Carbon Border Adjustment Mechanism: October 2026 Update

James Murray Excerpts

Friday 16th October 2026 Written Statements

[The Financial Secretary to the Treasury and Paymaster General (James Murray)]

The Government are introducing a carbon border adjustment mechanism from 1 January 2027. It will ensure that highly traded, carbon-intensive goods imported into the UK face a carbon price comparable to the price that would be paid were the goods produced in the UK.

Following Royal Assent of the Finance Act 2026, which provides the legislative framework for the UK CBAM, the Government laid the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026 (SI 2026-809) and the Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026 (SI 2026-995). The regulations set out the rules for technical components of the policy.

Today, the Government are publishing information on two key components used to calculate liabilities for CBAM: (i) the CBAM rate and (ii) default emissions values. This will help importers, businesses and international partners understand and prepare for their future CBAM liabilities.

We are today publishing illustrative CBAM rates for the first quarter of 2027, for each sector, as well as a worked example—all based on existing legislation. This is illustrative guidance only and is based on preliminary data. It will give businesses an initial indication of potential CBAM costs. It does not generate a tax liability. The official rates for the first quarter of 2027 will be published before the end of the calendar year. Following this, the official rates will be set and published on gov.uk by the Government at the beginning of each quarter.

We have also published default emissions values. These are the default emissions values that will apply to CBAM from January 2027. Default emissions values—expressed in tonnes of CO₂e per good—provide UK importers of CBAM goods with a Government-defined default for the emissions in their imported CBAM goods, and can be used where the actual emissions cannot be determined by the UK importer. They are vital to ensure liable persons can comply with the UK CBAM, even where actual reported emissions data is not available. The Government guiding principle in setting default values is to ensure that there is no advantage to liable persons in using default values rather than determining the actual embodied emissions of imported CBAM goods, as set out in schedule 17, part 4, to the Finance Act 2026.

As confirmed in a statement to Parliament in July, the UK CBAM will use single product-level default values, calculated on a trade-weighted average basis. Data from the EU is excluded. This helps to ensure the values better reflect the emissions embodied in goods for which the default values are most likely to be used, as well as recognising the commitment expressed by the UK and EU to link their emissions trading schemes which will result in EU-origin goods being exempt from UK CBAM.

A markup on default values helps to balance supporting the objectives of the CBAM and facilitating a transition to actual emissions reporting. On that basis, a markup of 10% has been applied in all sectors, except fertiliser where no markup is applied.

The default values published today will be in place for 2027 and 2028. The Government also commit today to introducing country-specific default values from 2029. This is in line with the Government previous commitment to move to an alternative approach when feasible. The appropriate level of markup will also be reviewed at this time.

Further information is available at: https://www.gov.uk/money/carbon-border-adjustment-mechanism.

HMRC will continue to publish guidance and engage with businesses ahead of the UK CBAM’s introduction on 1 January 2027.

[HCWS387]