UK CBAM: from framework to fine print ready for 2027 launch

With the implementation date of the UK’s Carbon Border Adjustment Mechanism (“CBAM”) of 1 January 2027 fast approaching, the UK government has taken significant steps to clarify the policy design and legislative framework since the beginning of the year. In this post we consider the latest developments and what affected businesses should be doing to ensure they are ready for 2027.

UK CBAM is a new tax on importers into the UK of goods from a set list of in-scope highly traded, carbon intensive industries. UK CBAM is intended to combat carbon leakage (the concept that carbon policies in one jurisdiction are nullified by relocation of emitting activities to jurisdictions where carbon policies are weaker) to ensure that the UK’s decarbonisation efforts have a tangible impact on reducing global emissions. In-scope industries currently include the cement, aluminium, fertiliser, hydrogen, iron and steel industries. 

In contrast to CBAM in the EU, UK CBAM will operate as a tax, rather than a certificate-based system. HMRC will administer the regime and importers will be responsible for self-assessments through CBAM returns in alignment with other UK indirect taxes.

Secondary legislation and associated consultation

A technical consultation has just closed (on 24 March 2026) on the first tranche of proposed draft secondary legislation published by the UK government for CBAM. The primary enforcing legislation, the Finance (No.2) Bill 2025 to 26, is not yet enacted and is currently progressing through the House of Lords. The technical consultation sought views on the drafting of the draft secondary legislation for CBAM, to ensure that the secondary legislation accurately reflects the policy position and to ensure that the tax operates as intended.

The draft secondary legislation sets out the administrative and technical framework for the regime and is comprised of:

1. The Carbon Border Adjustment Mechanism (Administrative Provisions) Regulations 2026 (Draft): these Regulations set out the provisions regarding the administration of registering and submitting CBAM returns and associated record keeping and reimbursement obligations;

2. The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026 (Draft): these Regulations set out the provisions regarding the calculation of the CBAM rate, principles with respect of carbon price relief, currency conversion provisions and record keeping requirements; and

3. The Carbon Border Adjustment Mechanism (Transitory Provision) Regulations 2026 (Draft): these Regulations set out the transitional provisions regarding registration, payments, accounting periods and penalties.

In addition to the draft secondary legislation, HMRC has published “The Carbon Border Adjustment Mechanism Consolidated Tertiary (Draft)”. This is a draft statutory notice which, once in force, will have the full force of law. It outlines how the CBAM legislation should be read together. 

Next steps ahead of 1 January 2027

The UK government has indicated that further secondary legislation will be published in the coming months, with another consultation anticipated ahead of finalisation of the legislation before the end of 2026.

The remainder of 2026 will be a vital period for importers to the UK of potentially in-scope goods to:

1. track the development of final UK CBAM legislation and guidance;

2. consider responding to consultations to shape the final legislative position;

3. ensure clarity around which companies, goods and supply chains will be in-scope;

4. ensure clarity around the nature and timing of compliance obligations;

5. prepare internal functions/processes and supply chain contracts to meet CBAM compliance requirements (e.g. data gathering and record keeping). 

How we can help

For further information or advice on any changes discussed here and how to best prepare for the implementation of UK CBAM, please contact Michael Barlow, Sarah Sackville Hamilton or another member of our Environment team, who will be happy to help.

This article was written with assistance from Sasha Anisman.