© 2023 CBAM Reports
UK CBAM: coming up in 2027
The UK CBAM
The UK CBAM
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UK CBAM, same as in the EU, is meant to stop carbon leakage
The UK's UK ETS, a key policy tool for achieving net-zero, could lead to carbon leakage if other countries don't implement similar carbon pricing mechanisms, creating an uneven playing field for businesses. -
UK CBAM implementation stages
CBAM obligations begin January 1, 2027. The first annual returns due by May 2028 and will cover imports during the entire year of 2027. Quarterly returns will commence starting in 2028. -
Eliminate disparity between prices paid for CO2 emissions in the UK and non-UK territories
Both the UK CBAM and EU CBAM will apply a carbon price to imported carbon-intensive goods, with the price defined by the relevant ETS. They also both calibrate implementation with a phasing-out of free allowances under the respective ETS. -
UK CBAM products coverage slightly differs from the EU CBAM
The UK CBAM will place a carbon price on some of the most emissions intensive industrial goods imported to the UK:- Cement
- Iron and steel
- Aluminium
- Fertilisers
- Hydrogen
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Allowances and Certificates concept
- There will be no purchase or trading of emission certificates.
Key questions
Key questions
CBAM liability will lie directly with the importer of imported products within scope of the UK CBAM on the basis of emissions embodied in imported goods. Group registration and liability sharing are allowed for connected companies within import groups.
The UK CBAM will be applied to Scope 1, Scope 2 and select precursor product emissions embodied in imported products to ensure comparable coverage with the UK Emissions Trading Scheme.
The price applied by a CBAM will be set on the basis of the explicit carbon price differential between the UK and the country where the products were produced.
The government will regularly publish CBAM rates at the start of each quarter, based on UK ETS and Carbon Price Support (CPS) mechanisms, adjusting for sectoral free allowances over time.
The UK CBAM will work cohesively with the UK ETS, including free allowances, to ensure imported products are subject to a carbon price comparable to that incurred by UK production, mitigating the risk of carbon leakage
The minimum registration threshold is set at £50,000 of CBAM goods imported in a 12-month period.
The Government will require emissions verification for UK CBAM by a body accredited by a member of the International Accreditation Forum (IAF), such as the United Kingdom Accreditation Service (UKAS) in the UK.
If verified emissions are not available, default values can be used. From 2027, the government will proceed with a single default value set per product.
The existing HMRC penalties will be used, 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.
Key documents
- Draft legislation of CBAM UK
- Carbon border adjustment mechanism (CBAM): Policy update
- Consultation response on the introduction of a UK Carbon Border Adjustment Mechanism (UK CBAM)
Unclear about application of CBAM rules? Have additional questions?
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