Draft legislation: carbon border adjustment mechanism
Consultation description
The carbon border adjustment mechanism (CBAM) will place a carbon price on specified goods imported to the UK from sectors that are at risk of carbon leakage. It takes effect from 1 January 2027.
This technical consultation aims to gather feedback from stakeholders on the drafting of the primary legislation to make sure it delivers the policy correctly and effectively. It is not a further consultation on the policy design.
The legislation ensures that UK decarbonisation efforts lead to a true reduction in global emission rather than simply displacing carbon emissions overseas. It sets out the scope of the tax and the calculation for CBAM liability, alongside the core administrative elements of the tax.
Alongside the draft legislation, the government is also publishing a CBAM policy update which provides an overview of the scope and design of CBAM in order to provide clarity for businesses who will be impacted. It includes decisions relating to CBAM policy taken by the government following publication of the government response to the 2024 policy consultation.
The consultation on the legislation will be of interest to importers of goods from the aluminium, cement, fertilisers, hydrogen, and iron and steel sectors, and downstream producers that use these goods in their supply chains.
Following this consultation, legislation will be included in a Finance Bill.
On this page, you can read:
- draft primary legislation
- draft explanatory notes
- a draft tax information and impact note (TIIN)
- a policy update
Background
The government confirmed on 30 October 2024 that a CBAM will be introduced on 1 January 2027. CBAM will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron and steel sectors that are at risk of carbon leakage.
This announcement followed a 12-week policy consultation, entitled ‘Introduction of a UK carbon border adjustment mechanism from January 2027’, which set out proposals for the design and administration of the CBAM. You can read the government response to this consultation.