Background

The government confirmed the introduction of a UK CBAM at the Autumn Budget 2024. This followed a period of consultation on the design and implementation of a CBAM, which started in March 2024. In its response to the consultation, ICAEW was broadly supportive of a UK CBAM but cautioned that businesses would need time, guidance and support if a CBAM was to be implemented effectively. 

On 24 April 2025, the government published draft legislation for technical consultation to ensure that the legislation meets the policy intent. The government is clear that this is not a further consultation on the policy design. The government has published a factsheet and a policy note alongside the draft legislation. 

The consultation closes on 3 July 2025. If you have any feedback that you would like ICAEW to consider for inclusion in its response, please contact Ed Saltmarsh by 13 June 2025.  

Why is a CBAM needed?

The government says that decarbonising UK industry is crucial to achieving its goal of reaching net zero by 2050. The UK’s primary carbon pricing mechanism is the UK Emissions Trading Scheme (ETS). However, imported goods are not subject to the UK ETS, potentially resulting in ‘carbon leakage’, being “the movement of production and associated emissions from one country to another due to different levels of decarbonisation effort through carbon pricing and climate regulation”. 

The government believes that the introduction of a CBAM is needed to address carbon leakage. 

How will the UK CBAM work?

The government has confirmed that the CBAM will operate as follows:

• Scope. The CBAM will apply to specified goods in the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors imported into the UK on or after 1 January 2027. The person liable for CBAM is the importer of the goods. 
• Registration.  A person must register with HMRC for CBAM if, applying forward-looking and backward-looking tests, they meet or exceed the minimum registration threshold of £50,000.
• Liability. The CBAM charge will take into account:
  • the emissions embodied within the goods. This could be based on actual emissions data or default emissions data published by the government; 
  • the appropriate CBAM rate. The government will publish CBAM rates for each sector at the beginning of each quarter from 1 January 2027; and  
  • any relief due. Carbon price relief may be claimed if the embodied emissions in the goods have previously been subject to a deductible carbon price.
• Payment. The first CBAM accounting period is the 12 months from 1 January 2027 to 31 December 2027. A return will be required and payment must be made within five months of the end of the period (ie, by 31 May 2028 for the period ended 31 December 2027).