The EU and UK Carbon Border Adjustment Mechanisms: A Comparison

UK CBAM

EU CBAM

From the outset: aims to capture only those goods whose production would be in scope of the UK ETS if produced domestically and which would be produced as a result of activities currently deemed at risk of carbon leakage within the UK ETS.

Scope 1 and scope 2 emissions (rebadged as "direct" and "indirect" emissions).

Limited part of Scope 3 emissions: certain precursor product emissions i.e. an in-scope CBAM good used as an input into the production process of a complex good that is also within scope of the CBAM – to be further specified at a later date.

By 2030: aims to extend the mechanism to all products subject to the EU ETS

Scope 1 and scope 2 emissions (electricity consumed for the production of CBAM goods)

Limited part of scope 3 emissions: input material under CBAM scope but, in case of complex goods, limited to the iron and steel sector only. Further review on downstream products.

Aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel
i.e. includes glass and ceramics which are not included as part of the EU CBAM but, unlike the EU CBAM, electricity is not in scope. 

Aluminum, cement, fertiliser, hydrogen, iron and steel and electricity

Initial list of commodity codes based on list of proposed products in the EU CBAM (but excluding commodity code relating to electricity as this is not in scope for UK CBAM). Additional codes:

• Glass (HS 7002 to 7008, 7010, 7016, 7019 – except 7019 62 10)

• Ceramics (HS 6901, 6902, 6903, 6904, 6905, 6906, 6907, 6910)

List of commodity codes. Used as starting point for drafting the UK list on sectors included in the UK CBAM.

CBAM liability calculated by multiplying the embodied emissions by the CBAM rate, less an adjustment for the effective overseas carbon price for each type of good. 

Reported on a CBAM return. 

Purchase and surrender of CBAM certificates (representing the embedded emissions less a reduction corresponding to the carbon price paid in the country of origin) at the current EU ETS market price.

CBAM liability = Embodied emissions x (CBAM sectoral rate – "Adjustment")

Number of CBAM certificates to be surrendered = embedded emissions – reduction corresponding to the carbon price paid in the country of origin

Embodied emissions will be calculable either by:

1. using default values as determined by the UK government. Subject to future review and for an initial period until at least 2031, default values will be set at a product level, in line with a global average of embodied emissions weighted by production volumes of key UK trading partners,
   OR 
2. using data on the actual emissions embodied within the CBAM goods, using prescribed methodology. 

Embedded emissions are calculated based on the actual emissions 

Simple goods: attributed direct and indirect emissions of goods / quantity of the goods produced by the installation over the period

Complex Goods: {attributed emissions of goods + Embedded emissions of precursors} / quantity of goods produced by the installation over the period

OR

Where actual emissions cannot be adequately determined, the embedded emission are determined using the default values.
Specific provisions apply for the transitory period.

Data on actual emissions to be "reliably and independently" verified by a body accredited by accreditation services which are part of the International Accreditation Forum.

To be verified by an independent third-party (verification principles and accreditation of verifiers rules still to be determined)

Set separately for each of the seven sectors.

Determined quarterly.

It will take into account (i) the average of the UK ETS auction price over the preceding quarter, (ii) the free allocation of allowances under the UK ETS and (iii) carbon price support rates.

Both indirect and direct emissions prices will be taken into account, on a weighted basis.

The price of CBAM certificates is set as the average of the closing prices of EU ETS allowances on the auction platform, for each calendar week.

N.B. While not part of the CBAM rate calculation per se, the CBAM certificates to be surrendered shall be adjusted to reflect to reflect the extent to which EU ETS allowances are allocated free of charge to EU installations producing the same goods.

CBAM liability will be reduced by any evidenced explicit carbon price overseas applied to the embodied emissions in the imported CBAM goods.

The government will specify which carbon price mechanisms may be credited; this will normally be an emissions trading scheme or a carbon tax with a fixed price. Regulatory policies or non-pricing carbon reduction measures will not be sufficient. 

Calculated by using an average of the headline carbon price over the previous quarter and adjusted to account for domestic support mechanisms and similar (i.e. the effective rate).

Applies also to indirect imports.

A CBAM declarant may claim in the CBAM declaration a reduction in the number of CBAM certificates to be surrendered in order to take into account the carbon price effectively paid in the country of origin for the declared embedded emissions (taking into account any rebate or other form of compensation available in that country that would have resulted in a reduction of that carbon price).

The requirements for such reduction and the applicable conversion will be specified in implementing acts.

No transitional period

In force for imports made on or after 1 January 2027

Extended reporting timeline for 2027, to allow sufficient time for the UK CBAM online registration and returns service to be set up and for liable persons to establish appropriate processes with their suppliers. 

Proposed deadline for submitting the first CBAM return and payment for the entire 2027 period of 30 May 2028.

From 2028 onwards, reporting on a quarterly basis.

Return submitted within a month of the end of the relevant accounting period i.e. by 30 April / 31 July / 31 October / 31 January.

Reporting-only transitional phase from 1 October 2023

Fully in force for imports made on or after 1 January 2026

N/A

Calendar year (12 months)

Declaration to be submitted by 31 May of the following year.

A CBAM liability will arise:

• when goods are first released into free circulation in the UK (if subject to customs procedures), or
• when the CBAM good first enters the UK otherwise.

The CBAM rate as at this date will apply.

CBAM applies where the goods, or processed products from those goods resulting from the inward processing procedure are imported into the customs territory of the EU.

UK Importers / person on whose behalf the goods are moved to the UK

EU Importers, who have to apply for the status of authorised CBAM declarant

A liable person will be able to appoint a tax agent to submit CBAM returns on their behalf. 

The tax agent will not take on joint and several liability for CBAM.

Where the EU importer appoints an indirect customs representative, the indirect custom representative can agree to act as an authorised CBA declarant. It is mandatory when the importer is not established in a member State.