UK CBAM starts in 2027: what businesses need to know now

29 July 2026 Policy & Regulation

One of the most significant new carbon-related business rules is less than six months away.

The UK’s Carbon Border Adjustment Mechanism — CBAM — begins on 1 January 2027¹.

For companies importing certain carbon-intensive goods, this is not simply another sustainability initiative.

It is a tax and customs issue. The Government impact assessments estimate that around 10,000 businesses could be significantly affected.²

What is CBAM?

UK manufacturers operating within carbon-intensive sectors can face costs associated with UK carbon pricing.

If competing goods are manufactured overseas in countries with lower or no equivalent carbon price, domestic producers can be placed at a disadvantage.

There is also a risk known as carbon leakage: production moves overseas rather than emissions genuinely being eliminated.

CBAM is intended to address that. It applies a carbon-related charge to specified imported goods so that their embodied emissions face a carbon price more comparable with UK production.³

Which sectors are covered?

The UK mechanism covers specified goods from carbon-intensive sectors including:

aluminium;
cement;
fertilisers;
hydrogen;
and iron and steel.

Whether an individual import is within scope depends on its commodity classification and the detailed CBAM rules.

Businesses should therefore avoid assuming that they are unaffected simply because they do not think of themselves as operating in a “carbon-intensive industry”.

A manufacturer importing steel components, for example, may be exposed even though its finished product sits in a completely different market.

Why should businesses start preparing in 2026?

Because record-keeping begins from day one.

Government guidance published in July confirms that anyone importing CBAM goods will need to keep specified records for goods imported from 1 January 2027, including commodity information, dates, values and other relevant data.⁴

For many businesses, gathering reliable emissions information through overseas supply chains may prove more challenging than calculating the eventual tax itself.

That makes supplier engagement important.

Businesses should understand:

what covered goods they import;
where those goods originate;
who holds the emissions data;
whether appropriate information is available;
and who internally owns CBAM compliance.

That could involve procurement, finance, sustainability, logistics and customs teams.

What about the £50,000 threshold?

HMRC guidance states that businesses can become liable to register where they expect to import £50,000 or more of CBAM goods within the relevant period, subject to the detailed rules. Registration itself opens by 1 January 2028, while the mechanism applies to imports from 1 January 2027.⁵

This creates an important distinction. A business should not assume that because a registration deadline is later, there is nothing to do during 2027.

The data trail begins earlier.

CBAM is also a procurement issue

This may ultimately be one of the most interesting consequences. Carbon information is moving further into normal purchasing decisions. Procurement teams have traditionally compared:

price + quality + lead time + availability.

Increasingly another factor appears:

embedded carbon cost.

A supplier with lower-carbon production may eventually become commercially more attractive if competing products carry greater carbon costs. CBAM therefore has the potential to influence supplier selection and manufacturing strategy, not just tax returns.

What about businesses that do not import directly?

They can still be affected.

Imagine a Midlands manufacturer buying steel from a UK distributor.

– The distributor imports the steel and pays CBAM.

– That additional cost could ultimately appear in the manufacturer’s purchase price.

The same principle can travel through supply chains.

Businesses should therefore consider indirect exposure, particularly where carbon-intensive materials represent a significant component of costs.

UK CBAM and EU CBAM are not the same thing

Businesses trading internationally also need to distinguish the UK system from the European Union’s CBAM.

The EU has its own regime and requirements.

UK companies exporting covered products to the EU may therefore have one set of obligations while importing covered materials into Britain creates another.

That makes carbon increasingly relevant to international trade compliance.

Four things businesses should do now

1. Identify affected commodity codes.

Map current imports against CBAM scope.

2. Calculate exposure.

Understand the value and volume involved.

3. Talk to suppliers.

Determine whether the emissions information you will need can actually be provided.

4. Assign responsibility.

Do not allow CBAM to fall into a gap between finance, procurement, logistics and sustainability.

Carbon is moving into the cost of doing business

For years, organisations have been encouraged to measure carbon primarily to understand environmental impact. CBAM changes the dynamic. For affected businesses, carbon information can influence tax, purchasing and competitiveness.

That is an important distinction — and a good reason for businesses to understand their exposure before January arrives.

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