Carbon pricing · four instruments
Carbon tax UK: no tax by that name, four prices instead
The UK has no instrument called a carbon tax.
It prices carbon through the UK ETS, the Climate Change Levy and Carbon Price Support, and from 1 January 2027 a border tax on imports, UK CBAM.
Each has its own payer, its own test and its own rate.
The instruments
Who pays, and on what
| Instrument | What it charges | Who pays | Law |
|---|---|---|---|
| UK Emissions Trading Scheme | Allowances surrendered to cover verified emissions | Installations, aviation and domestic maritime operators in scope | SI 2020/1265 |
| Climate Change Levy | A levy per kWh or kg on taxable supplies of energy | Charged on the taxable supply; reduced rates for climate change agreement holders | Finance Act 2000 Sch 6 |
| Carbon Price Support | Rates on gas, LPG and coal, listed with the levy | As set out on HMRC’s rates page | HMRC rates |
| UK CBAM | A tax on emissions embodied in five sectors’ imported goods | The importer, from 1 January 2027 | Finance Act 2026 Part 5 |
UK ETS
The UK ETS: a cap, allowances and a floor
The UK ETS replaced the UK’s participation in the EU ETS on 1 January 2021.
The UK ETS Authority says it covers heavy industry, power, aviation and domestic maritime, approximately 25% of UK territorial emissions, and has extended it into a 2031–2040 Phase II.
Operators submit a verified emissions report by 31 March and surrender allowances by 30 April each year.
The excess emissions penalty is £100 multiplied by an inflation factor for each allowance not surrendered.
The auction reserve price is £28 from 8 April 2026 under SI 2026/214, and rises each 1 January from 2027 with the GDP deflator; it is a floor for auctions, not the traded price.
Waste incineration will not join in 2028 as first planned, and no new date has been set.
Scope tests, deadlines and penalties are on the UK ETS page.
Climate Change Levy
The Climate Change Levy and Carbon Price Support
HMRC publishes the main rates; electricity and gas are charged at the same rate per kWh.
| £ per unit | From 1 April 2025 | From 1 April 2026 | From 1 April 2027 |
|---|---|---|---|
| Electricity (per kWh) | 0.00775 | 0.00801 | 0.00827 |
| Gas (per kWh) | 0.00775 | 0.00801 | 0.00827 |
| LPG (per kg) | 0.02175 | 0.02175 | 0.02175 |
| Any other taxable commodity (per kg) | 0.06064 | 0.06264 | 0.06468 |
A holder of a climate change agreement pays a reduced rate: the discount is 92% on electricity, 89% on gas, 77% on LPG and 89% on other commodities.
The mechanism is a reduced-rate supply under Finance Act 2000 Schedule 6 paragraph 44, not a reporting duty.
HMRC lists Carbon Price Support rates for 1 April 2016 to 31 March 2028 of £0.00331 per kWh of gas, £0.05280 per kg of LPG and £1.54790 per GJ of coal.
UK CBAM
UK CBAM: the one called a tax
Finance Act 2026 section 142(1) creates “a tax called the carbon border adjustment mechanism”, charged on goods imported on or after 1 January 2027.
It covers five sectors: aluminium, cement, fertilisers, hydrogen, and iron and steel goods, defined by commodity code.
The importer is liable, and registration is triggered by £50,000 or more of CBAM goods imported in the course of a business, on a rolling 12-month or forward 30-day test.
The goods, codes and rate method are on UK CBAM.
None of these instruments is a disclosure regime: SECR and UK SRS ask companies to report emissions, while these charge for them.
The national targets they serve are in the Climate Change Act 2008 and its carbon budgets.
Frequently asked
Carbon tax in the UK, answered
Does the UK have a carbon tax?
Not by that name.
No UK instrument is called a carbon tax.
Carbon is priced through the UK Emissions Trading Scheme, the Climate Change Levy with Carbon Price Support, and, from 1 January 2027, the UK carbon border adjustment mechanism, which the Finance Act 2026 calls a tax.
Who pays the UK carbon price?
It depends on the instrument.
UK ETS participants (installations in heavy industry and power, aviation and domestic maritime operators) surrender allowances; the Climate Change Levy is charged on taxable supplies of energy; and from 2027 importers of CBAM goods pay UK CBAM.
What is the UK ETS carbon price?
The UK ETS price is set by trading, so this page prints none.
What the law fixes is the auction reserve price, £28 from 8 April 2026 under SI 2026/214, which rises with the GDP deflator from 1 January 2027.
What is UK CBAM?
A tax charged on the emissions embodied in aluminium, cement, fertiliser, hydrogen, and iron and steel goods imported into the UK on or after 1 January 2027.
The importer is liable, and registration is triggered at £50,000 of CBAM goods imported in the course of a business.
What is the Climate Change Levy rate for 2026?
HMRC’s main rate from 1 April 2026 is £0.00801 per kWh for both electricity and gas, rising to £0.00827 from 1 April 2027.
Holders of a climate change agreement get a 92% discount on electricity and 89% on gas.
Is a carbon tax the same as carbon reporting?
No. These instruments charge for carbon; reporting regimes such as SECR and UK SRS ask a company to disclose its emissions.
UK CBAM is a tax on imports, not a disclosure duty.
Sources
Primary sources
Every rate and date on this page is the owner’s own: HMRC, DESNZ or the instrument.
- legislation.gov.ukFinance Act 2026, Part 5 (carbon border adjustment mechanism)
ss.142–158 and Schedules 16–19: a tax on imports from 1 January 2027.
- HMRCClimate Change Levy rates
Main rates 2025–2027, CCA discounts and Carbon Price Support rates.
- legislation.gov.ukFinance Act 2000, Schedule 6, paragraph 44
The reduced-rate supply behind a climate change agreement.
- GOV.UK (DESNZ)Participating in the UK ETS
The 31 March report and 30 April surrender; replaced EU ETS participation on 1 January 2021.
- GOV.UK (UK ETS Authority)UK ETS: a policy overview
Coverage of about 25% of UK territorial emissions; Phase II 2031–2040.
- legislation.gov.ukSI 2026/214 (auctioning amendment)
Auction reserve price £28 from 8 April 2026, index-linked from 1 January 2027.
- legislation.gov.ukSI 2020/1265, article 52
The excess emissions penalty: £100 × the inflation factor per allowance.
- GOV.UKUK ETS scope expansion: waste
Waste incineration will not join in 2028; no new date.