Explainer
CBAM, the carbon border adjustment mechanism, puts a carbon price on imports of carbon intensive goods. The EU charge began in 2026 and the UK’s starts in January 2027. Here is who pays, which goods are covered and what to do now.
By Christopher Fagan, Managing Partner, PEF Consulting Partners
A carbon border adjustment mechanism charges importers for the carbon emitted in making certain goods abroad, so that imports face a similar carbon cost to goods made under a domestic carbon price such as an emissions trading scheme. The aim is to stop carbon leakage, where production moves to countries with weaker climate rules.
The EU CBAM moved from a reporting only transition into its definitive period on 1 January 2026. Authorised declarants must declare the verified embedded emissions in covered imports each year and surrender CBAM certificates to match, less any carbon price already paid where the goods were made. It covers cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, and is fully phased in by 2034.
| Item | EU CBAM after the 2025 simplification |
|---|---|
| Threshold | 50 tonnes of covered goods per importer per year, excluding electricity and hydrogen; exceed it and all of that year’s imports are caught |
| Authorisation | Importers must be authorised declarants before they exceed the threshold |
| Certificates | On sale from 1 February 2027 |
| First annual declaration | By 30 September 2027, covering 2026 imports |
| Quarterly holding | From 2027, certificates covering 50% of the year to date liability at each quarter end |
| Item | UK CBAM |
|---|---|
| Start date | 1 January 2027 |
| Sectors | Aluminium, cement, fertiliser, hydrogen, iron and steel |
| Threshold | £50,000 of CBAM goods by customs value over twelve months |
| Who pays | The importer |
| Rate | Set per sector from the UK ETS price and published quarterly, with relief for carbon prices paid overseas |
| Registration and first return | Registration opens 1 January 2028 with a deadline of 31 January 2028; the 2027 return and payment are due by 31 May 2028 |
Only if the UK and EU link their emissions trading schemes and the EU grants an exemption. Talks have been reported as close to agreement ahead of an EU and UK summit in November 2026, but nothing is confirmed, and an exemption would need a signed agreement and changes to EU and UK law. Until then, UK exporters of covered goods should plan as if the EU CBAM applies to them.
Related reading: carbon accounting and reporting in the UK, scope 1, 2 and 3 emissions explained, ESG consultancy and compliance, the ESG due diligence checklist.
Carbon border adjustment mechanism: a charge on imports of carbon intensive goods that reflects the emissions released in making them, so they face a carbon cost similar to goods made at home.
On 1 January 2027. Importers register from 1 January 2028 and the first return and payment, for 2027, are due by 31 May 2028.
In the UK: aluminium, cement, fertiliser, hydrogen, and iron and steel. In the EU: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
The importer of the covered goods. In practice the cost usually flows into prices and supplier contracts, which is why exporters and buyers both need to plan for it.
If CBAM touches your supply chain, the work that matters now is the supplier emissions data. We can help you scope the exposure and build the data and costs into contracts.