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HMRC last week published a policy summary and technical consultations on draft secondary legislation in respect of the upcoming UK CBAM mechanism, due to come into effect on 1 January 2027. For more details on the UK CBAM proposals please see our previous blog posts here and here.
These recent publications largely reflect the details previously shared in government consultations and the draft Finance Bill (which will implement the UK CBAM mechanism and is currently making its way through the UK parliament) although the policy summary provides a helpful consolidation of key HMRC positions.
The draft secondary legislation published to date are:
- The Carbon Border Adjustment Mechanism (Calculation of
CBAM Rate and Determination of Carbon Price Relief) Regulations
2026– this sets out further details of the
calculation of the average ETS price for the purposes of the CBAM
rate for a sector and of the proposed carbon price relief
mechanism. In respect of the latter, entities can reduce their CBAM
liability through the carbon price relief mechanism if embodied
emissions in the CBAM goods have been subject to a qualifying
carbon pricing scheme elsewhere. Further details set out in this
draft regulation include:
- eligibility requirements for qualifying schemes and verification requirements for emissions data – the scheme for example must be mandatory at law and emissions data must be independently verified by a full member of the Global Accreditation Cooperation Incorporated; and
- the formula for the calculation of the carbon price relief. This will take into account any compensation or rebates that the installation received.
- The Carbon Border Adjustment Mechanism (Administrative Provisions) Regulations 2026 – this sets out further details of information and record keeping requirements.
- The Carbon Border Adjustment Mechanism (Transitory Provision) Regulations 2026 – this creates an initial transitory period temporarily extending deadlines to register, make payment and file returns.
- The Carbon Border Adjustment Mechanism Consolidated Tertiary- this sets out further procedural and technical details in relation to the scheme.
A further tranche of consultations and guidance is due to be published this year – these are expected to cover, amongst other things, monitoring and reporting requirements in respect of emissions data, and the methodology for calculating default emissions values.
Finally, to note that the UK can exempt goods from the UK CBAM where they originate from a country which has entered into arrangements with the UK to link their ETS with the UK's scheme. The UK and the EU are currently in discussions in relation to linking their schemes, and so it remains to be seen whether EU exporters will be exempt when the UK CBAM mechanism comes into force in January 2027.
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