- The government has confirmed its plans to introduce the UK CBAM from 1 January 2027, to target imports of carbon intensive products such as iron, steel, aluminium, fertiliser, hydrogen, and cement. The UK CBAM will represent the gap between any carbon price applied in the country of origin and the carbon price faced by UK producers. Ceramics and glass will not be part of the products in scope initially. There will be five rates of UK CBAM for each product type. Importers will need to register for UK CBAM, with the registration threshold set at £50,000 per rolling 12-months period.
- On 28 November 2024, two new consultations were issued on expanding the UK ETS to include the maritime sector from 2026 and on non-pipeline transportation for carbon capture and storage. On the same day, an initial response to the UK ETS authority’s 2023 free allocation review was published, confirming changes to free allocation rules to ensure participants who permanently cease their operations do not receive excess free allocation in their final year. On the former, the Department for Transport released on 25 March 2025 a new maritime decarbonisation strategy, aiming to cut greenhouse gas emissions to zero by 2050 with additional interim targets in 2030 (30%) and 2040 (80%). This includes the announcement of investment in green technologies and fuels and the inclusion of local shipping sector under the UK ETS from 2026. Two new calls for evidence were released on net zero ports and the decarbonisation of smaller vessels.
- On 30 January 2025, a policy paper was published by the Department for Energy Security and Net Zero, in response to an earlier consultation on certain technical and operational changes (including the publication of a registry transaction data, additional exception to disclosure of UK information and extension of ultra small emitters status) to the UK ETS, which came into force on 31 March 2025.
- On 11 February 2025, HM Treasury released the Terms of Reference for the newly created UK CBAM international group which will be used to communicate UK CBAM policy updates and receive feedback on specific UK CBAM policy design from international stakeholders.
- On 24 April 2025, HMRC released a technical consultation on draft legislation on UK CBAM. This consultation aims to refine the legislation to ensure it meets the policy intent and is not a further consultation on the policy design. A wider “policy update” was published, summarising the key features of the new tax.
- On 19 May 2025, the UK and the European Commission agreed to work towards establishing a link between the UK and EU carbon markets (UK and EU ETS). While negotiations are ongoing, an interim agreement could be made to avoid any potential negative impacts from the EU’s CBAM, which will be applied to British exports of certain goods from 1 January 2026.
- Timing: in relation to the maritime decarbonisation strategy, the call for evidence on net zero ports closed on 24 June 2025 and the call for evidence on small vessels will close on 25 July 2025. The consultation on draft legislation for the UK CBAM closed on 3 July 2025. It is unclear how long an agreement on the linkage of the UK and EU ETS may take.
Resources (click to open)
- A renewed agenda for European Union – United Kingdom cooperation Common Understanding (European Commission, May 2025)
- PM secures new agreement with EU to benefit British people (Prime Minister's Office, 10 Downing Street, May 2025)
- Carbon border adjustment mechanism (CBAM): Policy update (HMRC, April 2025)
- Draft legislation: carbon border adjustment mechanism (HMRC, April 2025)
- Call for evidence: Decarbonising smaller vessels (Department for Transport, March 2025)
- Call for evidence: Net zero ports - challenges and opportunities (Department for Transport, March 2025)
- Maritime Decarbonisation Strategy (Department for Transport, March 2025)
- Technical and operational amendments to the UK Emissions Trading Scheme: UK ETS Authority consultation response (Department for Energy Security and Net Zero, January 2025)
- Expanding and strengthening the UK Emissions Trading Scheme (Department for Energy Security and Net Zero, press release, November 2024)
- UK CBAM: a new tax on carbon-intensive imports | TaxScape | Deloitte (April 2024)
- Consultation on the introduction of a UK carbon border adjustment mechanism (HM Treasury and HMRC, March 2024)
- Factsheet: UK Carbon Border Adjustment Mechanism (Department for Energy Security and Net Zero, HM Treasury, consultation outcome, December 2023)
- Industry invited to share views on changes to Emissions Trading Scheme (Department for Energy Security and Net Zero, press release, December 2023)
