the UK side. Scope is defined by commodity code rather than by product description, so two visually similar items can be treated differently depending on how they classify.
At what volume do I have to register with HMRC?+
The announced registration threshold is GBP 50,000 of in-scope goods imported over any rolling 12-month period, raised from the GBP 10,000 originally floated in consultation. It is a value threshold rather than a tonnage one, which is the opposite of the EU de minimis rule expressed in net mass. The rolling nature matters: the obligation can be triggered mid-year by ordinary order accumulation, so the running total needs monitoring continuously rather than at year end.
Can I deduct a carbon price already paid in the country of origin?+
Yes — that is what makes it an adjustment rather than a tariff. The UK charge applies only to the gap between the UK carbon price and a carbon price genuinely paid overseas on the same emissions. The evidential burden sits with the importer: the price must have been actually paid rather than offset by free allocation, and it must be documented. A producer in a jurisdiction with no carbon pricing gets no deduction at all, which is the source of the expected competitiveness gap between supply routes.
What if I cannot obtain my supplier's actual emissions data?+
Default values are provided for cases where verified actual data is unavailable. They are typically calibrated conservatively, meaning they sit above what an efficient plant would report — so using a verified actual figure is nearly always cheaper than accepting the default. In practice this means starting supplier data collection well before 2027, because obtaining a verified carbon footprint from a steel mill or a cement plant usually takes several months.
Marie Fontaine
Marie leads customs research at TRADE-COST. She spent eight years in tariff classification and post-clearance audits before joining the product team to turn customs expertise into software.
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