The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026

Debate between John Lamont and James Murray

Monday 12th October 2026 General Committees

[James Murray]

The mechanism of removing free allowances is part of the transition to the new system. Under the new system, the CBAM price will ensure that those industries within the UK that are investing in decarbonisation are not disadvantaged by industries moving overseas. If the industries move overseas to areas that have a higher carbon intensity, they could be at an advantage relative to the industries here in the UK. It is about levelling the playing field for businesses operating in the UK.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

The Minister mentioned that fertiliser will be affected by the CBAM. Farmers are rightly concerned about how this will impact them. Some farming organisations have indicated that this might increase the price of fertiliser by up to £70 a tonne, which will obviously have a big impact on the price of food. When will the rate for fertiliser be set, and when will it be announced?

[James Murray]

Although fertiliser production is emissions-intensive, the effective carbon price paid by UK-based fertiliser manufacturers has been extremely low because of the allocation of free allowances to that sector. As a result, we expect initial liabilities to be very modest for imported fertilisers. To support transparency and to help businesses to prepare, the Government will publish illustrative CBAM rates very shortly, which will provide a clear indication of the likely scale of the charge that may apply to fertiliser imports when the CBAM comes into force.

I should emphasise that CBAM is not a protectionist measure, nor is it designed to raise revenue. Its purpose is to ensure that imported goods face carbon costs comparable to those that our domestic industry faces, as I set out in response to my hon. Friend the Member for Middlesbrough South and East Cleveland. It is therefore only right that, where the emissions embodied in an imported good have already been subject to qualifying a carbon price overseas, those costs are recognised and relief is made available. Importers of goods produced under schemes that align with the criteria, such as the EU emissions trading scheme or the Canadian federal output-based pricing system, should not pay twice for the same emissions. Those are just two examples; a list of all the national schemes that the Treasury recognises as qualifying carbon pricing schemes has been published on gov.uk.

The regulations establish the framework for claiming this relief. They define the characteristics of a qualifying carbon pricing scheme, set out how an effective carbon price should be determined and specify the evidence and independent verification required to support a claim for carbon price relief.

The Government remain committed to a full consultation throughout the development of CBAM, and that has included a technical consultation of the regulations before the Committee today. A small number of technical and clarificatory changes were made following that consultation, as is set out in paragraph 7.3 of the explanatory memorandum. Those changes improved the operation and clarity of the regulations without altering the policy intent. Engagement has not been limited to formal consultation. The Treasury and HM Revenue and Customs continue to work with domestic businesses, trade bodies, verifiers, international partners and other interested stakeholders and remain committed to ongoing engagement as CBAM comes into force on 1 January 2027 and beyond.

In summary, the regulations implement important aspects of the CBAM framework already approved by Parliament in the Finance Act 2026. They provide clarity on carbon price relief, including when it is available and how importers can calculate it, and they give transparency on how the CBAM rate will be calculated. In doing so, the regulations support the effective introduction of CBAM from 1 January. They help to protect against carbon leakage and they give businesses greater certainty about how the new tax will operate. I commend them to the Committee.

--- Later in debate ---

[James Murray]

I thank all Members for their contributions. As I set out in my opening remarks, the regulations before the Committee give effect to important elements of the CBAM framework, which has already been established by Parliament under the Finance Act 2026. Ultimately, CBAM is about ensuring that the UK’s decarbonisation efforts lead to a real reduction in global emissions. The regulations help to achieve that objective by ensuring that imported goods face a carbon price comparable to that of goods produced in the UK. The regulations support a fair, proportionate and effective CBAM to protect against carbon leakage, and to give industry the confidence to invest in the transition to net zero.

I am grateful to hon. Members for their contributions and will try to address some of their points. As I say, without CBAM the risk is that production and associated emissions will simply move overseas to jurisdictions with lower carbon costs. That carbon leakage, as it is referred to, would be the impact of not having a CBAM, rather than a true reduction in global carbon emissions.

A number of points have been made about the impact on businesses, about the timing of the introduction of the measures and about when the various values will be put in the public domain. I assure the Committee that we have considered carefully how best to support businesses’ preparations for CBAM. We have had to balance the benefits of publishing information at the earliest possible opportunity against the importance of ensuring that the figures published are sufficiently representative to be genuinely useful. For that reason, we have chosen to wait for the latest available data through the UK ETS baseline data reporting exercise, which will provide a robust illustration of future CBAM liabilities. As I say, we will publish that information very shortly.

[John Lamont]

The Minister will be aware of the comments of Paul Tompkins, the NFU deputy president, who has highlighted that adding a CBAM to fertiliser will add significantly to the costs and growing pressures that farm businesses already face. What discussions has the Minister had with the National Farmers’ Union about the issue and specifically about a date when farmers will find out the rate that is to be applied?

[James Murray]

As I said earlier, that happens not only through the formal consultation, but through regular engagement with all sorts of industries affected by the introduction of the CBAM. We want to ensure that we develop the detail of the policy in the best possible way, particularly in relation to fertiliser. I understand that the hon. Gentleman raised that issue, as did a number of others.

A few hon. Members mentioned a figure of £70 per tonne of emissions in fertiliser. I do not recognise that figure at all. I confirm to the Committee that, as I have said, although fertiliser production is emissions-intensive, the effect of the carbon price paid by UK-based fertiliser manufacturers has been extremely low because of the allocation of free allowances to the sector. As a result, we expect initial liabilities to be very modest for imported fertilisers. I will publish illustrative rates very shortly.

Other hon. Members questioned the impact on businesses of the administrative burden of implementing the CBAM. I reassure the Committee that only those that import £50,000-worth or more of CBAM goods in a 12-month period will need to register for the UK CBAM. HMRC estimates that more than 80% of otherwise affected importers will be excluded from the CBAM altogether and that more than 99% of imported emissions will be covered. We believe that that gets the balance right between covering the relevant imports and minimising the administrative burden to those who could be affected.

Oral Answers to Questions

Debate between John Lamont and James Murray

Tuesday 8th September 2026 Commons Chamber

[James Murray]

I congratulate the organisation in my hon. Friend’s constituency for successfully fundraising for two defibrillators. As she knows, decisions on fiscal matters are taken at the Budget. She makes a powerful case, but we have to evaluate whether VAT reliefs are passed on in full to consumers. That is one of the key considerations when taking decisions of this sort.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

T9. Nearly 100,000 hospitality jobs have disappeared in two years. Pubs, hotels and restaurants across the Scottish Borders are struggling with higher employment costs. When will the Labour Government cut their tax on jobs?

[James Murray]

We are providing a 20% cut in business rates for pubs in England. I urge the Scottish Government to do the same for Scottish pubs.

Office for Budget Responsibility Forecasts

Debate between John Lamont and James Murray

Monday 1st December 2025 Commons Chamber

[James Murray]

Long-term stability is at the heart of the fiscal rules that the Chancellor introduced at the Budget last year, which were met at the spring statement earlier this year and were met again at the Budget last week. As many hon. Members have mentioned today, the fact that we are meeting those fiscal rules with far greater headroom—£21.7 billion in this Budget—gives us greater stability, helps to bring down the costs of Government borrowing and protects us from future shocks.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

Andy Haldane, former Bank of England chief economist, has said that the Government’s “repeated mistakes” and misinformation about the public finances have sucked all the energy from the economy. Chief Secretary, the former chief economist is correct, isn’t he?

[James Murray]

As we said at the Budget, not only were we setting out to cut the cost of living, cut NHS waiting lists and cut Government borrowing; we were also focusing on growth through public investment in transport, energy, roads, railways and all the infrastructure that businesses need to invest to boost jobs and growth across the country. We invested in every part of the country, with a focus on Wylfa in Wales, Grangemouth in Scotland, the Oxford-Cambridge corridor and the northern growth corridor, because we know that growth has to happen right across the country to benefit people in every part of the UK.

Inheritance Tax Relief: Farms

Debate between John Lamont and James Murray

Monday 10th February 2025 Westminster Hall

[James Murray]

I will make some progress.

The Liberal Democrat spokesperson, the hon. Member for Glastonbury and Somerton (Sarah Dyke), asked how the figures were arrived at. The figure to which I referred—520 estates likely to be affected in ’26-27—comes from taking the historical data and projecting it forward using economic determinants. She may have seen the letter sent by the Chancellor to the Treasury Committee in November, which set out how that calculation was done. I suggest that all Members read that letter to understand the basis for that 520 number.

The statistics also show how many estates claiming business property relief are likely to be affected. Around three quarters of estates claiming business property relief alone, excluding those only holding alternative investment market shares, will not pay any more inheritance tax in 2026-27. The Office for Budget Responsibility has been clear that it does not expect this measure to have any significant macroeconomic impacts.

I recognise the disagreement over this policy, but Ministers and officials have been listening carefully to the views of the farming sector and rural communities. Ahead of the Budget, there was media speculation that the Government were going to abolish the reliefs altogether. In reaction to that speculation, the Treasury received and considered several representations from the farming sector with views on retaining the reliefs. I responded to a debate on the matter in this very room on 17 October.

[John Lamont]

Will the Minister give way?

[James Murray]

I have only a few minutes left, so I will not.

I have also participated in several meetings with farming bodies since the autumn Budget 2024, and I am meeting farming bodies again shortly to discuss their concerns further. At the same time, it is important to recognise that other organisations have called for the reliefs to be abolished or restricted. Commentators have highlighted that the reliefs currently contribute to an inheritance tax system that means that the very largest estates pay lower effective tax rates than smaller estates. As the Institute for Fiscal Studies has set out since the Budget, the changes we announced will still leave farmland much more lightly taxed than other assets.

I want to address as many of the points that Members made during the debate as possible, but it is worth saying first that it is important to see the changes in the context of wider support for farmers and the rural community. The Budget committed £5 billion to farming over the next two years, including the biggest budget for sustainable food production in our history. It committed £60 million to help farmers affected by the unprecedented wet weather last year, and we are protecting farms and rural businesses by committing £2.4 billion over the next two years to rebuild crumbling flood defences.

We will also continue to provide existing support for the farming industry in the wider tax system. That includes, for example, the exemption from business rates for agricultural land and buildings, and the ongoing entitlement for vehicles and machinery used in agriculture to use red diesel, as the hon. Member for Dumfries and Galloway (John Cooper) mentioned.

On the point made by the right hon. Member for Orkney and Shetland (Mr Carmichael) about the inheritance tax treatment of Scottish agricultural leases, the Government are aware of the issue and officials have already discussed it with their counterparts in the Scottish Government. There is an existing provision in the Inheritance Tax Act 1984 that deals explicitly with the Scottish agricultural leases. Section 177 of the Inheritance Tax Act means that Scottish agricultural leases passed down on death are not included in the value of the estate.

Agricultural and Business Property Reliefs: OBR Costing

Debate between John Lamont and James Murray

Thursday 23rd January 2025 Commons Chamber

[James Murray]

The OBR’s publication yesterday sets out the costings that were in the October Budget. There is no difference between the costings set out in October and what the OBR set out yesterday. It simply showed more of the background behind how they calculated those costings, for transparency and so that people are aware. Indeed, it says in the report that that is done in an effort to improve the public debate and ensure that people understand what is behind the data published at the time of the Budget.

As I said to several Opposition Members, clearly this was one of many tough decisions that we took in the Budget to balance the public finances, but we also made sure that there is greater protection from inheritance tax under our proposed reform scheme than is available more widely.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

The Labour Government’s family farm tax will be catastrophic to farmers in my constituency in the Borders. I will join many of them and their tractors in Kelso on Saturday, when the farming community comes together to show its displeasure and disapproval of this policy. Farmers will struggle to pay this tax, so what assessment have the Government made of the policy’s impact on vets, feed merchants, machinery suppliers, and all the other people who support the rural economy?

[James Murray]

Supporting the rural economy, public services and investment right across the country is part of Labour’s national mission to get the economy growing, but the prerequisite for that investment and economic growth is stable public finances. Without economic stability, we cannot proceed to the investment and growth that we all so desperately need. That is why the decision to target agricultural property relief and business property relief was taken, alongside all the other difficult decisions that we took in the Budget.