The Government has published the draft secondary legislation for the UK’s Carbon Border Adjustment Mechanism (CBAM), which is due to go live on 1 January 2027. This represents an important development for UK businesses importing affected materials.

What Is CBAM?

CBAM has already been introduced in the EU and will apply a carbon price to certain imported goods in order to reduce the risk of “carbon leakage”. This refers to the concern that emissions-intensive production simply shifts overseas when the UK tightens its own environmental standards.

UK importers of goods from the aluminium, cement, fertilisers, hydrogen, and iron and steel sectors, as well as downstream producers that use these goods within their supply chains, are likely to be affected by CBAM.

CBAM is scheduled to commence on 1 January 2027, and the primary legislation for this has already been included in Finance Bill 2025–26. The new draft rules set out the legislative requirements associated with administering the tax.

What the Draft Rules Cover

The draft legislation includes details on:

  • Calculation of the CBAM rate.

  • The availability of carbon price relief, which can reduce the amount of CBAM charged.

  • The administrative requirements relating to registration for CBAM.

  • The information that must be included on CBAM tax returns and the associated record-keeping obligations.

  • Details of the reimbursement arrangements.

  • How the weight of a CBAM good will be defined and the related record-keeping requirements.

  • The records importers will need to retain.

In summary, if you import goods that fall within the scope of CBAM, these draft rules provide an early indication of the additional administrative workload the regime will introduce.

What’s Next?

The documents are open for technical consultation until 24 March 2026, and HM Revenue and Customs (HMRC) is seeking feedback on whether the draft rules are workable in practice.