UK is gearing up for its own CBAM implementation with technical consultation commencement

The UK government has facilitated a technical consultation on draft legislation for its own Carbon Border Adjustment Mechanism (CBAM), clarifying its scope, calculation and administration ahead of a July 3, 2025 deadline. From January 1 2027 (a year after the European Union’s CBAM implementation), the nation-imposed CBAM will place a carbon price on imports of emissions-intensive goods, including aluminium, safeguarding domestic producers against ‘carbon leakage’. It targets UK businesses importing over GBP 50,000 of specified goods in a 12-month period while exempting certain scrap products. The mechanism ensures that imported goods “face a carbon price which is comparable to the carbon price paid by domestic producers”.

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Consultation, timeline and exemptions

On April 24, 2025, HM Treasury published a draft of primary legislation and launched a technical consultation that will run until July 3, 2025, inviting detailed feedback on the draft wording rather than on overarching policy. The CBAM is set to take effect on January 1 2027, with its first accounting period covering the entire calendar year of 2027.

The CBAM will apply to imports from seven high-risk sectors — aluminium, cement, fertiliser, hydrogen, iron and steel, ceramics and glass, subject to carbon leakage concerns. It is targeted at UK businesses importing GBP 50,000 or more of these specified goods over 12 months.

Exemptions include imported scrap products from the aluminium, iron and steel sectors, recognising their environmental benefit and lower net emissions. Post-2027, the government will keep the “sectoral and product scope of CBAM … under review to reflect the evolving carbon leakage risk and technological context”.

CBAM charges will be based on both direct (Scope 1) and indirect (Scope 2) emissions, which importers can report using actual data or accept default emission values determined by the UK government.

From January 1, 2027, as per the new draft “value may be set at a level that ensures that there would not be an advantage to any person liable to CBAM in using the value instead of determining the emissions embodied in a CBAM good,” the government will consider alternative approaches to setting default values. Default values will be published ahead of the mechanism’s launch and may cover a single year or multiple years.

Free allowance adjustment

The government will adjust CBAM rates downward to reflect free allowances under the UK Emissions Trading Scheme (UK ETS), resulting in a single CBAM rate per sector. It will also allow carbon pricing schemes that use standardised emissions factors to quantify embodied emissions in CBAM goods to be deductible, simplifying administrative burdens.

However, Indian and Chinese aluminium exporters, whose lion’s share of production is still dependent on non-renewable energy, will likely confront new administrative burdens and possible cost increases unless they demonstrate low-carbon production credentials.

At the same time, provisions permit the exemption of goods originating in jurisdictions with linked carbon pricing schemes and the implementation of obligations under international carbon-price agreements.

Accounting periods

CBAM’s inaugural accounting period spans January 1, 2027, to December 31, 2027, with returns and payments due within five months of the period’s end. From January 1 2028, the mechanism will shift to quarterly accounting, with a two-month return and payment window for each quarter.

By pricing embedded CO₂ and PFC emissions at the border, CBAM aims to prevent aluminium smelting from relocating to jurisdictions with laxer climate rules, ensuring imported aluminium carries a carbon cost comparable to that paid by UK producers.

Over 50 European companies are calling for ETS linkage at a May 19 summit to harmonise carbon prices and avoid competitive distortions, which is evidently essential if UK exporters of low-carbon aluminium are not to face dual levies.

Platts assessed the UK ETS price (nearest December) at GBP 49.50 per tonne CO₂e on April 24, 2025, anchoring CBAM calculations to market realities. Gabriel Rozenberg, CEO of CBAMBOO, warns that the UK mechanism could have a “significant impact compared to the EU CBAM,” affecting around 10,000 businesses versus 180,000 under the EU’s scheme. “Even if the UK economy is smaller than the EU, it is going to impact a lot of businesses,” Rozenberg added.

As the UK considers aligning its ETS with the EU’s, harmonisation will be crucial to prevent competitive distortions and double levies on low-carbon aluminium exporters.