Carbon Border Adjustment Mechanism (CBAM)

Background

CBAM is a UK tax designed to help deliver net zero. The tax is applied to imported goods to ensure UK carbon intensive businesses which reduce their emissions are not undercut. A similar tax has been agreed in Europe and will come into force in January 2026.

The BRC submitted comments on the scope and operation of CBAM earlier this year and the Government has recently responded to the consultation, confirming next steps including the introduction of the tax from 1 January 2027.

Scope of CBAM

Following the consultation the Government has reduced the scope of products covered by CBAM, which should benefit retailers. Ceramics and glass have both been removed, as production is less energy intensive, and susceptible to imports than had been imagined. The product categories covered are aluminium, iron and steel, cement, hydrogen and fertilisers. The charge will apply to all products covered under 4 digit customs codes listed in Annex B of the Government response which you can read here. By removing glass and ceramics, the scope is now more aligned with the EU scheme.

Payment

The calculation of the tax is linked to the UK emissions trading scheme (ETS) to ensure a link to the carbon taxes UK businesses pay. It will begin from January 2027 and importers will pay quarterly. This means UK charges could be different to those in the EU. Carbon taxes paid in other countries, such as the EU CBAM can be offset against the UK charge, the Government will carry out further work on how this will work.

Next Steps

Both Primary and Secondary legislation are required to implement CBAM. As part of that work, Government will clarify further processes which underpin the CBAM. It will also produce further guidance for industry ahead of 2027.

As glass and ceramics have been removed from the initial CBAM its impact on members has been removed, so we will continue to monitor its introduction but our detailed work on it is likely to be limited.