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ARTICLE · 01 JULY 2026

The New UK Carbon Border Adjustment Mechanism

Jones Day
Jones Day
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The UK Carbon Border Adjustment Mechanism enters into force on January 1, 2027, imposing a carbon price on imports of aluminum, cement, fertilizers, hydrogen, and iron and steel to address carbon leakage and ensure competitive parity with domestic producers under the UK Emissions Trading Scheme. Operating as a tax administered by HMRC, the mechanism will phase out free allowances over nine years while potentially exempting EU imports if UK-EU ETS linking negotiations succeed.

United KingdomEnvironment
Chris Papanicolaou
Chris Papanicolaou
Will Land
Will Land
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On January 1, 2027, the UK Carbon Border Adjustment Mechanism ("UK CBAM") will enter into force, placing a carbon price on specified imports of carbon-intensive industrial goods. Operating alongside an expanding UK Emissions Trading Scheme ("UK ETS"), the UK CBAM represents a significant development in the UK's carbon-pricing architecture with far-reaching implications for importers, domestic producers, and the wider business community.

Overview and Scope

The UK CBAM is designed to address "carbon leakage," which is the movement of production and associated emissions to jurisdictions with weaker, or nonexistent, carbon pricing. It will ensure that carbon intensive imports face a price comparable to that borne by UK domestic producers under the UK ETS, ensuring competitive parity for UK manufacturers and safeguarding investment in industrial decarbonization. The mechanism will operate as a tax administered by His Majesty's Revenue and Customs ("HMRC"), with full financial

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