The UK government is currently consulting on draft primary legislation establishing a UK Carbon Border Adjustment Mechanism (“CBAM”), which is set to come into force from 1 January 2027. The current consultation is limited to ensuring that the draft primary legislation implements the Government’s stated policy intent, rather than seeking further stakeholder comment on the policy design itself and is open until 3 July 2025.
1. Introduction and Purpose of CBAM
The CBAM is a tax charged on the emissions embodied in certain specified goods imported into the United Kingdom. Those emissions include not only the emissions from the production process itself but the indirect emissions from the use of electricity used in that process. Its primary aim is to ensure that imported goods are subject to a carbon price equivalent to that faced by domestic producers, thereby preventing carbon leakage and supporting the UK’s climate objectives, specifically its commitment to achieve net zero by 2050.
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