UK CBAM — the carbon border adjustment mechanism

The CBAM rate is not a headline figure a minister announces. It is calculated quarterly, and S.I. 2026/809 sets out how. Step 1 of the calculation in section 149(3) of the Act takes the mean of all UK ETS auction clearing prices in the quarter preceding the quarter in question. If no allowances were auctioned in that quarter, it uses the most recent quarter in which some were.

So the tax on an import in one quarter is priced off what UK ETS allowances actually cleared at in the quarter before — a real market price, lagged by three months.

Step 2 then reduces that price to reflect the free allowances a UK manufacturer of the same good would have received, because the point of the tax is comparability rather than penalty. And this is where the drafting becomes remarkable. The factor is not a UK number. Regulation 4 specifies “the same factor that is set out in Article 16(14) of Commission Delegated Regulation (EU) 2019/331”, for the corresponding scheme year.

A British tax, on imports, calculated by reference to an article of a European Union delegated regulation on free allocation. It is on the face of the instrument.

Which means anyone modelling a CBAM liability has to track an EU instrument to get the UK number right — and that the two systems are already coupled in the arithmetic, whatever happens to the linking negotiations described further down this page.

Once you have a rate you need a quantity, and there are exactly two ways to get one. You may use a default value published by the Treasury, in which case the emissions are simply the weight of the good multiplied by that value. Or you may use actual verified data from the installation that made it.

Only direct emissions are in scope at commencement. Indirect emissions — the electricity used to make the goods — are out, and that is a reversal.

The October 2024 consultation response said the government intended CBAM to cover indirect emissions. Budget 2025 reversed it, excluding them at implementation to reflect continued support for the Energy Intensive Industries Compensation Scheme. Both documents are on the record; the later one governs.

The actual-data route is set out in regulation 5 of S.I. 2026/995 as an eight-step calculation. It identifies a monitoring period, takes verified emissions for that type of good from the installation over that period, converts non-CO₂ gases, adds precursor emissions, divides by the weight of that type of good produced in the period to give an emissions intensity per tonne — rounded to five decimal places — and multiplies by the weight actually imported.

Cement and fertilisers get a modified step 7, because they arrive in different mixtures and concentrations: their functional units are converted by an equation in a Treasury notice.

Regulation 8 carries the conversion table for the gases that are not carbon dioxide, and it is short: nitrous oxide at 265 tonnes of CO₂e per tonne, tetrafluoromethane at 6,630, hexafluoroethane at 11,100. Methane does not appear, because it is not among the specified emissions for these production processes.

One negative finding, and it matters for anyone budgeting. No default emissions values have been published as at 10 September 2026. The gov.uk collection says only that HMRC “will publish guidance soon on rates and default emissions values”. Until they appear, the default route cannot be priced, and the actual route cannot be avoided by anyone who wants a number.

This is the newest thing in the scheme, and the most immediately useful. S.I. 2026/995 was made on 8 September 2026 and laid before the House of Commons on 9 September 2026. Its regulation 9 decides which year’s emissions data you are allowed to use.

Emissions must be monitored over a calendar year. For a CBAM good imported before 1 January 2028, the monitoring period is either the most recent calendar year for which there are verified data, taken from the year of import or the year before it — or the calendar year in which the good was produced.

Read plainly: a good imported during 2027, the first year of the tax, may be settled on verified 2026 emissions data.

That is a real concession rather than a technicality. Verification of a calendar year cannot finish until the year has ended, so without this provision an importer in early 2027 would have had no verified year to point at and no choice but the default values that do not yet exist. Overseas producers who monitored 2026 can supply a usable figure from day one.

From 1 January 2028 the window widens rather than closes: the monitoring period may be the most recent of the two calendar years preceding the year of import, or again the year of production. Precursor goods follow the same period as the good they went into, or the year that precursor was itself produced.

The practical instruction for a UK importer is therefore not “wait for guidance”. It is: ask your suppliers now whether their 2026 emissions were verified, and by whom.

Actual emissions data are only usable if a verifier says they are. Regulation 12 of S.I. 2026/995 requires a verifier to be independent of the importer, of the installation that made the good and its operator, and of any installation that made a precursor good — and to be accredited to verify that particular type of CBAM good.

The verifier reports to the operator of the installation, not to the importer. The importer receives the product of that report and carries the consequences of it.

The verification report must name the installation, its operator and the verifier, carry the verifier’s accreditation number and the monitoring period, and contain a verification opinion statement saying whether the operator’s data are sufficiently accurate to be used. That statement is the hinge: without it there are no verified emissions data, and without verified data there is no actual-emissions route.

Then comes the detail almost nobody has quoted. An accreditation body, under regulation 15, must be “a full member of the Global Accreditation Cooperation Incorporated, a New Zealand incorporated society with the incorporation number 50223540”.

A United Kingdom tax, on imported goods, whose evidential chain is anchored to a named New Zealand incorporated society, identified in the instrument by its registration number.

The same formulation appears in the carbon-price-relief instrument, so it governs both halves of the calculation. It is not an error — it is how the UK has chosen to plug into the international accreditation system without writing its own. But it does mean that checking whether your verifier is acceptable begins with a membership list held on the other side of the world.

If the emissions embodied in your imported goods have already borne a carbon price abroad, the CBAM charge can be reduced by it. That is carbon price relief, and S.I. 2026/809 sets both the qualifying test and the arithmetic.

The relief is the whole reason CBAM is an adjustment rather than a tariff. Without it the tax would charge for carbon that has already been paid for once.

A qualifying carbon pricing scheme has four cumulative characteristics. It must be administered by or for a city, a province, state or region or group of them, a national government or a supranational organisation, with that body deciding how the revenue is used. It must require participation as a matter of law from all installations making the good, or from all those above a specified emissions level. It must impose a cost on emissions, directly or indirectly. And its rules, scope and headline carbon price must be publicly available.

The arithmetic is a five-step calculation of an effective carbon price, and the word is doing work. The headline price is only the start: free allowances, the threshold above which a price bites, graduated pricing, and rebates or refunds under a support scheme are all netted off. A jurisdiction can advertise a high carbon price and deliver a low effective one.

The importer performs that calculation themselves, using data on a carbon pricing verification form completed by an accredited verifier and given to the installation.

HMRC published a provisional list of schemes that currently meet the criteria on 27 August 2026. It is explicitly provisional and intended to help importers prepare, so it should be checked again rather than cached.

Open S.I. 2026/995 and the first line, above the title, is not about carbon at all. It reads: this instrument “has been made partly in consequence of a defect in S.I. 2026/802 and is being issued free of charge to all known recipients of that Statutory Instrument”.

That is the government’s own word — defect — about its own CBAM administrative regulations, made eight weeks earlier and not yet in force. Regulation 17 shows what was wrong.

As originally made, the CBAM return asked for the commodity code, the weight, the carbon price relief and the place of origin. It did not ask for the emissions.

Regulation 10 of S.I. 2026/802 listed four things a return must carry. The charge, however, is embodied emissions multiplied by the CBAM rate — so the one figure the tax is actually computed on had no field on the form. Regulation 17 of the September instrument inserts three: the level of the default value where one is used; the emissions intensity, verified by a verifier, where actual data are used; and whether the good was produced using another CBAM good meeting the UK-precursor conditions. It also adds a record-keeping line about section 147(2).

None of this is a scandal, and it was caught in good time — both instruments come into force together on 1 January 2027, so no return was ever filed on the defective version. It is included here because it tells you something true about the state of the regime.

A tax whose administrative regulations needed patching two months after they were made, and whose default emissions values are still unpublished, is a tax still being finished.

Plan accordingly: treat the current guidance as a moving target, keep the primary instruments rather than a summary of them, and re-check before you rely on anything dated earlier than September 2026.