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Government confirms introduction of a UK CBAM in 2027

4 November 20243 min read
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Government confirms introduction of a UK CBAM in 2027

Last week, the government published a consultation response on the introduction of a UK Carbon Border Adjustment Mechanism (UK CBAM).

Key announcements include:

  • Timelines: The government has confirmed that a UK CBAM will be introduced on 1 January 2027.

  • Sectors: The UK CBAM will put a carbon price on goods that are at risk of carbon leakage imported to the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Products from the glass and ceramics sectors will not be in scope of the UK CBAM from 2027, as previously proposed.

  • Registration threshold: The value of the minimum registration threshold will be increased from £10,000 to £50,000 (€150 in the EU), meaning that only businesses importing £50,000 or more of CBAM goods over a 12-month period will need to comply with the UK CBAM.

  • Verification of emissions: The government will proceed with requiring verification of emissions for the UK CBAM by a body accredited by an International Accreditation Forum (IAF) member, such as the United Kingdom Accreditation Service (UKAS) in the UK. 

  • Default values: Where verified emissions are not available, default values will be available for use by importers. From 2027, the government will proceed with a single default value set per product. The government also acknowledged the views in favour of default values that account for variances in average emissions intensities between different jurisdictions. An alternative approach will be considered after 2027.

  • Weight of CBAM goods: The government will require businesses to evidence the net mass of their CBAM goods.

  • CBAM rate: The UK CBAM rate will be set on a quarterly basis.

  • Overseas carbon pricing: Only explicit carbon prices will be recognised, and any applicable carbon pricing will offset the UK CBAM liability.

  • Tax point: The tax point for the UK CBAM will arise when goods enter free circulation, with liability based on emissions from processing outside the UK, while goods qualifying for returned goods relief will be exempt if customs conditions are met.

  • Liable person: The liable person will be defined as the person responsible for the goods when they are released into free circulation or, where there are no customs controls, the person on whose behalf the goods are moved to the UK. Individuals importing CBAM goods for personal use will not be liable for the UK CBAM.

  • Return window: An initial five-month return window will be provided, with specific guidance for industries with complex supply chains.

  • Penalties: The government will use existing HMRC powers and penalties, including a general regulatory penalty for offences that are specific to the UK CBAM. In addition, the government will seek to align with the VAT penalty points system for late submission of CBAM returns and late payment. 

  • Evasion: Fraudulent evasion of the UK CBAM will be treated as a criminal offence.

  • CBAM industry working group: HMRC and HMT will establish a CBAM industry working group in the near future.

  • International cooperation: The government will introduce a UK CBAM international group to engage with other governments whose exporters have a keen interest in the functioning of the UK CBAM.

The UK CBAM will require both primary and secondary legislation, which will be published in draft before being laid in front of Parliament. The government will also issue further guidance and support ahead of the UK CBAM's commencement in 2027. techUK members will be kept informed of developments.

techUK’s response to the original consultation can be accessed here.