Understanding the New UK CBAM Carbon Price Relief Frameworks

HMRC's publication of qualifying Carbon Price Relief frameworks provides greater certainty for importers affected by UK CBAM. Understanding how these schemes operate may help businesses prepare for future reporting requirements and assess potential compliance costs.


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HMRC has published its list of recognised overseas carbon pricing schemes eligible for Carbon Price Relief (CPR) under the UK CBAM. This is another significant regulatory milestone as we move closer to the UK Government’s expected Q4 updates covering price and emission factors ahead of full implementation in January 2027.

What’s the UK CBAM and how does CPR work?

The UK CBAM will introduce a carbon tax on carbon-intensive imports from January 2027.

UK businesses importing over £50,000 of in-scope goods will be required to comply with UK CBAM requirements. This involves registering as a CBAM importer, collecting embedded emissions data from overseas manufacturers, completing CBAM reports, and meeting the associated financial obligations.

The UK CBAM’s objective is to account for the carbon emissions occurring in countries with weaker carbon regulations (carbon leakage) and ensure local UK manufacturers are not outcompeted by cheaper imports. By applying an equivalent carbon tax to that faced by domestic businesses on goods produced overseas, the UK CBAM creates a level playing field between UK and overseas manufacturers.

Carbon Price Relief (CPR) is a particularly important element of the UK CBAM because it allows obligated businesses to reduce their CBAM liability by deducting eligible carbon prices already paid overseas.

What does a business need to claim CPR?

For an overseas carbon pricing scheme to qualify, it must meet specific requirements, including:

  • Is administered by a government at national, regional or city level
  • Has government-determined rules around the use of collected revenues
  • Has legally mandated participation
  • Has publicly available rules and regulations
  • Imposes a cost on the relevant emissions, using emission factors derived from the following sources:
  • International Panel on Climate Change (IPCC)
  • International Energy Agency (IEA)
  • United Nations Framework Convention on Climate Change (UNFCCC)

Additionally, businesses seeking to claim CPR will also need to provide:

  • A complete verification report from the manufacturer
  • The publicly available carbon price applicable under the scheme
  • Data on the emissions embodied in the CBAM good

Given these tight rules, only a few overseas carbon pricing schemes qualify.

Which overseas schemes qualify for CPR?

As of September 2026, HMRC has recognised the following overseas carbon pricing schemes as eligible for Carbon Price Relief under UK CBAM:

  • Australia Safeguard Mechanism
  • Canada Federal Output-Based Pricing System (OBPS)
  • Chile Carbon Tax
  • China National Emissions Trading System
  • EU Emissions Trading System (EU ETS)
  • Indian Carbon Credit Trading Scheme (CCTS)
  • Japan GX-ETS
  • Kazakhstan Emissions Trading System (KAZ ETS)
  • Korea Emissions Trading System (K-ETS)
  • Montenegro Emissions Trading Scheme
  • New Zealand Emissions Trading Scheme (NZ ETS)
  • Serbia Carbon Tax
  • Singapore Carbon Tax
  • South Africa Carbon Tax
  • Swiss Emissions Trading System (CHETS)
  • Taiwan Carbon Fee

However, being on HMRC’s list does not automatically mean that every carbon price paid under an eligible scheme will qualify for relief.

Importers sourcing from countries covered by these schemes may be able to reduce future UK CBAM liabilities, provided all reporting and verification requirements are met.

Why is this important?

The publication of HMRC’s list gives importers and manufacturers greater visibility on which overseas schemes may reduce UK CBAM liabilities.

With further UK CBAM guidance and updates expected in Q4, businesses should be using this period to assess their exposure, engage suppliers and understand whether overseas carbon pricing schemes could reduce their future liability.

How can Valpak help with UK CBAM compliance?

The UK CBAM is now less than four months away. Is your business ready?

Valpak’s team of CBAM experts can provide the following support:

  • Regulatory review and threshold confirmation
  • Supplier engagement
  • Cost forecasting
  • Full UK CBAM compliance

Visit our UK CBAM service page or submit an enquiry if you would like to book a consultation.

Ready to prepare for UK CBAM?

If you’re unsure whether your business will be affected by UK CBAM, now is the time to understand your obligations, engage suppliers and prepare your emissions reporting processes.

Take our Free UK CBAM Obligation Quiz to determine whether your imports are in scope.
Download our EU and UK CBAM White Paper for practical guidance on compliance requirements and supplier data collection.
Speak to our specialists about our UK CBAM Compliance Service for support with threshold assessments, supplier engagement, reporting and cost forecasting.

ichael Trotter Comas

Written by: Michael Trotter Comas

Topics:

Blog, CBAM

FAQs

The UK Carbon Border Adjustment Mechanism (CBAM) is a carbon pricing policy that will apply to certain imported goods from January 2027. Its aim is to address carbon leakage and create a more level playing field between UK producers and overseas manufacturers.

Carbon Price Relief (CPR) allows businesses to reduce their UK CBAM liability where eligible carbon prices have already been paid overseas under qualifying carbon pricing schemes.

HMRC has published a list of recognised schemes, including the EU Emissions Trading System, Singapore Carbon Tax, China National Emissions Trading System and several others.

No. Only carbon pricing schemes that meet HMRC’s qualifying criteria and associated reporting requirements can be used to claim Carbon Price Relief.

Businesses will need emissions data, evidence of the applicable carbon price, supporting verification documentation and details of the relevant carbon pricing scheme.

The UK Carbon Border Adjustment Mechanism is due to come into force in January 2027.