- In April 2025, HMRC released a technical consultation on draft legislation for the UK’s carbon border adjustment mechanism (CBAM), which will take effect from 1 January 2027. Importers who meet or exceed the minimum registration threshold of £50,000 per rolling 12-month period will need to register.
- The UK’s CBAM will target imports of carbon-intensive products such as iron, steel, aluminium, fertiliser, hydrogen, and cement. UK CBAM is intended to ensure imports of carbon-intensive products face the same carbon price as domestic producers. Ceramics and glass will not be in scope initially but the product scope of CBAM is intended to expand over time. There will be separate UK CBAM rates applied to each product type.
- In 2024, the government consulted on expanding the scope UK’s existing Emissions Trading Scheme (UK ETS) to the waste and maritime sectors, and greenhouse gas removals (GGRs). In July 2025, the UK ETS Authority confirmed that the scope of the UK ETS will be expanded to the domestic shipping sector from 2026 and confirmed its intention to include the waste sector from 2028. The Authority aims to legislate for the integration of UK-based engineered GGRs into the UK ETS by the end of 2028, and for the system operational by the end of 2029.
- In 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). Negotiations are ongoing, with the design of an agreement to link UK and EU ETS intended to exempt UK products from EU CBAM and vice versa. The EU CBAM enters its fully operational phase from 1 January 2026.
- Timing: the UK CBAM will take effect from 1 January 2027 and it is unclear how long an agreement on the linkage of the UK and EU ETS may take. The UK ETS will be expanded to domestic shipping from 2026. It is intended to expand the UK ETS to the waste sector from 2028 and apply it to GGRs by the end of 2029.
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