What Is the Carbon Border Adjustment Mechanism?

Why It Matters

CBAM will reshape import costs and supply‑chain strategies, driving domestic and overseas producers toward lower‑carbon practices while safeguarding the UK’s climate targets.

Key Takeaways

• The UK’s CBAM will commence on January 1 2027 to curb carbon leakage.
• Applies to imports of aluminium, cement, fertiliser, hydrogen, iron‑steel.
• Threshold: £50,000 worth of goods per year triggers reporting obligations.
• Tax based on UK carbon price, adjustable for overseas carbon costs.
• Importers must inform supply chain, gather emissions data, and file returns.

Summary

The United Kingdom will roll out a Carbon Border Adjustment Mechanism (CBAM) on 1 January 2027, aimed at preventing carbon leakage by pricing the carbon content of certain imported goods.

CBAM targets five high‑risk sectors—aluminium, cement, fertiliser, hydrogen and iron‑steel. Importers whose annual purchases from these categories exceed £50,000 must calculate the embedded emissions of each shipment and pay a tax linked to the UK carbon price, with a credit possible for any carbon cost already incurred abroad.

HMRC advises firms to notify their supply chains early, request emissions data, and use the dedicated email [e-mail] for updates. Detailed guidance is available on GOV.UK under the “CBAM” search term.

The regime adds a new compliance layer and cost factor for import‑dependent businesses, incentivising greener production abroad and aligning UK climate goals with global emissions reductions.

Original Description

From 1 January 2027, the UK will introduce the Carbon Border Adjustment Mechanism or CBAM - a new policy that places a carbon price on certain imported goods. This video explains what CBAM is, why it matters and who it affects. If your business imports aluminium, cement, fertiliser, hydrogen, or iron steel worth more than £50,000 in a year - CBAM may apply to you. Find out:

• why CBAM is being introduced

• how CBAM works

• which sectors are affected

• how businesses and tax agents need to prepare

You'll get a clear overview that will help you and your supply chain prepare and gather the details you'll need for your CBAM tax returns. You can find more information on GOV.UK.

0:00 Introduction

0:17 Why CBAM is being introduced

1:00 How CBAM works

1:07 Which sectors are affected

1:51 How businesses and tax agents need to prepare

2:20 Latest information

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