UK sets initial carbon border levy under £10 per tonne
The UK's new carbon border adjustment mechanism will charge importers of steel, aluminium, cement, hydrogen and fertilisers from January 2027.
HM Revenue & Customs published illustrative rates for the UK's upcoming Carbon Border Adjustment Mechanism on 16 October. Importers of steel, aluminium, and cement will face a carbon border levy of less than £10 per tonne of emissions when the regime starts in January 2027. The scheme covers five key industrial sectors: aluminium, cement, fertilisers, hydrogen, and iron and steel.
The initial illustrative rates per tonne of CO₂ equivalent are as follows:
| Sector | Levy Rate (£) |
|---|---|
| Aluminium | 9.79 |
| Iron and Steel | 9.69 |
| Hydrogen | 9.24 |
| Cement | 8.78 |
| Fertiliser | 1.45 |
HMRC emphasised that "the figures are not forecasts and create no tax liability." The underlying emissions data is still being checked by the UK ETS Authority and could change. These rates reflect the current system of free allowances under the UK Emissions Trading Scheme.
Implementation timeline and registration requirements
The UK CBAM takes effect on 1 January 2027. Liability for the levy begins on that date, but the registration portal for businesses will not open until 1 January 2028. Companies liable for charges in 2027 will have until 31 January 2028 to complete their registration.
A £50,000 registration threshold applies. This is based on the value of relevant imports over the previous 12 months or expected within the next 30 days. Notably, imports made before 1 January 2027 are excluded from this backwards-looking calculation.
Rate calculation methodology and exemptions
CBAM rates will be recalculated each quarter to reflect movements in the UK ETS carbon price and the phased withdrawal of free permits for domestic producers. A 10% markup will apply to all covered sectors except fertilisers. The average UK ETS auction price was £58.15 per tonne between July and September 2024, providing context for future calculations.
The initial low rates are directly tied to the high proportion of free allowances still granted to UK manufacturers. In the cement sector, for example, free allowances cover 87.1% of direct emissions. The phase-out factor for these free allowances will be 97.5% in 2027, meaning importers will initially pay roughly 15% of the full carbon price.
Default emissions values, listed against eight-digit product codes, will apply from 1 January 2027 until 31 December 2028. HMRC will publish the first set of applicable rates for the January to March 2027 period before the end of 2026. Quarterly updates will follow this initial publication.
