What you need to know

  • In 2023 the EU introduced the world's first Carbon Border Adjustment Mechanism which took effect from October 2023 (EU CBAM).
  • The EU CBAM's main objective is to reduce "carbon leakage" and incentivise the EU's global trading partners to decarbonise their heavy emitting sectors.
  • On 30 March 2024, HM Treasury and the Department for Energy Security and Net Zero published a detailed consultation on the introduction of a UK CBAM.

What you need to do

  • From 2026, the EU CBAM will become fully operational, requiring importers to pay a carbon import levy for certain "carbon-intensive" goods originating from countries that lack an equivalent carbon pricing regime.
  • The purpose of this document is to compare, in high level, the EU and UK CBAMs, highlighting particular areas of divergence.

In 2023 the EU introduced the world's first Carbon Border Adjustment Mechanism which took effect from October 2023 (EU CBAM). During a transitional phase until the end of 2025, importers of goods in EU CBAM sectors will be subject to EU CBAM reporting requirements. From 2026, the EU CBAM will become fully operational, requiring importers to pay a carbon import levy for certain "carbon-intensive" goods originating from countries that lack an equivalent carbon pricing regime. The EU CBAM's main objective is to reduce "carbon leakage" and incentivise the EU's global trading partners to decarbonise their heavy emitting sectors.

The development of a UK CBAM is slightly behind that of the EU CBAM; however, things are changing at pace. Having been trailed in the 2023 Autumn Statement, the UK Government confirmed on 18 December 2023 that it will implement a UK CBAM by 2027. On 30 March 2024, HM Treasury and the Department for Energy Security and Net Zero published a detailed consultation on the introduction of a UK CBAM, which sets out the UK Government’s “minded to” positions on the detailed design of the UK CBAM. This consultation closes on 13 June 2024, and will feed into the final design of UK CBAM.

The purpose of this document is to compare, in high level, the EU and UK CBAMs, highlighting particular areas of divergence.