UK CBAM countdown: What importers need to know now

The UK’s Carbon Border Adjustment Mechanism (CBAM) is a core component of the country’s ambitious Net Zero strategy set to take effect on 1 January 2027.

This blog outlines some of the key differences between the UK and EU CBAM following the government’s draft primary CBAM legislation on 24 April and the recent UK-EU relations renewal deal.

What is the UK CBAM?

The UK CBAM follows in the footsteps of the EU CBAM, aimed at curbing carbon leakage by placing a tax on carbon-intensive imports to match domestic carbon prices. This helps maintain local emission reduction efforts and keeps local companies competitive against imports from countries with less stringent carbon regulations. The EU CBAM is currently in its transitional phase until 31 December 2025, after which it will enter its definitive period with financial obligations.

UK CBAM vs EU CBAM: Key differences

The UK’s version of CBAM is set to kick off a year later, with some notable differences:

• No transitional period: financial obligations will start in 2027, leaving UK-importers with little time to prepare for the scheme in stark contrast to its European counterpart. The EU CBAM’s transitional period has been a much-needed learning phase for industry and government, leading to some significant proposed changes, such as a de minimis threshold and an overall simplification of the reporting process. Without a transitional phase, UK importers may face heavy administrative burdens and penalties.
• A different obligation threshold: UK companies with an import value over £50,000 in the twelve months preceding 1^st of January 2027, or with an expected import value exceeding £50,000 over the next thirty days, at any point from 1^st January 2027, will be obligated. In contrast, companies with an import value of 150 euros are obligated in the EU, with a proposal to increase the threshold to 50 tonnes in 2026.
• Different obligated commodity codes: electricity will be excluded from the UK CBAM.
• Different carbon prices: UK carbon prices are expected to be lower than EU carbon prices as they reflect quarterly UK ETS and CPS pricing.

Will the UK and EU CBAMs align?

While these differences have been the source of industry worry for months, they are now likely to be ironed out following the UK and EU’s announcement to link their Emissions Trading Schemes as part of a new collaborative deal. The new deal should avoid approximately £800 million in taxes for UK exporters in the first year of the EU’s CBAM and see continuity between the two schemes making for an impactful carbon leakage reduction strategy.

The steel and aluminium industries have also called on the government for industry-specific research to avoid supply chain disruptions and cost spikes which will affect consumers.

What’s next?

The UK CBAM draft will remain open for technical consultation until 3 July 2025, after which the government will review the legislation in accordance with its new EU deal ahead of its official introduction later this year. A full list of the obligated commodity codes included in the draft is available on the government website.

Many companies will already be familiar with the world of CBAM thanks to its EU implementation , but for those that aren’t, it is essential that they understand how CBAM affects them as early as possible. Supply chains can be complicated and collecting the necessary data for CBAM reporting is no easy task as producers will often have limited to no visibility on their emissions. We encourage companies to start early and avoid any headaches further down the line.

For additional information on key EU CBAM dates and what lies ahead, please see our article on Decoding CBAM here.

How Valpak can help: End-to-end CBAM Compliance service

Navigating CBAM can be daunting, but you don’t have to do it alone. We offer a comprehensive, end-to-end CBAM compliance service, designed to take the pressure off your business. Our support includes:

• Obligation checks to confirm whether your business falls within CBAM scope

• Supply chain assessments and emissions data collection

• Full reporting preparation in line with UK (and EU) CBAM requirements

• Ongoing consultancy and support to help you adapt to future changes

• Integration with broader sustainability and Net Zero strategies

Unsure whether your business is obligated under the EU CBAM? Take our online quiz to find out! Feel free to contact us directly with your CBAM questions at [email protected]