Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

December 22, 2023

UK Government announces adoption of Carbon Border Adjustment Mechanism (UK CBAM)

  • The UK Government has confirmed that it will implement a Carbon Border Adjustment Mechanism (CBAM) by 2027.
  • The UK CBAM will apply a charge on the carbon emissions embodied in imports from the following sectors: aluminum, cement, ceramics, fertilizers, glass, hydrogen, iron and steel.
  • Consultation will take place on the design and mechanics of the UK CBAM in 2024. However, some key details are available now.

On 18 December 2023, in their response to the consultation on policy measures to address the risks of carbon leakage, the United Kingdom (UK) Government announced that a UK Carbon Border Adjustment Mechanism (CBAM) will be implemented by 2027.

In March-June 2023, the UK Government consulted on the adoption of policies to address "carbon leakage risk to support decarbonisation." The Government sought views on the nature and extent of carbon leakage risk to UK industry, and the potential design and implications of policies to address such risks. For an overview of this consultation, see EY Global Tax Alert, UK Government launches consultation on a carbon border adjustment mechanism and other measures, dated 30 March 2023.

In announcing a UK CBAM by 2027, the UK Government has indicated that additional consultation will take place on the design and mechanics of the UK CBAM in 2024. Nonetheless, some key details have been released about how the mechanism will be constructed, as outlined below.

Functioning of the UK CBAM

As with its EU equivalent, the UK CBAM will apply a tariff on imports of emission-intensive products, based on the embedded emissions of these imports. The UK CBAM will be a customs-orientated regime, with liability being placed on the importer of record for products in scope.

One key area where the UK CBAM will seemingly diverge from the EU CBAM is the use of emission certificates. Although the EU CBAM requires reporters to purchase and surrender CBAM certificates, the UK Government appears to have ruled this out for the UK regime.


The UK Government has committed to implementing the UK CBAM "by 2027." No further detail has been provided at this stage regarding any potential transitional periods or a phased introduction of the regime. The EU CBAM is currently in a transition phase until 1 January 2026, when it becomes fully operational.

Sector scope

The envisaged scope of the UK CBAM diverges from its EU equivalent. Though both will cover iron and steel, aluminum, cement, hydrogen and fertilizers, the UK CBAM will also include ceramics and glass. Notably, the UK CBAM is not expected to cover electricity. The exact goods covered under these sectors will remain unclear until a full list of products is published, however we do know that the UK will aim for "comparative coverage" with the UK Emission Trading Scheme (UK ETS).

Emissions scope

The UK CBAM will be applied to Scope 1, Scope 2 and select precursor product emissions in imported products. As with the EU CBAM, Scope 3 emissions will not be initially included in the UK CBAM.

Carbon prices paid outside the UK

In line with the EU CBAM, explicit carbon prices paid in other jurisdictions will be considered when calculating the price to be paid under the UK CBAM. As with the EU CBAM, it is not known which carbon prices will be accepted under this mechanism.

Coordination with UK ETS

The application of the UK CBAM will be linked with the UK ETS. Also on 18 December, the UK ETS Authority announced two consultations seeking views on how to improve the UK ETS. One of these consultations focuses on free allocations under the UK ETS, which will have a direct impact on the cost impacts of UK CBAM. It is expected that, as with the EU CBAM, the introduction of financial impacts under the UK CBAM will likely be aligned with availability of free allowances under the UK ETS.

Next steps for businesses

Although details of the UK CBAM have not been finalized and will be consulted on in 2024, there are a number of steps business can take now to start their preparations, leveraging the lessons learned from preparations for the EU CBAM, such as:

  • Assign internal responsibility, in consultation with General Counsel, for managing preparations for the UK CBAM
  • Develop a strategy for engaging with the UK Government on UK CBAM and related measures; as part of this, impacted businesses should determine the priorities for their business and engage with future consultations
  • Continue to monitor and assess any legislative developments on the topic; consider responding to the current ETS consultation on free allocations and future consultations on the UK CBAM regime
  • If you have completed, or are currently undergoing preparations for the EU CBAM, consider options for harmonizing data collection and reporting processes across the two regimes, as well as other upcoming sustainability reporting measures (e.g., those covering deforestation, human rights and supply-chain due diligence)


For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom)

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more