UK CBAM 2027 Carbon Border Adjustment Mechanism (CBAM) 2027

From 1 January 2027, the United Kingdom will introduce its own Carbon Border Adjustment Mechanism (UK CBAM). For British businesses importing steel, this marks a structural change in how import costs are calculated.

Under the UK CBAM, the embedded carbon emissions associated with certain imported goods — including iron and steel — will become a direct cost factor. Until now, carbon pricing in the UK has primarily operated through the UK Emissions Trading Scheme (UK ETS), applying to domestic producers. With the introduction of CBAM, carbon pricing will extend to certain imported products.

For steel importers, this means that emissions intensity is no longer just an environmental metric — it becomes a financial one.

The UK CBAM is a mechanism designed to prevent carbon leakage — the relocation of production to countries with lower or no carbon pricing. It aims to create a level playing field between UK producers subject to the UK ETS and foreign producers exporting into the UK market.

The system works through a direct financial charge (levy), not a certificate scheme like the EU model. The CBAM charge will be calculated based on:

• The embedded emissions (direct Scope 1 emissions) of the imported product.
• The prevailing UK ETS carbon price (adjusted for free allocations).
• Any explicit carbon price already paid in the country of origin.

If the exporting country does not apply a carbon price equivalent to the UK ETS, the difference will be adjusted at the UK border.

From 2027, the UK CBAM will apply to several carbon-intensive sectors, including:

• Iron and steel
• Aluminium
• Cement
• Fertiliser
• Hydrogen

For steel importers, this means that certain steel products like galvanised wire, black annealed wire and baling wire — depending on their commodity classification — will fall within scope. Importantly, the UK has set a minimum registration threshold of £50,000. Only businesses importing above this value (over a 12-month rolling period) must comply. Furthermore, in its initial phase, the UK CBAM focuses on direct emissions (Scope 1). Indirect emissions (Scope 2), such as electricity use, are currently excluded until at least 2029.

The UK relies significantly on imported steel. A substantial share of steel products entering the UK market originate from countries such as Turkey, China, India, South Korea, and Vietnam. Steel production, particularly through blast furnace routes, can generate approximately 2 tonnes of CO₂ per tonne of steel.

Under UK CBAM, when steel is imported from countries without a comparable carbon pricing system, the embedded emissions will be reflected in the final import cost. This shifts the commercial question from: “What is the landed price of the steel?” to: “What is the total cost of the steel once carbon exposure under UK CBAM is included?”

• The carbon intensity of suppliers becomes commercially relevant.
• Verified emissions data (from accredited bodies like UKAS) becomes essential.
• Country of origin impacts total cost.

Although the UK CBAM begins in 2027, the European Union has already implemented its own CBAM system, which entered its definitive financial phase on 1 January 2026. While the EU model differs structurally — operating through certificates — early market developments demonstrate how carbon pricing affects trade:

• Carbon becomes an explicit cost component.
• Importers require total emissions transparency from suppliers.
• Procurement decisions increasingly factor in embedded CO₂.

For UK businesses, the EU experience provides insight into how CBAM reshapes supply chain and procurement strategy.

From 1 January 2027, the UK Carbon Border Adjustment Mechanism will integrate embedded CO₂ into the cost structure of imported steel.

For British importers, UK CBAM means:

• Carbon intensity affects landed cost
• Emissions transparency becomes essential
• Supplier choice may influence carbon exposure

The UK CBAM is not merely a reporting requirement. It represents a structural shift in how carbon is accounted for in international steel trade.