UK CBAM Starting in 2027: What the UK’s Carbon Border Adjustment Mechanism Means for Your Business

As of August 2026

The UK CBAM will take effect on January 1, 2027, and will increase the cost of importing carbon-intensive goods into the United Kingdom. For German companies that supply steel, aluminum, cement, fertilizer, or hydrogen to the UK, this creates a second carbon border adjustment mechanism alongside the EU CBAM—with its own deadlines, thresholds, and a fundamentally different mechanism.

Key Points at a Glance

• The UK CBAM will take effect on January 1, 2027—with no prior reporting or transition period; the financial obligation applies from day one.
• Unlike the EU CBAM, it is structured as a tax (collected by HMRC), not as a permit system.
• Five sectors are covered: aluminum, cement, fertilizers, hydrogen, and iron and steel. Unlike in the EU, electricity is not initially included.
• Registration is required for imports of CBAM goods with a total value of £50,000 or more over a rolling 12-month period.
• In 2027, only direct emissions will be subject to the tax; indirect emissions will be included no earlier than 2029. The first payment is due by May 31, 2028.

What is the UK CBAM?

The UK CBAM (UK Carbon Border Adjustment Mechanism) is the carbon border adjustment mechanism that the United Kingdom will introduce on January 1, 2027. It imposes a charge on the embedded emissions of imported, carbon-intensive goods and adjusts their prices to align them with those of goods produced domestically under the UK Emissions Trading Scheme (UK ETS). The goal is to prevent carbon leakage—the shift of production to regions with lower CO₂ pricing.

The mechanism is administered by the UK’s tax and customs authority, HMRC. This means that the UK CBAM is legally structured as a tax—a key difference from the EU model, which operates through the purchase and surrender of allowances.

UK CBAM (Carbon Border Adjustment Mechanism): UK CO₂ border adjustment mechanism effective January 1, 2027, levied as a tax by HMRC on the embedded emissions of imported goods made of aluminum, cement, fertilizers, hydrogen, and iron and steel (Source: UK Government/HMRC; ICAP, 2024).

When does the UK CBAM take effect—and who is affected?

The UK CBAM will take effect on January 1, 2027, without the two-year reporting-only phase that the EU used to launch its system: The financial obligation applies from day one. The “liable person” is affected—generally the person in whose name the customs declaration is filed, which is typically the importer.

In its first year, the mechanism will cover five sectors with a high risk of carbon leakage: aluminum, cement, fertilizers, hydrogen, and iron and steel. Glass and ceramics have been excluded for now, but may be included later. In 2027, only direct emissions from the production process will be subject to the mechanism; indirect emissions (from electricity consumption during production) will be included no earlier than 2029.

How does the UK CBAM differ from the EU CBAM?

The most significant difference lies in the mechanics: The UK CBAM is a tax, while the EU CBAM is a permit system. In the UK, HMRC calculates a sector-specific levy; in the EU, importers purchase and redeem CBAM permits. Furthermore, the two systems differ in terms of start date, sectors, thresholds, and pricing basis.

Companies—such as many German industrial firms—that supply both the EU and the United Kingdom must comply with both sets of regulations simultaneously. The following table compares the key features.

Characteristic: UK CBAM, EU CBAM; Start: January 1, 2027, with no transition period; Final regime in effect since January 1, 2026 (following the 2023–2025 transition period)Mechanism: Tax levied by HMRC; purchase and surrender of CBAM allowances. Sectors: Aluminum, cement, fertilizers, hydrogen, iron/steel (glass and ceramics initially excluded); aluminum, cement, fertilizers, hydrogen, iron/steel, and electricity. Scope of emissions: In 2027, only direct emissions; indirect emissions from 2029 at the earliest; direct and indirect emissions (compliance for indirect emissions initially limited to cement and fertilizers only)Price basis: UK ETS auction price, sector-specific, adjusted quarterly; EU ETS price (EUA), uniform, weeklyThreshold£50,000 worth of CBAM goods per rolling 12-month period50 metric tons (net mass) per importer per yearFirst billingFirst period: calendar year 2027, payment due by May 31, 2028; thereafter quarterly; Ongoing permit requirement, annual fee

The comparison shows that while the UK CBAM is newer, it is stricter in some respects—primarily because the payment obligation takes effect immediately, without a grace period. We cover details on the EU-side certificate price in our article on CBAM certificates for 2026/2027; we discuss the planned expansion of the EU system to include additional goods in our article on the CBAM expansion to downstream products.

When do companies need to register for the UK CBAM?

Anyone who imports CBAM goods worth at least £50,000 is required to register. HMRC assesses this using two tests: prospectively, to determine whether imports over the next 30 days will reach the threshold, and retrospectively, to determine whether they have reached it in the previous twelve months. As soon as either threshold is exceeded, registration with HMRC is mandatory.

During the legislative process, the threshold was deliberately raised from the original £10,000 to £50,000 to reduce the administrative burden on smaller importers. Those who remain below this threshold are not required to register—but should monitor their import volumes on an ongoing basis, as the retrospective test is applied on a monthly basis.

How is the UK CBAM levy calculated?

The levy is calculated by multiplying the embedded emissions of a good by the sector-specific UK CBAM rate, minus any eligible CO₂ price already paid in the country of origin. The rate is based on the average UK ETS auction price from the previous quarter and is adjusted quarterly—adjusted for the share of free allowances in the respective sector.

When it comes to emissions data, importers have a choice: They can use actual, verified figures from their suppliers or rely on default values. Default values are convenient but are generally more expensive because they are set conservatively. Reliable, product-specific emissions data—such as that from a Product Carbon Footprint (PCF) —therefore directly reduces the levy. The Corporate Carbon Footprint (CCF) serves as the basis at the corporate level.

Only explicit CO₂ prices are taken into account—that is, emissions trading systems with a market price or a CO₂ tax with a fixed rate. Non-price-based instruments, such as energy taxes, are not considered. The first billing period covers the entire calendar year 2027; payment is due by the end of May 2028. Thereafter, quarterly billing periods apply.

What Does the UK CBAM Mean for German Companies?

German companies that supply aluminum, steel, cement, fertilizer, or hydrogen to the United Kingdom will in the future have to comply with two parallel carbon border adjustment mechanisms: the EU CBAM for imports into the EU and the UK CBAM for imports into the United Kingdom. Both require reliable emissions data for each product—so the real challenge lies less in customs procedures and more in data quality.

Added to this is a strategic unknown: The United Kingdom and the EU have been negotiating since January 2026 to link their emissions trading systems. If this were to happen, reciprocal CBAM exemptions would be possible—the British government estimates the relief for its own industry at around £800 million by 2030. Until then, however, the rule is: plan as if there were no exemption.

Organizations that are already building their CO₂ database for CSRD reporting can use the same foundation for both CBAM systems. This is precisely where efficiency comes into play: a clean emissions inventory, used multiple times.

Our Assessment

The key factor in the UK CBAM is not customs clearance, but the quality of emissions data. Companies with a robust PCF for their British export products start with a clear advantage: They can replace default values with verified actual values and thereby significantly reduce their levy. Building this database takes time—supplier data must be collected and verified, which cannot be done at the last minute before the first billing cycle.

At the same time, we advise closely but objectively monitoring the ETS negotiations between London and Brussels. A link between the two could largely eliminate the UK CBAM burden for EU producers—but no one should count on this until an agreement is signed. The pragmatic approach for 2026: Identify CBAM-covered goods based on their HS codes, check the £50,000 threshold, and discuss verified emissions data with suppliers early on.

Conclusion and Next Steps

The UK CBAM is more than just a copy of the EU model: As a tax with an immediate payment obligation, a sector-specific rate, and its own threshold, it requires specific preparation. German exporters should now address three key areas: check the HS codes of their goods shipped to the UK for CBAM relevance, compare the £50,000 threshold against their own imports, and work with suppliers to establish verified emissions data. Those who integrate this database with their EU CBAM and CSRD efforts can fulfill multiple obligations from a single source—and transform a regulatory burden into actionable management data.

Sources

1. Jones Day: The New UK Carbon Border Adjustment Mechanism (June 2026). jonesday.com
2. International Carbon Action Partnership (ICAP): UK Outlines Details for the Introduction of the Carbon Border Adjustment Mechanism Starting in 2027 (October 2024). icapcarbonaction.com
3. European Commission: Carbon Border Adjustment Mechanism (as of 2026). taxation-customs.ec.europa.eu
4. ICAP: EU Adopts Simplifications to CBAM Rules Ahead of the Compliance Phase Starting in 2026 (2025). icapcarbonaction.com

All sources were accessed in July 2026.