The European Union’s Carbon Border Adjustment Mechanism (CBAM) enters its definitive phase on 1 January 2026, introducing financial obligations on certain carbon-intensive goods imported into the EU.
UK businesses exporting these goods must assess their exposure, review contractual arrangements, and establish processes to support compliance ahead of the first reporting deadlines.
Scope and Timeline of CBAM
CBAM applies to imports into the EU of specific goods, including steel, cement, aluminium, fertilisers, hydrogen, and electricity.
The first annual declarations for goods imported during 2026 must be submitted by September 2027. While this may appear to allow sufficient preparation time, the operational and contractual changes required mean early action remains necessary.
The CBAM Carbon Border Adjustment Mechanism ensures that imported goods are subject to a carbon cost equivalent to that faced by EU producers under the EU Emissions Trading System (ETS). In practice, this introduces both administrative requirements and financial implications for businesses involved in EU trade.
What CBAM Means for UK Businesses Exporting to the EU
CBAM applies to the specified goods when they are imported into the EU from 1 January 2026. It is important to note that the legal obligation to comply with CBAM does not automatically fall on the UK exporter.
Responsibility lies with the EU-based importer of record, unless contractual arrangements place that responsibility on the exporter. This distinction is critical when assessing compliance obligations.
The importer of record is required to purchase CBAM certificates corresponding to the embedded carbon emissions in the imported goods. The price of these certificates is linked to the EU ETS and will initially be calculated on a quarterly basis in 2026, before moving to weekly updates from 2027.
Even where UK exporters are not directly responsible for compliance, CBAM is likely to influence pricing negotiations, supplier selection, and long-term contractual arrangements. A clear understanding of how CBAM affects cost structures and supply chains is therefore essential.
Thresholds and Exemptions That Determine Your Obligations
CBAM includes a threshold mechanism that affects the extent of financial obligations.
Where the EU importer of record imports goods with embedded emissions below 50 tonnes per year, reporting requirements remain in place, but there is no obligation to purchase CBAM certificates. Where this threshold is exceeded, certificate purchases become mandatory.
Electricity and hydrogen are excluded from the threshold and remain subject to CBAM requirements regardless of volume.
The threshold applies cumulatively across all covered goods imported by a single entity within a calendar year. It is not assessed on a product-by-product basis, meaning combined emissions from multiple goods must be considered when determining whether the threshold has been exceeded.
How the 50-Tonne Threshold Works in Practice
The threshold is assessed on an annual basis, requiring ongoing monitoring of embedded emissions throughout the year.
EU importers must maintain accurate and up-to-date records of emissions associated with their imports. Quarterly monitoring is generally considered the minimum practical approach to ensure compliance.
If the threshold is exceeded during the year, the obligation to purchase CBAM certificates applies from that point onwards. Failure to identify this transition in a timely manner may result in penalties.
Although UK exporters may not be directly responsible for monitoring thresholds, maintaining visibility over emissions data and supporting EU customers with accurate information is advisable to minimise potential disruption.
Who Counts as the Importer of Record Under Different Trade Terms
Determining the importer of record is fundamental to understanding CBAM obligations.
Responsibility is defined by the agreed incoterms between the contracting parties.
Under Delivered Duty Paid (DDP) terms, the seller assumes responsibility for import into the EU. In this case, a UK exporter may become the importer of record and would therefore be required to comply with CBAM obligations, including registration as an authorised CBAM declarant.
Under Delivered at Place (DAP) terms, the buyer is responsible for import. The EU-based buyer becomes the importer of record and assumes CBAM obligations.
Many existing contracts may not have been drafted with CBAM in mind. A review of incoterms and associated responsibilities is strongly recommended to ensure clarity and avoid disputes.
Key Compliance Steps and Deadlines from 2026 Onwards
The CBAM implementation timeline is clearly defined:
- Definitive regime commences: 1 January 2026
- CBAM certificates become available: February 2027
- First annual declaration (covering 2026 imports): 30 September 2027
- Deadline for surrendering certificates: 31 May 2028
The EU importer of record must register within the CBAM registry before submitting declarations.
From 2027 onwards, embedded emissions data must be verified by accredited verifiers. This requirement applies at the installation level and necessitates early engagement with suppliers to ensure data availability and accuracy.
Preparing Emissions Data for Verification
The collection and verification of emissions data are central to CBAM compliance.
EU importers are required to obtain detailed, installation-level data covering both direct and indirect emissions in accordance with EU methodology. UK exporters supplying into the EU will typically need to provide this information to their customers.
Establishing data-sharing processes at an early stage supports greater accuracy and reduces reliance on default values, which are intentionally conservative and may result in higher compliance costs.
Differences between UK and EU reporting frameworks, particularly in relation to indirect emissions, should be addressed proactively to ensure consistency and avoid delays in verification.
The Bottom Line
CBAM represents a significant regulatory development for trade between the UK and the EU. While elements of the framework have been in place for some time, the introduction of financial obligations from 2026 materially increases its impact.
Businesses that proactively review contractual arrangements, clarify responsibilities, and establish robust data processes will be better positioned to manage compliance effectively.
Delaying preparation is likely to result in increased administrative burden and higher costs. Early and structured engagement remains the most effective approach.
