UK CBAM Liability Calculation Guide 2027

Emissions Data, Carbon Price Relief and Cost Forecasting for Importers

CBAM Journal | Sekason Research Limited | London

Published 2026 | Compliance Intelligence Series

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Executive Summary

UK importers of steel, aluminium, cement, fertiliser, and hydrogen goods must calculate and pay a carbon charge on all qualifying imports from 1 January 2027, with the first return and payment due by 31 May 2028; failure to register by 31 January 2028 exposes importers to compulsory registration, back-assessed tax liability, and penalties under HMRC's extended enforcement powers.

The charge is calculated by multiplying embodied emissions by a sector-specific quarterly CBAM rate derived from UK ETS auction prices, then deducting eligible Carbon Price Relief — but that deduction requires a verified carbon pricing report completed by a GACI-accredited verifier using an HMRC-prescribed template, and importers who cannot obtain it will pay the full charge.

Default emissions values are available where verified supplier data is absent, but they represent a fixed government-published figure that will produce higher liability than verified data wherever a supplier's actual emissions intensity falls below that default.

Key Findings

Finding	Implication
CBAM rate is quarterly and variable	Liability cannot be calculated until HMRC publishes rates from Q1 2027; advance forecasting requires scenario modelling against UK ETS price ranges
Two emissions data options carry different financial risk	Default values may produce higher liability than verified actual emissions; the financial differential depends on sector and supplier production route
Carbon Price Relief requires third-party verification	An HMRC-template carbon pricing verification report from a GACI-accredited verifier is mandatory; relief cannot be claimed on the basis of supplier self-declaration
Record-keeping obligation is 6 years	Records must be retained for 6 years after the end of the accounting period to which they relate
First accounting period is annual, not quarterly	The 2027 accounting period runs 12 months; quarterly filing begins from 1 January 2028
Registration uses two tests	Both the 30-day forward-looking test and the 12-month backward-looking test must be applied on an ongoing basis, not assessed once

Executive Action Checklist

• Assess registration threshold exposure against the £50,000 rolling 12-month test — begin monitoring from 1 January 2027

• Contact in-scope suppliers to establish whether verified emissions data will be available for 2027 imports

• Identify whether overseas suppliers operate under a qualifying carbon pricing scheme — begin Carbon Price Relief documentation planning now

• Assign internal responsibility for CBAM returns across procurement, finance, and compliance functions

• Register with HMRC via Government Gateway by 31 January 2028 at the latest; earlier registration is permissible

• Submit first CBAM return and payment by 31 May 2028

• Establish a 6-year record-keeping system for all CBAM-relevant documentation

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Regulatory Context: Understanding UK CBAM Before 2027

Why the UK Introduced CBAM

Carbon leakage — the displacement of emissions-intensive production to jurisdictions without equivalent carbon pricing — directly undermines the effectiveness of the UK Emissions Trading Scheme. Without a border mechanism, UK ETS costs create an incentive for manufacturers to relocate production overseas or for importers to source from lower-cost, higher-emission suppliers, producing no net reduction in global emissions. UK CBAM addresses this by ensuring that imported goods in scope sectors carry a carbon cost comparable to that borne by UK domestic producers under the UK ETS.

The mechanism is not designed as a trade barrier. Its stated purpose is to align the carbon price embedded in imports with the carbon price faced by UK manufacturers in the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors. Importers cannot avoid the charge by switching to lower-cost supply chains alone: if the replacement supplier operates in a jurisdiction without a qualifying carbon pricing scheme, the full CBAM liability applies. The only route to reducing liability through supply chain decisions is sourcing from producers in jurisdictions with qualifying carbon pricing schemes that generate eligible Carbon Price Relief.

Policy Objective Framework

Objective	Mechanism
Prevent carbon leakage	Apply carbon charge to imports equivalent to UK ETS cost
Protect UK industry competitiveness	Ensure overseas producers face comparable carbon costs
Support global decarbonisation	Incentivise carbon pricing adoption in exporting jurisdictions
Maintain UK ETS integrity	Prevent substitution of UK-produced goods with uncarbon-priced imports

What Changed Between 2024 and 2026

UK CBAM moved from policy announcement to detailed legislative framework between October 2024 and April 2026. The October 2024 confirmation established the 1 January 2027 launch date and the £50,000 registration threshold. Primary legislation was introduced through the Finance Act 2026. Draft secondary legislation was published in two rounds: the first on 10 February 2026 for a 6-week technical consultation closing 24 March 2026, and the second on 9 April 2026 for a further 6-week consultation closing 21 May 2026.

The April 2026 secondary legislation package covered four substantive areas: calculation of the CBAM rate and Carbon Price Relief methodology, administrative provisions including registration and returns, emissions and verification requirements, and transitory provisions modifying dates for the first accounting period.

These regulations remain in draft pending final responses and will be laid as finalised secondary legislation later in 2026. The core policy framework confirmed by the April 2026 Policy Summary is the operative basis for compliance planning, subject to any changes arising from consultation review.

Regulatory Change Timeline

Date	Development
30 October 2024	UK Government confirms UK CBAM introduction from 1 January 2027
26 November 2025	UK Government publishes CBAM policy framework update [see note]
10 February 2026	First round draft secondary legislation published; consultation opens
24 March 2026	First consultation closes
9 April 2026	Second round draft secondary legislation and updated Policy Summary published
21 May 2026	Second consultation closes
Later 2026	Final secondary legislation to be laid
Autumn 2026	Illustrative CBAM rate example to be published by HMRC
1 January 2027	UK CBAM enters into force
31 January 2028	Registration deadline for businesses that became liable during 2027
31 May 2028	First return and payment deadline

Note: The 26 November 2025 entry refers to a government publication recorded in research data. The specific document title should be confirmed at gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam before final publication of this report.

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UK CBAM vs EU CBAM: Calculation Differences

Multinational importers subject to both UK and EU CBAM face materially different calculation obligations under each regime. The differences affect emissions scope, rate-setting methodology, verification requirements, and the treatment of carbon price relief. Treating the two systems as equivalent creates direct compliance risk.

UK vs EU CBAM Comparison Table

Feature	UK CBAM	EU CBAM
Start date	1 January 2027	1 January 2026 (definitive phase)
Sectors covered	Steel, aluminium, cement, fertiliser, hydrogen	Steel, aluminium, cement, fertiliser, hydrogen, electricity
Electricity	Not in scope	In scope
Rate-setting	Quarterly, based on UK ETS auction clearing prices with free allocation adjustment	Based on EU ETS carbon price — specific methodology per EU CBAM implementing regulation
Emissions scope	Direct (Scope 1) only, aligned with UK ETS system boundaries	Direct emissions; indirect emissions for some sectors (aluminium, fertilisers)
Carbon price relief	Deducted from CBAM charge; requires HMRC-template verification report from GACI-accredited verifier	Deducted from certificates required; separate verification process
Default values	Government-published per CBAM good; specific values to be published before 2027	EU default values published
Accounting period (Year 1)	Annual: 1 January 2027 to 31 December 2027	Annual
First return deadline	31 May 2028	Annual declaration deadline — specific date per EU CBAM implementing regulation
Threshold	£50,000 of CBAM goods over rolling 12-month period	Annual mass threshold — per EU CBAM implementing regulation
Verification interoperability	Monitoring methodology broadly designed for interoperability with EU CBAM	EU-specific requirements; some reciprocal recognition
Criminal offences	Yes: fraudulent evasion and deliberate misstatement	Yes

Note: The EU CBAM first return deadline, threshold figure, and rate-setting mechanism require verification at taxation-customs.ec.europa.eu before this table is finalised for publication. These entries have been restated conservatively pending that check.

The electricity exclusion from UK CBAM scope is the most significant sectoral difference for importers operating across both regimes. The threshold structures also differ: the UK uses a value-based test while the EU uses a mass-based threshold. Importers operating under both regimes must apply both threshold tests independently.

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Compliance Obligations for UK Importers

Who Must Comply

Any person who imports CBAM goods into the UK in the course of a business and meets or exceeds the £50,000 minimum registration threshold is liable for UK CBAM. The liable person is the importer — defined as the person in whose name the customs declaration is made, or, where a declaration is made on behalf of another person, the person on whose behalf it is made. Private individuals importing for non-commercial purposes are not in scope.

Two tests determine when the registration obligation arises. Both must be applied on an ongoing basis throughout the year; a one-time annual assessment is not sufficient.

• Forward-looking test: On any given day, consider whether the total value of CBAM goods expected to be imported over the next 30 days will meet or exceed £50,000. If the test is met, the liability to register begins on that day.

• Backward-looking test: On the first day of each month, look back over the preceding 12 months to determine whether the total value of CBAM goods imported has met or exceeded £50,000. If the test is met, the registration liability begins on the day the test is applied.

For the first calendar year of CBAM (1 January 2027 to 31 December 2027), importers applying the backward-looking test need only look back to 1 January 2027. If both tests are met simultaneously, registration liability begins from the earlier date.

Friction point: the rolling nature of both tests means importers with variable or seasonal import volumes cannot apply a static annual review. A business that imports £48,000 of CBAM goods in one quarter and then receives a large order may trigger the forward-looking test before it triggers the backward-looking test. A threshold monitoring system — reviewed monthly — is the required operational response.

Scope Decision Tree

Do you import goods in the aluminium, cement, fertiliser, hydrogen,
or iron and steel sectors?
│
├─ NO → Not in scope of UK CBAM
│
└─ YES → Are the goods classified under commodity codes listed
          in the UK CBAM Annex?
          │
          ├─ NO → Not in scope
          │
          └─ YES → Are you importing in the course of a business?
                    │
                    ├─ NO (private individual) → Not liable
                    │
                    └─ YES → Do the goods originate outside the UK
                              (non-preferential rules of origin)?
                              │
                              ├─ NO (UK origin) → Not liable
                              │
                              └─ YES → Apply both registration tests:
                                        Forward-looking: next 30 days ≥ £50,000?
                                        Backward-looking: past 12 months ≥ £50,000?
                                        │
                                        ├─ EITHER TEST MET →
                                        │   Registration obligation triggered
                                        │   Register by 31 January 2028 (first year)
                                        │   or within 30 days in subsequent years
                                        │
                                        └─ NEITHER TEST MET →
                                            Continue monitoring both tests monthly

Mandatory Data Requirements

Four categories of data are required to complete a CBAM return, each with a distinct source and collection obligation.

Required Data Checklist

Data Category	What Is Required	Source	Format Confirmed by HMRC
Emissions intensity	tCO2e per functional unit for each CBAM good	Supplier installation (with verifier sign-off) or government default values	Reported in tCO2e per functional unit; weight reported in kg, converted to tonnes by HMRC
Product classification	8-digit commodity code as at date of tax point	Customs declaration	8-digit commodity code in force when good passed tax point
Country of origin	Non-preferential rules of origin	Customs declaration / commercial documentation	As per non-preferential rules of origin
Carbon pricing evidence	Verified carbon pricing verification report (HMRC template)	Supplier installation via GACI-accredited verifier	HMRC-prescribed template; format to be published in guidance

Where multiple consignments of the same CBAM good are imported during an accounting period, each consignment must be reported separately on the return. Where different CBAM goods are imported in the same shipment, each good must be reported separately. There is no consolidated reporting mechanism for multiple goods.

Friction point: the emissions intensity data requirement sits with the installation producing the goods, not with the importer directly. Importers are dependent on overseas suppliers obtaining and passing through verified data. Suppliers in jurisdictions with no prior CBAM-equivalent experience may be unfamiliar with the verification process. Establishing data collection protocols with suppliers before 1 January 2027 is the only way to avoid defaulting to government default values for the first accounting period.

Reporting and Record-Keeping Requirements

The first CBAM return must be submitted and payment made by 31 May 2028, covering imports from 1 January 2027 to 31 December 2027. From 1 January 2028, accounting periods move to quarterly, with a graduated return and payment window.

Quarterly Accounting Schedule from 2028

Accounting Period	Return and Payment Deadline
1 January 2028 to 31 March 2028	31 July 2028
1 April 2028 to 30 June 2028	29 September 2028
1 July 2028 to 30 September 2028	30 November 2028
1 October 2028 to 31 December 2028	28 February 2029

Return amendments are permitted to correct errors and must be made within 3 years of the end of the accounting period. Nil returns must still be submitted where a registered importer has no CBAM liability for a given period.

Compliance Evidence Matrix

Record Type	What Must Be Held	Retention Period	Held By
Import records	Commodity code, date of import, value, weight (including customs C88/SAD declarations)	6 years after end of accounting period	Importer
Registration records	Information provided at registration; evidence of threshold triggering; weight estimates	6 years after end of accounting period	Importer
Emissions data	Verification report or good-specific verification summary from installation operator	6 years after end of accounting period	Importer
Emissions data — actual	Installation address, operator details, monitoring period dates, verifier name and details, emissions intensity	6 years after end of accounting period	Importer
Carbon Price Relief records	Qualifying scheme evidence, verification document, headline carbon price data, currency conversion evidence, CPR calculations	6 years after end of accounting period	Importer

All records must be held for 6 years after the end of the accounting period to which they relate. Records for the 2027 accounting period must be retained for 6 years from the end of that period.

How UK CBAM Liability Is Calculated

The UK CBAM Calculation Formula

UK CBAM liability is determined by a three-component formula confirmed in the Finance Act 2026 and April 2026 secondary legislation:

CBAM Liability = CBAM Charge − Carbon Price Relief

Where:

CBAM Charge = Embodied Emissions (tCO2e) × CBAM Rate (£/tCO2e)

Carbon Price Relief = Embodied Emissions (tCO2e) × Effective Carbon Price (£/tCO2e)

The total Carbon Price Relief claimed cannot exceed the CBAM Charge. CBAM liability cannot be negative.

Step-by-Step Formula Framework

Step	Variable	Definition	Source of Input
1	Embodied emissions	Total tCO2e contained in the imported CBAM good, calculated using either verified actual emissions intensity or government default values	Supplier verification report or HMRC-published default values
2	CBAM rate	Sector-specific quarterly rate in £/tCO2e, derived from UK ETS auction clearing prices adjusted for free allocation	HMRC quarterly publication (from Q1 2027)
3	CBAM charge	Step 1 × Step 2	Calculated by importer
4	Effective carbon price	Carbon price per tCO2e already paid on the good under a qualifying overseas scheme, adjusted for free allowances, compensation, and rebates	HMRC-template verification report from GACI-accredited verifier
5	Carbon Price Relief	Step 1 × Step 4 (converted to GBP using HMRC quarterly exchange rates)	Calculated by importer
6	CBAM liability	Step 3 − Step 5	Final figure reported on return

Calculation Flowchart

START: CBAM good imported into UK
│
├─ Determine commodity code → Confirm in-scope sector
│
├─ Determine weight of good (kg, excluding packaging)
│   └─ Convert to tonnes (HMRC performs conversion on return)
│
├─ Determine emissions intensity (tCO2e per functional unit)
│   ├─ Verified actual emissions data available?
│   │   ├─ YES → Use verified emissions intensity from
│   │   │         supplier verification report
│   │   └─ NO  → Use HMRC-published default emissions value
│
├─ Calculate embodied emissions:
│   Emissions Intensity × Weight (tonnes) = tCO2e
│
├─ Obtain CBAM rate for relevant sector and quarter from HMRC
│
├─ Calculate CBAM Charge:
│   Embodied Emissions (tCO2e) × CBAM Rate (£/tCO2e) = £ Charge
│
├─ Is Carbon Price Relief available?
│   ├─ NO → CBAM Liability = CBAM Charge
│   └─ YES → Calculate Effective Carbon Price using
│              HMRC-template verification report
│              Convert to GBP using HMRC quarterly exchange rate
│              CPR = Embodied Emissions × Effective Carbon Price
│              CBAM Liability = CBAM Charge − CPR (minimum £0)
│
└─ Report on CBAM return: commodity code, weight,
   emissions intensity, CPR (if applicable), liability

Understanding Embedded Emissions

Embedded (embodied) emissions are the direct

(Scope 1) greenhouse gas emissions produced during the manufacturing or processing of a CBAM good, expressed as an emissions intensity in tCO2e per functional unit. The system boundaries that define which emissions are captured by UK CBAM reflect UK ETS system boundaries. Indirect emissions (Scope 2 — electricity consumption) are not within UK CBAM scope, which is a material difference from EU CBAM's treatment of certain sectors.

The functional unit is, as a general rule, one tonne of the CBAM good under the relevant commodity code.

Two sectors use modified functional units: for cement, the functional unit is tonnes of clinker content; for fertilisers, the functional unit is tonnes of nitrogen contained in the good. This distinction has direct calculation consequences: importing 100 tonnes of a fertiliser product does not mean the emissions intensity is applied to 100 tonnes — it is applied to the nitrogen content of that 100 tonnes.

Greenhouse gas conversion factors confirmed in legislation for emissions other than CO2:

Gas	tCO2e per tonne of emission
Nitrous oxide (N2O)	265
Tetrafluoromethane (CF4)	6,630
Hexafluoroethane (C2F6)	11,100

These conversion factors apply to aluminium (perfluorocarbons) and fertilisers/cement (nitrous oxide). For steel and hydrogen, only CO2 emissions fall within scope.

For complex CBAM goods — goods produced using precursor CBAM goods — the embodied emissions of the final good must include the emissions embodied in those precursor inputs.

A relevant precursor is a CBAM good used as an input into the production of another CBAM good. Where a complex good incorporates UK-produced precursor goods that were subject to UK carbon pricing, the emissions attributable to those UK precursors can be deducted from the total.

Emissions Calculation Framework

Step	Action	Notes
1	Identify monitoring period	Single calendar year; installation-level measurement
2	Identify relevant emissions from production	Apply system boundaries to attribute emissions to CBAM good
3	Convert non-CO2 gases to CO2e	Use statutory conversion factors (table above)
4	Sum CO2 and CO2e	Total tCO2e for monitoring period
5	Add precursor emissions	Where applicable: precursor weight × precursor emissions intensity (or default value)
6	Identify weight of CBAM good produced	Total production weight for monitoring period
7	Calculate emissions intensity	Total tCO2e (Step 5) ÷ Total weight (Step 6), rounded to 5 decimal places
8	Calculate embodied emissions	Emissions intensity × weight of imported good

The CBAM emissions and verification regulations have been published in draft. The system boundaries reference document has been published alongside the April 2026 secondary legislation but remains subject to consultation review.

Compliance managers should confirm that the system boundaries document has been finalised and laid in secondary legislation before relying on sector-specific emissions attribution details for 2027 returns.

Carbon Price Relief Explained

Carbon Price Relief reduces CBAM liability where the embodied emissions in an imported good have already been subject to a qualifying carbon pricing scheme overseas. The deduction is calculated by multiplying the embodied emissions of the relevant good by the effective carbon price paid under that scheme, expressed in GBP. The total CPR claimed cannot exceed the CBAM charge for that good; it cannot create a negative liability.

CPR is available only where all of the following conditions are met: the overseas scheme qualifies under the criteria set out in legislation; the importer holds a carbon pricing verification report completed by a GACI-accredited independent verifier using the HMRC-prescribed template; and the effective carbon price has been calculated following the six-step methodology set out in the April 2026 secondary legislation.

Carbon Price Relief Decision Matrix

Condition	Outcome
Supplier operates under a qualifying carbon pricing scheme	CPR potentially available — proceed to verification
Qualifying scheme criteria met (mandatory participation, publicly available rules, government-administered revenue)	Scheme eligible — proceed to effective carbon price calculation
HMRC-template verification report obtained from GACI-accredited verifier	CPR can be claimed
HMRC-template verification report not obtained	CPR cannot be claimed — full CBAM charge applies
Carbon price paid in overseas currency	Must convert to GBP using HMRC quarterly exchange rate for quarter prior to import
Compensation or rebates received by installation	Must deduct from effective carbon price before applying to relief calculation
Emissions for CPR purposes exceed emissions used for CBAM charge calculation	CPR capped at CBAM charge amount
Supplier operates under multiple qualifying schemes	Calculate CPR separately for each scheme; sum amounts

Qualifying carbon pricing scheme criteria — all of the following must be met:

• The scheme is a carbon tax, emissions trading scheme, or scheme pricing emissions in imported goods

• Administered by city, national, or regional government, or a supra-national organisation

• Revenue use is determined by the relevant government or organisation

• Participation is mandatory by law for installations producing CBAM goods

• The rules, scope, and headline carbon price are publicly available

• The scheme imposes a direct or indirect cost on relevant emissions

Friction point: the CPR verification report must be obtained from the installation that produced the CBAM good — not from the importer's immediate supplier where the importer is purchasing through a trading intermediary. Supply chains with multiple intermediaries between the importer and the producing installation create a documentation chain that must be established before the first import. Importers who cannot obtain the HMRC-template verification report from the producing installation cannot claim CPR, regardless of whether a qualifying scheme exists in the country of origin.

Worked Example: Single Shipment Calculation

The following example uses hypothetical figures to illustrate the full calculation methodology. No actual CBAM rates have been published as at June 2026; an illustrative rate will be published by HMRC in Autumn 2026.

Scenario: A UK importer purchases 500 tonnes of hot-rolled steel coil (iron and steel sector) from a producer in a jurisdiction with a qualifying carbon emissions trading scheme. The importer holds a verified emissions intensity figure and a completed carbon pricing verification report.

Worked Calculation Table

Step	Component	Figure	Basis
1	Import weight	500,000 kg	Customs declaration (net weight, excluding packaging)
2	Import weight (tonnes)	500 tonnes	HMRC converts kg to tonnes
3	Verified emissions intensity	1.8 tCO2e per tonne of steel	Supplier verification report (hypothetical)
4	Embodied emissions	900 tCO2e	Step 2 × Step 3
5	UK CBAM rate (hypothetical illustrative)	£40 per tCO2e	HMRC quarterly rate (hypothetical — actual rates from Q1 2027)
6	CBAM charge	£36,000	Step 4 × Step 5
7	Effective carbon price paid overseas (hypothetical)	£22 per tCO2e	HMRC-template verification report, converted to GBP at HMRC quarterly rate
8	Carbon Price Relief	£19,800	Step 4 × Step 7
9	CBAM liability	£16,200	Step 6 − Step 8

In this illustrative example, Carbon Price Relief reduces the CBAM charge by 55% — from £36,000 to £16,200. At actual rates and with verified emissions data, the proportional reduction will depend on the effective carbon price of the supplier's qualifying scheme relative to the published UK CBAM rate. The CBAM rate used in Step 5 is hypothetical. Compliance managers should substitute the actual published rate when HMRC releases it.

Default Values vs Verified Emissions Data

When Default Values Apply

Government default emissions values will be available for every CBAM good in scope from 1 January 2027. Importers may use default values where verified actual emissions data is unavailable — there is no requirement to use actual data. However, the reverse condition applies for precursor goods: default values may be used for precursors even where actual data is used for the final good, but actual data cannot be used for precursors if default values are applied to the final good.

Default values will be published in a notice on GOV.UK in advance of CBAM coming into force. HM Treasury may amend or update default values where required. As of June 2026, specific default values by sector and commodity code have not yet been published. Compliance planning that treats default value figures as known before publication is premature.

Default values published by the government represent a fixed emissions figure per CBAM good. Where a supplier's actual emissions intensity is below the default, relying on default values will produce a higher liability than verified data would. Where actual emissions exceed the default, default values produce lower liability — but this creates a different risk: under-reporting true embodied emissions, which exposes the importer to HMRC assessment.

Financial Impact of Using Default Values

The financial case for obtaining verified emissions data depends on two factors: how far the actual emissions intensity of the specific supplier's production process diverges from the government-published default, and the volume of imports. For low-volume importers approaching the £50,000 threshold, the cost of verification may exceed the liability saving. For high-volume importers of carbon-intensive goods, the differential can be material.

Cost Impact Comparison Table

Note: CBAM rates and default values below are hypothetical illustrative figures for methodology demonstration. Actual default values and CBAM rates will be published by HMRC before 1 January 2027.

Scenario	Import Volume	Emissions Intensity	Embodied Emissions	Hypothetical CBAM Rate	CBAM Charge
Using default value (hypothetical)	500 tonnes steel	2.4 tCO2e/tonne	1,200 tCO2e	£40/tCO2e	£48,000
Using verified actual data (hypothetical)	500 tonnes steel	1.8 tCO2e/tonne	900 tCO2e	£40/tCO2e	£36,000
Liability differential	—	0.6 tCO2e/tonne lower	300 tCO2e lower	—	£12,000 saving

For a medium-sized importer purchasing 2,000 tonnes of steel per year at this differential, the annual saving from verified data over default values would be £48,000 — before any Carbon Price Relief. Importers should model this using their actual import volumes once default values are published.

Importers using default values for suppliers whose actual emissions are above the default will have under-reported liability. Where HMRC cross-checks return data against emissions data held elsewhere — for example, where EU CBAM declarations exist for the same supplier — discrepancies may trigger enquiry.

Decision Framework: Which Approach Should Importers Use?

The choice between default values and verified emissions data is a commercial and compliance decision that must be made on a supplier-by-supplier basis once default values are published.

Default vs Verified Emissions Data Decision Tree

Should this supplier's goods be reported using verified data
or default values?
│
├─ Can the supplier provide verified emissions intensity data?
│   ├─ NO → Default values apply (unavoidable)
│   │        Action: Obtain default values when published;
│   │                model financial exposure
│   │
│   └─ YES → Is the supplier's actual emissions intensity
│             likely to be LOWER than the default?
│             │
│             ├─ UNKNOWN → Cannot determine without defaults
│             │             Action: Compare once defaults published
│             │
│             ├─ NO (supplier emissions higher than default) →
│             │   Default values produce lower liability
│             │   Risk: Under-reporting if actual emissions
│             │         materially exceed the default
│             │
│             └─ YES (supplier emissions lower than default) →
│                 Is import volume sufficient to justify
│                 verification cost?
│                 ├─ NO → Default values may be more cost-effective
│                 └─ YES → Verified data produces lower liability
│                           Action: Obtain HMRC-template
│                           verification report from installation

Supplier Data Collection and Verification

What Data Importers Need From Suppliers

The emissions data required for a UK CBAM return is produced and held at the installation level — the facility that manufactured or processed the CBAM good. Importers purchasing through trading intermediaries must trace the data chain back to the producing installation. A supplier's commercial invoice confirms the price; it does not confirm the emissions intensity of production.

Supplier Information Checklist

Data Item	Mandatory or Recommended	Who Produces It	Format
Emissions intensity (tCO2e per functional unit)	Mandatory if using actual data	Installation operator	As verified and reported by accredited verifier
Monitoring period covered by emissions data	Mandatory	Installation operator	Calendar year (1 January to 31 December)
Verification report or good-specific verification summary	Mandatory	Accredited verifier appointed by installation	Formal verification report
Name and accreditation details of verifier	Mandatory	Installation operator	Verifier name, address, company number
Installation address and operator details	Mandatory	Installation operator	Address and company number
Applicable monitoring period for precursor goods (if relevant)	Mandatory where complex goods are involved	Installation operator	Calendar year
Carbon pricing verification report (HMRC template)	Mandatory if claiming CPR	GACI-accredited verifier, completed via HMRC template	HMRC-prescribed template
Headline carbon price of qualifying scheme	Required for CPR	Publicly available from scheme administrator	Price per tCO2e for relevant quarter
Evidence of mandatory scheme participation	Required for CPR	Scheme administrator / supplier	Public regulatory documentation

Where a supplier declines to provide verified emissions data, the importer has no alternative other than to use government default values. Where a supplier cannot or will not provide the CPR verification report, Carbon Price Relief cannot be claimed — the full CBAM charge applies regardless of whether the supplier's production is subject to an overseas carbon price.

Assessing Data Reliability

Importers who accept emissions data without assessing its reliability risk filing returns based on materially inaccurate figures, which creates exposure to HMRC enquiry and potential assessments.

Supplier Risk Assessment Matrix

Risk Factor	Low Risk	Medium Risk	High Risk
Verifier accreditation	GACI-accredited body, correct scope of activities	GACI-accredited body, scope of activities not confirmed	Unaccredited verifier or no verifier
Monitoring period alignment	Data covers the same calendar year as import or prior year as applicable	Data covers a period more than 2 years before import	No monitoring period stated
System boundary compliance	Explicit confirmation of UK ETS-aligned system boundaries	EU CBAM system boundaries used (broadly interoperable but not identical)	No system boundary reference
Precursor treatment	All precursor emissions identified and correctly attributed	Precursor emissions included but method unstated	No precursor treatment where complex good involved
Site visit confirmation	Verifier confirms site visit during monitoring period	Site visit not mentioned in verification report	No site visit
Materiality threshold	Misstatements below 5% threshold confirmed	No materiality statement	Misstatements not assessed

Many overseas installations producing steel, aluminium, cement, fertilisers, and hydrogen have encountered EU CBAM verification requirements since 2023. UK CBAM veriffication requirements are not identical to EU CBAM requirements.

The UK Policy Summary states that monitoring methodology is broadly designed to support interoperability — but interoperability is not equivalence. Importers should confirm with their suppliers that the verification report addresses UK CBAM-specific requirements before filing.

Carbon Price Relief Documentation Requirements

The CPR documentation obligation is the most administratively intensive element of UK CBAM compliance. Every item below must be held before CPR can be claimed on a return. The absence of any single item prevents the entire CPR claim.

CPR Documentation Checklist

Document	Why Required	Format	Status of HMRC Guidance
Carbon pricing verification report	Mandatory for CPR — must confirm quantity of relevant emissions, scheme applicability breakdown, any monetary support, and (where applicable) indirect emissions factors	HMRC-prescribed template; completed by GACI-accredited verifier	Template to be published in guidance; not yet available as at June 2026
Evidence of mandatory scheme participation	Confirms the installation is legally obligated to participate in the qualifying scheme	Public regulatory documentation from scheme jurisdiction	Publicly available
Publicly available headline carbon price of qualifying scheme	Required to calculate effective carbon price	Published by scheme administrator; mean average for quarter prior to import	Publicly available
GACI-accredited verifier accreditation details	Confirms verifier meets independence and accreditation requirements	Verifier's accreditation certificate	Available from accreditation body
Currency conversion evidence	Required where CPR is calculated in overseas currency	HMRC quarterly exchange rate for quarter prior to import	HMRC to publish exchange rates
Calculations supporting CPR amount claimed	Audit trail for HMRC review	Importer's own calculation documentation	Importer-generated
Evidence of any compensation/rebates received	Required to adjust effective carbon price	Installation's records (to be included in verification report)	Within HMRC template

The HMRC-template CPR verification report has not been published as of June 2026. Importers cannot complete the CPR documentation process until this template is available. HMRC has indicated that further detail will be published in guidance in advance of 1 January 2027. Compliance managers should monitor GOV.UK for template publication and factor the lead time for supplier accreditation and verification into their supply chain engagement timeline.

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Financial Exposure and Risk Analysis

Liability Drivers

UK CBAM liability is driven by four primary variables, only two of which are within the importer's direct control. Understanding which elements can be managed — and which cannot — is the basis for a rational compliance cost strategy.

Risk Factor Table

Liability Driver	Driver Source	Within Importer's Control?	Management Action
Import volume of CBAM goods	Commercial purchasing decisions	Yes (partially)	Threshold monitoring; volume forecasting
Emissions intensity of imported goods	Supplier production route and efficiency	Indirect only (through supplier selection)	Supplier engagement; emissions data collection
UK CBAM rate (quarterly, UK ETS-linked)	HMRC/UK ETS market price	No	Scenario modelling; hedging where available
Carbon Price Relief eligibility	Overseas carbon pricing scheme and documentation quality	Indirect (through supplier jurisdiction and data quality)	CPR documentation planning; supplier vetting
Default vs verified data differential	Supplier data availability; verification cost	Yes	Verification investment decision
Accounting period and filing deadline	Regulatory design	No	Calendar management
Penalty exposure from non-compliance	Own compliance behaviour	Yes	Internal controls and registration monitoring

Cost Forecasting Model for 2027

CBAM costs cannot be precisely forecast before HMRC publishes actual quarterly rates in early 2027. Importers can build scenario models using the confirmed methodology, their actual import volumes, supplier emissions intensity data (or estimated default values), and UK ETS price ranges as a proxy for CBAM rate estimates.

Forecasting Framework

Input	Source	Certainty Level
Import volume (tonnes per sector)	Internal procurement data	High
Emissions intensity (tCO2e per functional unit)	Supplier verification data or estimated default values	Medium (defaults not yet published)
CBAM rate	UK ETS price proxy; actual HMRC rate from Q1 2027	Low before publication; confirmed quarterly
CPR deduction	Effective carbon price × embodied emissions	Medium (depends on supplier scheme and verification)

2027 Scenario Model

Hypothetical CBAM rates and emissions intensities for methodology illustration. Actual rates will be published by HMRC from Q1 2027.

Scenario	Import Volume	Emissions Intensity	CBAM Rate (hypothetical)	CPR Deduction	Estimated Liability
Conservative (low ETS price, verified data, full CPR)	1,000 tonnes steel	1.8 tCO2e/tonne	£30/tCO2e	£12/tCO2e	£32,400
Central (mid ETS price, verified data, partial CPR)	1,000 tonnes steel	1.8 tCO2e/tonne	£45/tCO2e	£18/tCO2e	£48,600
Stressed (high ETS price, default values, no CPR)	1,000 tonnes steel	2.4 tCO2e/tonne	£60/tCO2e	£0	£144,000

The stressed scenario illustrates the compounding effect of default values, no Carbon Price Relief, and elevated UK ETS prices. For an importer of 1,000 tonnes of steel, the difference between the conservative and stressed scenarios exceeds £110,000. At 5,000 tonnes annually, that differential exceeds £550,000.

Practical forecasting steps:

1. Identify all commodity codes imported that fall within the UK CBAM Annex

2. Obtain current import volumes per sector from customs and procurement records

3. Obtain or estimate emissions intensity per commodity (request supplier data now; use sector ranges as proxy until defaults are published)

4. Apply conservative, central, and stressed CBAM rate assumptions based on UK ETS price history

5. Identify which suppliers operate under qualifying carbon pricing schemes; estimate CPR deduction where verification data is available

6. Update the model when HMRC publishes default values and the illustrative rate (Autumn 2026) and again when the Q1 2027 actual rate is published

Compliance Failure Risks

Risk Register

Risk	Trigger	Consequence	Mitigation
Failure to register	Import volume exceeds £50,000 threshold without registration	HMRC compulsory registration; tax assessment for liability from point of obligation; failure-to-notify penalty	Apply both registration tests monthly; assign calendar trigger for backward-looking test
Under-reporting emissions	Using emissions intensity below actual levels without verified data to support it	HMRC assessment for additional tax; error-in-return penalties; potential fraud investigation for deliberate misstatement	Use verified data or government default values; do not use unverified supplier estimates
Incorrect Carbon Price Relief claim	CPR claimed without HMRC-template verification report, or based on non-qualifying scheme	CPR disallowed; full CBAM charge becomes payable; penalties for errors in return	Obtain HMRC template verification report before claiming; confirm scheme qualifies
Missing supplier data	Verified emissions data not obtained before return deadline	Default values must be used; potentially higher liability; no ability to retrospectively claim actual data for that period	Initiate supplier data collection before 1 January 2027; do not wait until return deadline
Late filing or payment	Return or payment not submitted by deadline	Late filing and late payment penalties under HMRC's extended existing powers	Build return preparation timeline working back from 31 May 2028; assign responsibility
Record-keeping failure	Records not held for required 6-year period	Inability to respond to HMRC information notice; penalties for failure to comply	Establish records retention policy specifying 6-year retention from end of accounting period
Criminal exposure	Fraudulent evasion or deliberate misstatement	Criminal prosecution	Senior sign-off on return accuracy; documented review process

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Sector-Specific Impact Analysis

Steel

Steel carries the largest aggregate CBAM compliance burden of any UK CBAM sector, driven by three compounding factors: high embedded emissions in primary production, highly globalised supply chain structures, and the sector's depth of commodity code scope under the UK CBAM Annex. The emissions intensity of steel varies substantially by production route — primary steelmaking generates significantly higher CO2 per tonne than production via electric arc furnace using scrap — and importers sourcing from countries without carbon pricing face the full CBAM charge without any CPR deduction.

The commodity code scope for iron and steel under UK CBAM is broad, covering the full Chapter 72 of the UK Tariff plus specific additional codes, with specific exclusions for ferroalloys and ferrous scrap. Importers must verify that each commodity code in their steel procurement falls within the Annex codes at the point of importation. Commodity code changes in the UK Tariff will be tracked and updated for CBAM purposes, but importers bear the obligation to confirm scope at the tax point.

Steel supply chains frequently pass through multiple processing stages across different jurisdictions, creating precursor emissions tracking obligations for complex steel goods. Importers of fabricated or processed steel products must establish whether their imported goods incorporate precursor CBAM goods produced in different installations, as the embodied emissions of those precursors must be included in the total calculation.

The CBAM rate for iron and steel will include a free allocation adjustment reflecting the UK ETS free allowances historically allocated to this sector. As the UK ETS tightens free allocation, the effective CBAM rate for steel will increase even without changes to the headline ETS auction price. Compliance managers should factor this trend into multi-year liability modelling.

Aluminium

Aluminium presents a distinct emissions complexity: the carbon intensity of production varies substantially by production route and electricity source, as confirmed in research data. UK CBAM captures only direct (Scope 1) process emissions — electricity is not within UK CBAM scope — which means the electricity-related carbon differential between production sources is not reflected in UK

CBAM liability, unlike the EU CBAM treatment which includes indirect emissions for aluminium.

Perfluorocarbons (CF4 and C2F6) are within scope for aluminium under UK CBAM. Their confirmed global warming potential — 6,630 and 11,100 tCO2e per tonne respectively — means that aluminium producers with significant perfluorocarbon emissions will generate substantially higher embodied emissions figures than producers with low PFC rates. Importers sourcing from smelters with poor PFC management face disproportionate liability relative to total import weight.

Aluminium scrap is explicitly excluded from UK CBAM scope by commodity code. Importers sourcing recycled aluminium inputs confirm this exclusion via the relevant commodity code at the tax point.

Cement

Cement is characterised by high direct process emissions that are inherent to clinker production and cannot be reduced through fuel switching alone. Process emissions arising from the chemical decomposition of limestone during clinker production are a structural feature of cement manufacturing — they occur regardless of energy efficiency improvements. Even cement producers with highly energy-efficient operations carry substantial embedded emissions per tonne of clinker.

The UK CBAM functional unit for cement is tonnes of clinker content, not tonnes of the final cement product. Different cement products contain varying proportions of clinker — Portland cement is predominantly clinker, while blended cements may contain lower clinker fractions. Importers must know the clinker content of the specific cement product imported to apply the emissions intensity correctly. A standard cement specification sheet is insufficient for this purpose; the clinker proportion must be confirmed.

Cement imports from jurisdictions with active carbon pricing on clinker production — notably those covered by the EU ETS — may generate CPR where verification documentation is available. The cement sector's inherent process emissions make the default value exposure among the highest of all in-scope sectors; the financial impact of using default values versus verified data is likely to be material for high-volume cement importers.

Fertilisers

Fertilisers present the most complex multi-gas emissions profile of any UK CBAM sector. Both CO2 (from ammonia synthesis) and nitrous oxide (N2O) are within scope for the majority of nitrogenous fertiliser products. N2O carries a confirmed global warming potential of 265 tCO2e per tonne. Fertiliser producers that have not implemented N2O abatement technologies will generate substantially higher embodied emissions than those with catalytic reduction systems in place, and this differential will be directly reflected in CBAM liability for their importing customers.

The UK CBAM functional unit for fertilisers is tonnes of nitrogen content, not tonnes of the product. Importers of fertiliser products with varying nitrogen concentrations must calculate the nitrogen content of each shipment to apply the correct emissions intensity. Mixed fertilisers (NPK products) that contain nitrogen fall within scope; the specific exclusion of phosphorus-potassium-only fertilisers (CN code 3105 60 00) removes one class of mixed product from scope.

The fertiliser sector includes precursor relationships: nitric acid (CN 2808) is a precursor to nitrogen-containing fertilisers. Importers of complex nitrogen products manufactured using precursor nitric acid that was itself a CBAM good must account for precursor emissions in their total embodied emissions calculation.

Hydrogen

Hydrogen presents the widest emissions intensity range of any UK CBAM sector, driven entirely by production route. Production methods generate materially different emissions intensities: grey hydrogen from unabated steam methane reforming carries significantly higher embedded CO2 than blue hydrogen with carbon capture or green hydrogen from electrolysis. The emissions intensity differential between production routes is substantial and directly determines CBAM liability per tonne imported.

Only CO2 is within scope for hydrogen under UK CBAM. Hydrogen is identified by a single commodity code (2804 10 00), making product classification straightforward. The liability challenge is emissions intensity verification: hydrogen production emissions data must be sourced from the producing installation, and the emissions intensity is highly sensitive to the specific production process, feedstock, and carbon capture performance.

The sector is relatively nascent in terms of CBAM compliance infrastructure. Fewer hydrogen installations than steel or cement installations will have prior experience with CBAM-equivalent verification requirements. Early engagement with producers on verification readiness is advisable.

Sector Risk Ranking Table

Sector	Emissions Intensity Risk	Supply Chain Complexity	CPR Availability	Default Value Exposure	Overall Risk Level
Steel (iron and steel)	High (varies by route)	High (global, multi-stage)	Medium (varies by origin)	High	High
Cement	High (inherent process emissions)	Medium	Medium (EU ETS coverage)	High	High
Fertilisers	High (N2O amplification)	Medium	Medium	High	High
Aluminium	Medium (Scope 1 only; PFC variable)	Medium	Medium	Medium	Medium-High
Hydrogen	Variable (highly route-dependent)	Low (simpler supply chain)	Low (limited qualifying schemes)	Medium	Medium

Sector Liability Scenario Comparison

Hypothetical figures for methodology illustration only. Based on 500-tonne import volumes. Emissions intensities and CBAM rates are illustrative — actual figures will depend on verified supplier data and published HMRC rates.

Sector	Hypothetical Emissions Intensity (tCO2e/tonne)	Hypothetical CBAM Rate	Gross CBAM Charge (500t)	Estimated CPR (where available)	Net Liability Range
Primary steel	2.0	£40/tCO2e	£40,000	£0–£20,000	£20,000–£40,000
Cement (clinker-heavy)	0.8 per tonne clinker	£40/tCO2e	£16,000	£0–£8,000	£8,000–£16,000
Ammonia (fertiliser precursor)	1.6	£40/tCO2e	£32,000	£0–£16,000	£16,000–£32,000
Primary aluminium	1.2 (Scope 1 only)	£40/tCO2e	£24,000	£0–£12,000	£12,000–£24,000
Grey hydrogen (unabated SMR)	10.0 per tonne H2 [see note]	£40/tCO2e	£200,000	Limited	£160,000–£200,000

Note on grey hydrogen figure: The 10.0 tCO2e/tonne H2 figure is illustrative. Actual emissions intensities for grey hydrogen from unabated steam methane reforming vary by plant; importers must obtain verified emissions data from the producing installation. All figures in this table are hypothetical.

The hydrogen scenario illustrates why production-route intelligence is critical for this sector. Even at modest import volumes, the emissions intensity of unabated grey hydrogen means CBAM exposure is disproportionately high relative to shipment weight.

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Practical Action Framework

90-Day Preparation Plan

Compliance preparation before 1 January 2027 requires 90 days of structured work across three phases, beginning no later than 1 October 2026. The sequencing is designed around confirmed regulatory deliverables and the data dependency chain.

Days 1–30: Assessment and Supplier Engagement

• Audit customs records to identify all commodity codes imported in the preceding 12 months; cross-reference against UK CBAM Annex codes

• Quantify import volumes per in-scope commodity code; calculate 12-month rolling value for each

• Apply backward-looking and forward-looking registration tests to determine current threshold status

• Issue supplier questionnaires to all in-scope suppliers requesting: confirmation of qualifying carbon pricing scheme participation; willingness to provide verified emissions intensity data; ability to provide HMRC-template CPR verification report

• Obtain HMRC's illustrative CBAM rate example (expected Autumn 2026) and update financial exposure model

• Confirm whether HMRC-template CPR verification report has been published; if so, distribute to qualifying suppliers

Days 31–60: Data Collection and Verification

• Collect verified emissions intensity data from suppliers that have confirmed availability; confirm accreditation status of verifier for each

• Collect CPR verification reports from suppliers operating under qualifying carbon pricing schemes

• Identify gaps: suppliers unable to provide data; suppliers where data will be available post-January 2027 under Option 2 (production-date linked emissions)

• For identified gaps, confirm government default values (expected to be published before 1 January 2027) and model default-value liability for those supply lines

• Establish record-keeping system: file structure for 6-year retention, covering import records, emissions data, CPR documentation, and weight evidence

Days 61–90: Systems, Controls and Registration Readiness

• Assign CBAM return preparation responsibility across procurement (commodity codes and weight data), finance (payment and return submission), and compliance (emissions and CPR documentation)

• Build CBAM return template using confirmed return information requirements

• Register with HMRC via Government Gateway

• Confirm threshold monitoring process is operational: both forward-looking and backward-looking tests must be applied from 1 January 2027

• Brief CFO and relevant directors on 31 May 2028 payment deadline and estimated liability range (conservative, central, stressed scenarios)

Building an Internal CBAM Operating Model

A CBAM operating model requires three functional areas: data infrastructure, supplier relationship management, and return and payment process.

These cannot be improvised in the months before the first return deadline.

• Data infrastructure must capture, store, and retrieve four data types: customs import records (commodity codes, weights, dates, values), emissions intensity data per consignment linked to the supplier verification report, CPR documentation per qualifying supplier, and CBAM rate data per sector per quarter. Existing customs and finance systems are unlikely to capture all four data types in a CBAM-structured format without modification or supplementary record-keeping. The return requires each consignment to be reported separately; a consolidated import record is insufficient.

• Supplier relationship management requires identifying a contact at each in-scope supplier responsible for CBAM-related data provision, establishing a data request timeline aligned to the monitoring period (calendar year data available after year-end verification), and maintaining version control where emissions intensity data changes between monitoring periods. For importers sourcing through trading intermediaries, the relationship must extend to the producing installation — not only the immediate counterparty.

• Return and payment process requires a nominated individual responsible for completing the CBAM return, a review and sign-off process before submission given that errors in returns are a specified penalty trigger, a payment mechanism registered with HMRC before the first deadline, and an amendment process for post-filing corrections within the 3-year window. The CBAM return is a tax return — not a regulatory filing. Finance function ownership with compliance function input is the appropriate structure for most organisations.

Procurement, Finance and Compliance Responsibilities

RACI Matrix

Task	Procurement	Finance	Compliance/Legal	IT/Data
Identify in-scope commodity codes	Responsible	Consulted	Accountable	—
Monitor registration threshold (both tests)	Responsible	Accountable	Consulted	—
Issue supplier data requests	Responsible	—	Accountable	—
Collect and store verified emissions data	Responsible	—	Accountable	Responsible (system)
Collect and store CPR verification reports	Responsible	—	Accountable	Responsible (system)
Calculate CBAM charge per consignment	—	Responsible	Accountable	—
Calculate Carbon Price Relief	—	Responsible	Accountable	—
Complete and submit CBAM return	—	Responsible	Accountable	—
HMRC payment	—	Responsible	Informed	—
Record-keeping (6-year retention)	Consulted	Responsible	Accountable	Responsible (system)
Threshold monitoring system maintenance	—	Consulted	Accountable	Responsible
Supplier accreditation verification	Responsible	—	Accountable	—

Accountable = final sign-off.

Responsible = executes task.

Consulted = input required.

Informed = notified of outcome.

Pre-2027 Readiness Checklist

Readiness Assessment Scorecard

Item	Regulatory Basis	Completed?
All in-scope commodity codes identified and verified against CBAM Annex	Finance Act 2026 / April 2026 regulations	☐
12-month import value calculated per commodity code	£50,000 threshold — GOV.UK Policy Summary	☐
Forward-looking and backward-looking registration tests documented	GOV.UK Policy Summary — Registration section	☐
HMRC registration completed (Government Gateway)	Registration obligation — GOV.UK Policy Summary	☐
Verified emissions intensity data requested from all in-scope suppliers	Emissions and Verification Regulations 2026	☐
Accreditation status of verifiers confirmed (GACI membership)	GOV.UK Policy Summary — Verification section	☐
Government default values obtained (when published)	GOV.UK Policy Summary — Default values section	☐
HMRC-template CPR verification report obtained from qualifying suppliers	Carbon Price Relief Regulations 2026	☐
Qualifying carbon pricing scheme status confirmed per supplier jurisdiction	GOV.UK Policy Summary — Qualifying schemes	☐
Return preparation template built covering all required return data fields	Administrative Provisions Regulations 2026	☐
6-year record-keeping system established	GOV.UK Policy Summary — Record keeping section	☐
CBAM liability forecast prepared (conservative/central/stressed)	Internal management requirement	☐
Payment method registered with HMRC for 31 May 2028 deadline	GOV.UK Policy Summary — Payment methods	☐
Senior management briefed on CBAM liability estimate and key deadlines	Internal governance	☐

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Strategic Outlook: 2026–2027

Expected Regulatory Developments

Three areas of secondary legislation remain in draft as of June 2026 and will be finalised following consultation: the administrative provisions regulations, the calculation and CPR regulations, and the emissions and verification regulations.

All three were published for technical consultation in April 2026 with a closing date of 21 May 2026. Any material changes between the draft and final regulations will require compliance procedures to be updated.

Four specific regulatory deliverables from HMRC are confirmed as forthcoming before 1 January 2027:

• Default emissions values, to be published in a notice on GOV.UK

• An illustrative CBAM rate example, expected in Autumn 2026

• The HMRC-template CPR verification report format, to be published in guidance

• Detailed GOV.UK guidance on registration, returns, and record-keeping

The Finance Act 2026 also enables the government to consider international arrangements or agreements with other jurisdictions regarding CBAM equivalence. No arrangements are currently in place; any such agreement would affect CPR eligibility and potentially exemption eligibility for goods from linked ETS jurisdictions.

Areas Likely to Receive Further HMRC Guidance

Several areas confirmed in primary and secondary legislation require supporting guidance that had not been published as of June 2026.

• Verification infrastructure: Details of accreditation bodies and processes for verifiers seeking GACI accreditation for UK CBAM purposes have not been published. Overseas installations that have not yet appointed a qualifying verifier cannot begin verification until this infrastructure is established.

• Exemptions detail: The Policy Summary confirms that further detail on all exemptions — returned goods relief, temporary admission, special customs procedures, UK precursor goods — will be set out in detailed guidance ahead of 1 January 2027. Importers relying on any exemption should not apply exemption criteria based solely on the Policy Summary.

• Currency conversion: HMRC will publish quarterly exchange rates for CPR currency conversion. The mechanism for publishing these rates and the specific rates applicable from Q1 2027 onwards have not been confirmed.

• Non-digital registration: HMRC has confirmed that importers unable to use digital services can contact HMRC to explore non-digital registration, but no further detail has been provided.

What Compliance Managers Should Monitor

Regulatory Watchlist

Item to Monitor	Source	Action Trigger
Final secondary legislation laid	GOV.UK — HMRC legislation tracker	Review for changes from draft; update compliance procedures
Default emissions values published	GOV.UK notice	Update financial exposure model; recalibrate default vs verified decision
HMRC illustrative rate example (Autumn 2026)	GOV.UK / HMRC	Update scenario model
HMRC-template CPR verification report published	GOV.UK guidance	Distribute to qualifying suppliers immediately
Registration portal opens on Government Gateway	GOV.UK / HMRC	Register without delay
Detailed GOV.UK CBAM guidance published	GOV.UK	Review exemptions, record-keeping requirements, and return instructions
First actual CBAM rate published (Q1 2027)	HMRC quarterly publication	Finalise Q1 2027 liability calculation
Any international arrangement or linked ETS exemption	UK Government announcement	Assess impact on CPR eligibility for affected supply chains

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Frequently Asked Questions

How exactly do I calculate UK CBAM liability for a single shipment using verified emissions data?

Multiply the verified emissions intensity (in tCO2e per functional unit) by the net weight of the imported good in tonnes to obtain embodied emissions. Multiply the embodied emissions by the HMRC quarterly CBAM rate for the relevant sector to obtain the CBAM charge. If Carbon Price Relief applies, multiply the embodied emissions by the effective carbon price — calculated using the HMRC-template verification report and converted to GBP at the HMRC quarterly exchange rate — and deduct the result from the CBAM charge to arrive at the liability figure for the return.

When should I use verified emissions data instead of default emissions values?

Use verified actual emissions data when the supplier's actual emissions intensity is demonstrably lower than the government-published default and import volumes are sufficient to justify verification cost. Default values are permitted where actual data is unavailable, but they will produce higher liability wherever actual production emissions fall below the default. Make this decision on a supplier-by-supplier basis once default values are published by HMRC before 1 January 2027.

What evidence do I need from suppliers to claim carbon price relief?

You need a completed carbon pricing verification report in the HMRC-prescribed template, obtained from the installation that produced the CBAM good and signed off by a GACI-accredited independent verifier. The report must confirm the quantity of relevant emissions, the breakdown of applicable scheme elements, and any monetary support received by the installation. You must also hold the publicly available headline carbon price of the qualifying scheme for the relevant quarter and evidence confirming the installation's mandatory participation in that scheme.

How can I estimate my company's UK CBAM costs before 2027?

Build a scenario model using confirmed import volumes per in-scope commodity code from customs records, an estimated emissions intensity per good using supplier data or sector proxies until defaults are published, and a range of hypothetical CBAM rates based on UK ETS auction price history. Run the model under conservative, central, and stressed rate assumptions and estimate CPR deductions separately where qualifying suppliers have been identified. Update the model when HMRC publishes default values and the illustrative rate ahead of 1 January 2027.

What internal controls should be in place before UK CBAM begins?

A threshold monitoring process applying both the 30-day forward-looking and 12-month backward-looking registration tests must be operational from 1 January 2027. A record-keeping system covering import records, emissions data, CPR documentation, and weight evidence must be in place with a 6-year retention policy. Return preparation responsibilities must be assigned across procurement, finance, and compliance functions with a documented sign-off process. HMRC registration must be completed before the 31 January 2028 deadline — earlier registration is permissible.

What happens if supplier emissions data is incomplete, delayed or unavailable?

Where verified emissions intensity data is unavailable, the importer must use the government-published default emissions value for that CBAM good. Every consignment reported on a return requires either verified data or a default value — there is no provision for an empty emissions field. Incomplete supplier data does not exempt an importer from filing obligations or extend the 31 May 2028 return deadline.

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Sources Used in This Report

This article is backed by authoritative source and research;

• HM Treasury / HMRC — Carbon Border Adjustment Mechanism (CBAM): Policy Summary (9 April 2026)

  https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary

• HM Treasury / HMRC — Factsheet: Carbon Border Adjustment Mechanism (28 November 2025)

  https://www.gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam/factsheet-carbon-border-adjustment-mechanism

• HM Treasury / HMRC — Draft Regulations: Carbon Border Adjustment Mechanism (10 February 2026)

  https://www.gov.uk/government/consultations/draft-regulations-carbon-border-adjustment-mechanism-cbam

• HM Treasury — Introduction of a UK Carbon Border Adjustment Mechanism from January 2027 (21 March 2024)

  https://assets.publishing.service.gov.uk/media/65fc11fef1d3a0001132ac6f/Introduction_of_a_UK_carbon_border_adjustment_mechanism_from_January_2027.docx.pdf

• European Commission (DG TAXUD) — Carbon Border Adjustment Mechanism (Updated 2026)

  https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

• European Commission (DG TAXUD) — CBAM Successfully Entered Into Force on 1 January 2026 (14 January 2026)

  https://taxation-customs.ec.europa.eu/news/cbam-successfully-entered-force-1-january-2026-2026-01-14_en

• European Commission — Start of the Definitive Period of the CBAM in the EU (2026)

  https://trade.ec.europa.eu/access-to-markets/en/news/start-definitive-period-cbam-eu

• UK Parliament Library — Carbon Border Adjustment Mechanism Research Briefing (10 April 2026)

  https://researchbriefings.files.parliament.uk/documents/CBP-9935/CBP-9935.pdf

• International Carbon Action Partnership (ICAP) — UK Announces Major Policy Decisions and Launches New Consultations (19 December 2025)

  https://icapcarbonaction.com/en/news/uk-announces-major-policy-decisions-and-launches-new-consultations-ets-expansion

• International Carbon Action Partnership (ICAP) — UK Outlines Details for Carbon Border Adjustment Mechanism Introduction in 2027 (13 November 2024)

  https://icapcarbonaction.com/en/news/uk-outlines-details-carbon-border-adjustment-mechanism-introduction-2027

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