Carbon Border Adjustment Mechanism (CBAM): Frequently asked questions

The Carbon Border Adjustment Mechanism is a carbon price applied at the border. It ensures that imported goods pay for their embedded carbon emissions at a rate comparable to what domestic EU or UK manufacturers already pay under their respective Emissions Trading Systems (ETS).

CBAM is intended to address “carbon leakage”, where production moves to countries with lower environmental regulations to avoid carbon costs. It does this by applying a carbon charge to specific imported goods.

In practical terms, if your supplier’s factory overseas emits carbon making the steel, aluminium, cement, or fertiliser you buy, you (or your customer) will pay a carbon charge when those goods ate brought into the EU or UK.

CBAM currently covers six product categories, identified by their CN (Combined Nomenclature) commodity codes:

• Iron and Steel – including raw steel, tubes, pipes, rails, screws, bolts, nuts, washers, and other fasteners.
• Aluminium – including unwrought aluminium, bars, rods, profiles, wire, plates, sheets, foil, tubes, and pipes.
• Cement – including clinker and finished cements.
• Fertilisers – nitrogenous fertilisers, including ammonia and nitric acid as precursors.
• Hydrogen
• Electricity (EU CBAM only – the UK excludes electricity from its scheme).

Important: the test is the CN code of the final product as imported, not what it is made of. A car made of steel is not covered; a steel bolt is.

Use Tool 2: CN Code Look-Up to check your specific products.

No. CBAM only applies to emissions directly associated with the production of the goods. 

Emissions from transport, distribution, or logistics are entirely out of scope and should not be included in CBAM calculations. In practice, CBAM focuses on emissions generated during manufacturing, including, for the EU, emissions linked to the electricity used in production. It does not cover emissions arising from transporting the goods to their final destination.

Note: The EU is considering whether to extend CBAM to transport‑related emissions in the future, but this does not apply at present.
 

Both systems share the same core principle – charging for embedded emissions in imports – but the mechanics differ:

• EU: Certificate-based - Importers buy CBAM certificates (priced at the weekly EU ETS average) and surrender them annually by 30 September of the following year.
• UK: Levy/tax-based - Importers file a return with HMRC and pay a levy based on a published UK carbon price, adjusted for any foreign carbon price already paid.

Key divergence for Northern Ireland: the EU includes indirect emissions (electricity) from day one. The UK excludes indirect emissions until 2029 at the earliest. This means the UK CBAM levy on electricity-intensive goods like aluminium will be significantly lower than the equivalent EU cost between 2027 and 2029.

CBAM coverage is determined by the CN code of the product as it is imported, not by what it is made of. Raw materials and semi-finished goods (steel sheets, bars, coils) are in scope. Some specified finished metal products - including screws, bolts, nuts, washers, tubes, and pipes - are also explicitly listed.

However, complex manufactured products that contain steel or aluminium (such as machinery or vehicles) are currently out of scope. The test is the commodity code, not the material content. Use Tool 2: CN code look-up (XLS, 197KB) to check your specific product code.

No. CBAM does not use a “degree of processing” test in the way that customs rules of origin do. The scope is determined strictly by the CN code of the product as imported. If the CN code appears on the covered list, it is in scope - regardless of how much processing it has undergone. If the code falls outside the list, it is currently exempt.

Businesses should be aware of the anti-circumvention rules: slightly modifying a product solely to change its CN code to a non-covered category is prohibited and carries severe penalties.
 

Glass is not included in the EU CBAM’s covered sectors. The EU’s initial scope was driven by sectors where carbon leakage risk was highest and where production is most carbon-intensive relative to product value.

In the UK, glass and ceramics were proposed for inclusion during the December 2023 consultation, but the UK Government has explicitly confirmed that these sectors will not be in scope for the 1 January 2027 start date. Both the EU and UK have indicated they will keep sectoral scope under review for potential future inclusion.

EU CBAM: The transitional reporting period ran from 1 October 2023 to 31 December 2025. The definitive (financial) regime went live on 1 January 2026. From that date, EU importers must purchase and surrender CBAM certificates.

UK CBAM: Comes into force on 1 January 2027. The first accounting period covers the full 2027 calendar year, with the first return and payment due by 31 May 2028. From 2028, the UK moves to quarterly returns.
 

CBAM is triggered when goods with a covered CN code are imported into the customs territory. The specific conditions are:

(a) The product’s CN code falls within the covered list (iron/steel, aluminium, cement, fertilisers, hydrogen, and electricity for the EU).

(b) The goods are being released for free circulation (not in transit or under a temporary customs procedure).

(c) The import exceeds the relevant threshold: 50 tonnes cumulative net mass per year for EU CBAM, or £50,000 in import value over a rolling 12-month period for UK CBAM.

The origin of the goods and the processing stage matter because they determine the embedded emissions figure, but the fundamental trigger is the customs classification and the act of importation.
 

Not currently. As of late 2025, goods moving GB to NI are not subject to EU CBAM formalities. However, this is a key area of negotiation. If the EU deems there is a risk of carbon leakage into the Single Market via this route, they may request CBAM checks on “at risk” goods entering NI from GB in the future.

For now, the trade remains free of CBAM charges, but you should monitor the Windsor Framework “Green Lane” rules closely.
 

Under the Windsor Framework, Northern Ireland occupies a unique dual regulatory position. NI businesses may interact with both the EU and UK CBAM systems:

Exporting to the Republic of Ireland/EU: EU CBAM has not been formally extended to NI under the Windsor Framework. Your Republic of Ireland (ROI) customer is not currently required to treat NI-origin goods as CBAM imports. However, where your product contains third-country precursors (e.g. Turkish steel, Chinese aluminium), the ROI buyer may face CBAM obligations linked to those non-EU inputs and will request your emissions data.

Importing from overseas: You are the UK importer of record and must register with HMRC, report emissions, and pay the UK CBAM levy from 2027.

A single NI business that both imports raw materials and sells finished goods to the ROI will face obligations under both regimes simultaneously.

Generally, no. EU CBAM has not been formally extended to NI, so purely NI-origin goods entering the Republic of Ireland (ROI) are not currently subject to CBAM registration requirements. However, where your products contain third-country precursors, your ROI customer may need to register as an authorised CBAM declarant and will require your emissions data. In practice, many ROI buyers are requesting emissions data as standard commercial practice regardless of the formal legal position. Your best course of action is to maintain data readiness.

The exception: if you sell on Delivered Duty Paid (DDP) Incoterms, you become the importer of record into the EU and must register yourself. Review your Incoterms carefully.

The Windsor Framework places Northern Ireland within the EU’s Single Market for goods, creating specific CBAM implications:

Northern Ireland to Republic Of Ireland (ROI) trade: EU CBAM has not been formally extended to NI under Article 13(4) of the Windsor Framework, and is not currently applied to NI-origin goods entering ROI. However, where NI goods contain third-country precursors, the ROI buyer may face CBAM obligations linked to those non-EU inputs. This position is evolving - businesses should maintain data readiness as a commercial safeguard.

GB to NI: Currently exempt from EU CBAM, but “at risk” goods rules could change this.

Overseas to NI: UK CBAM applies from 2027, as NI is part of the UK customs territory.

ETS linkage between the UK and EU would resolve many of these tensions.

If your goods are produced in NI or ROI and only move between those two jurisdictions, you do not currently need to register as an EU CBAM declarant or purchase CBAM certificates. EU CBAM has not been formally extended to Northern Ireland under Article 13(4) of the Windsor Framework, and is not being systematically applied to NI-origin goods entering ROI.

However: if your NI-produced goods contain third-country precursors (for example, Turkish steel or Chinese aluminium), your ROI customer may face CBAM obligations linked to those non-EU inputs and may request your emissions data. The CBAM trigger is the origin of the precursor inputs, not the NI-to-ROI movement itself.

This position is evolving. The EU could seek to extend CBAM to NI under the Windsor Framework in future, particularly if there are concerns about third-country goods being routed through NI into the EU. Businesses should maintain data readiness as a commercial safeguard and monitor policy developments.

When the finished product re-enters the EU, EU CBAM applies to the import. The key question is the CN code of the product at the point of importation: if the re-imported product has a covered CN code, the EU importer must report embedded emissions and hold CBAM certificates.

The fact that the raw aluminium originally came from within the EU does not exempt the re-imported product. CBAM looks at where the final production took place (the UK installation), not where the raw material originated.

However, if the EU buyer can demonstrate that the UK production facility operates under a carbon pricing scheme (the UK ETS), this may qualify for a carbon price deduction, reducing the financial cost. If UK–EU ETS linkage is agreed, this scenario could change materially - linked goods would potentially be exempt altogether.

You are an importer if, you bring CBAM-covered goods into NI or GB from outside the UK/EU. You are the liable party under UK CBAM – register with HMRC, file returns, pay the levy.

You are an exporter/supplier if, you sell CBAM-covered goods to an EU/ROI customer. You are not directly liable, but your customer needs your emissions data to comply.

Many NI businesses are both – importing raw materials and exporting finished products. If so, you interact with both systems.

For UK CBAM (importing from overseas): You must register with HMRC if the value of your imported CBAM goods meets or exceeds £50,000 under either of two tests:

• Forward-looking: on any given day, do you expect the next 30 days of CBAM goods imports to reach £50,000?
• Backward-looking: on the first day of any month, have the preceding 12 months of CBAM goods imports reached £50,000?

If both tests are met, liability begins on the earlier date. For imports during 2027, the backward-looking test only looks back to 1 January 2027. See Section 10.2 of the main guidance for worked detail.

Yes, and this is one of the most common pitfalls. If an NI SME sells goods to the EU on DDP (Delivered Duty Paid) Incoterms, the SME acts as the importer of record in the destination country. That makes the SME legally responsible for registering as an authorised CBAM declarant, submitting reports, and purchasing certificates.

This is a significant compliance burden that many smaller businesses do not anticipate when agreeing contract terms. Always check your Incoterms: selling DAP or FCA keeps the CBAM declarant responsibility with the buyer; selling DDP transfers it to you.

Action: Review all EU sales contracts now. If you sell DDP, take advice on switching to DAP or factor the full CBAM compliance cost into your pricing.

The EU CBAM declarant is the entity that acts as the importer of record when goods are released for free circulation in the EU customs territory. If steel is imported into Ireland through a Dublin-based holding company, that company (or whoever clears the goods through Irish customs) is the EU CBAM declarant.

The NI business’s role depends on the Incoterms agreed in the contract: if selling DDP, the NI business is the importer of record and carries full declarant responsibility; if selling DAP or FCA, the Dublin holding company handles the customs formalities and is the declarant.

EU CBAM (live now):

• Quarterly top-up: Hold certificates covering at least 50% of cumulative year-to-date emissions, by end of each quarter.
• Annual surrender: By 30 September of the following year.
• Certificate sales commence: 1 February 2027 (for 2026 compliance year).

UK CBAM (from 2027):

• First accounting period: Full calendar year 2027.
• First return and payment: 31 May 2028.
• From 2028: Quarterly returns. Initial quarters allow three to four months for returns and payment; the standard deadline transitions to two months after each quarter end.

First-year registration easement: Businesses that trigger the £50,000 threshold during 2027 have until 31 January 2028 to register with HMRC, rather than the standard 30 days from the trigger date. The 30-day rule applies from 1 January 2028 onwards.

EU system: Yes. Under the CBAM Simplification Regulation (EU) 2025/2083, a de minimis exemption applies to importers bringing in less than 50 tonnes of net mass of CBAM goods per calendar year. The Commission estimates this removes ~90% of importers while capturing 99% of emissions. Note: does not apply to electricity or hydrogen.

UK system: You only need to register with HMRC if imported CBAM goods meet or exceed £50,000, assessed under both a 30-day forward-looking test and a 12-month backward-looking test. See the question above, 'Do I need to register anywhere' for the full detail. A single large consignment can trigger the forward-looking test on its own - the rolling 12-month figure is not the only check.

Caveat: even if your EU customer falls below the 50-tonne threshold, they may still request your emissions data commercially. The exemption removes the regulatory obligation, not the commercial expectation.

No. The carbon price itself is not discounted. The full market rate applies (e.g. ~€80/tonne). The reduction comes from the volume you pay for.

To mirror the gradual removal of free allowances for domestic industry, importers are only charged on a percentage of total embedded emissions in the early years:

Example (2026): 100 tonnes embedded CO₂ × 2.5% = 2.5 tonnes liable. At €80/cert = €200.

Trajectory: ~48.5% by 2030; 100% by 2034. Use Tool 6: Cost modeller (XLS, 209KB) to project your costs.
 

The “final carbon value” is not a single number. It is the result of several interacting elements:

The core calculation: Embedded emissions (tonnes of CO₂e per tonne of product) multiplied by the applicable carbon price (EU ETS-linked certificate price, or UK CBAM rate), adjusted for the free allocation phase-in, minus any verified carbon price already paid in the country of origin.

Each variable changes over time: Emissions intensity can be reduced through cleaner production; carbon prices fluctuate with the market; the free allowance percentage ratchets down each year (EU: from 2.5% of full liability in 2026 to 100% by 2034, varying by sector; UK: similar trajectory); and origin-country carbon schemes evolve.

This is why CBAM cost planning should be reviewed annually, not treated as a one-off exercise. Use Tool 6: Cost modeller (XLS, 209KB) to project costs under different scenarios.
 

Yes. Both the EU and UK systems allow deductions for an “effective carbon price” paid in the production country (e.g. China’s national ETS, or a local carbon tax), provided:

• The price was effectively borne (not rebated or compensated on export).
• You have documentary evidence of payment.
• The price relates to the specific goods being imported.

Tip: Use the carbon price fields in Tool 5: Supplier data request template (DOC, 21KB) to collect this information systematically.

You must distinguish between the financial cost and the administrative liability:

Price parity only: The financial cost may be zero (via deduction), but the paperwork remains. You must still file declarations and prove the UK price was paid.

ETS Linkage: The only scenario that removes both cost and paperwork. UK-origin goods would be fully exempt.

Summary: price parity saves you money; linkage saves you time.

For 2026: Based on the quarterly average of EU ETS auction prices for each quarter of 2026 (transitional arrangement for the first compliance year only).

From 2027: Based on the weekly average of EU ETS auction prices.

Certificates can be purchased at any time once sales open. They may be carried forward or sold back to the Registry.

No.

Both the EU and UK CBAM regimes are designed to price the actual emissions embedded in the production of your goods. Purchasing voluntary carbon credits (such as forestry or renewable energy certificates from the voluntary carbon market) does not reduce the emissions figure used in your CBAM calculation and cannot be surrendered in place of CBAM certificates or used to lower your UK CBAM levy.

This is a fundamental design principle. CBAM targets what came out of the factory chimney and the power grid during production, not what a business has chosen to offset elsewhere.

However, there is one narrow exception under the UK system. The draft secondary legislation recognises "the payment of a monetary amount to reflect the removal of a quantity of greenhouse gases from the atmosphere" as a valid element when calculating the effective carbon price - but only where all three of the following conditions are met:

• The payment is recognised by a qualifying carbon pricing scheme (such as a national ETS or carbon tax).
• The rules of that scheme explicitly permit participants to make such a payment to meet their obligations.
• The price charged for the removal is publicly available.

In practice, this means that only carbon removal payments built into a formal, government-run compliance scheme count. Standard voluntary offset purchases from private registries (such as Verra or Gold Standard credits) do not qualify.

The EU system does not currently include any equivalent recognition of carbon removal payments within the CBAM framework.

What about "insetting" (i.e. reducing emissions within your own supply chain)?

This is different, and it does help. "Insetting" typically means investing in emissions reductions at the source, for example, helping your supplier switch to renewable energy, upgrading furnace efficiency, or increasing the use of recycled content in production.

These actions directly reduce the actual embedded emissions of the goods you import. A lower emissions figure means fewer certificates to buy (EU) or a smaller levy to pay (UK). Unlike offsets, this is not a workaround, it is exactly the behaviour CBAM is designed to incentivise.

Summary:

• Voluntary carbon offsets: Not recognised. They do not reduce your CBAM liability under either regime.
• Carbon removals within a formal compliance scheme: Recognised under the UK system only, and only where the scheme's rules explicitly allow it.
• Supply chain emissions reductions (insetting): The most effective route. Lower actual emissions at the factory = lower CBAM costs. This is the strategy to prioritise.
   

You must use “Default Values,” but use the correct set for the relevant regime:

Where your ROI customer faces EU CBAM obligations (e.g. due to third-country precursors in your product): EU Commission default values apply, based on country-specific values with stepped upward adjustments (10% in 2026, 20% in 2027, 30% from 2028; fertilisers: 1% annually).

For UK imports (overseas to NI): Under the UK system, importers must use the default emissions values published by HMRC in a GOV.UK notice ahead of 1 January 2027. From the start of the scheme, there will be one default value per CBAM good - a single figure applied regardless of country of origin or installation. This contrasts with the EU approach, which uses country-specific defaults. HM Treasury has the power to amend or update UK default values over time where evidence supports a change, and any revisions will be published through the same notice mechanism.

The risk: defaults are deliberately punitive. Relying on them makes your products more expensive than competitors with actual data. Use Tool 5: Supplier data request template (DOC, 21KB) to formally request data.

No. Default values are a temporary safety net, not a permanent strategy.

EU: Commission guidance indicates defaults should generally cover less than 20% of total emissions for complex goods. Full long-term reliance on defaults is not a compliant strategy.

UK: Defaults permitted initially but the approach may change after 2027.

Commercially, defaults are set higher than most actual emissions figures. Using them unnecessarily means overpaying.

A precursor is an input material that is itself a CBAM-covered good, used to manufacture another CBAM-covered good – a “carbon ingredient.”

Examples: Clinker → cement. Ammonia → fertiliser. Steel billets → pipes or screws.

Why it matters: CBAM requires total embedded emissions including precursor carbon. If you import steel screws, the emissions from producing the original raw steel are included.

You must ask raw material suppliers for their emissions data. Tool 3: Emissions calculator (XLS, 202KB) performs this “bubble” calculation automatically.
 

Maintain a “CBAM Evidence Pack” per shipment, including:

• Commercial documents (invoice, bill of lading, customs entry).
• Technical evidence (mill test certificate / quality report).
• Carbon data (supplier declaration, Tool 3: Emissions calculator (XLS, 202KB) calculation record, data source notation).
• Verification evidence (third-party report, where applicable).

Retention: Minimum 4 years (EU) / 6 years (UK) from the end of the relevant accounting period. NI businesses subject to both regimes should plan for a six-year retention period. Use Tool 4: Evidence pack structure (DOC, 202KB) for a ready-made folder template.

EU CBAM: Verification by an EU-accredited verifier is mandatory from 2026 where actual emissions values are used. If relying on default values, verification is not required for those entries, but the use of defaults must be documented and justified.

UK CBAM: Full verification requirements not yet confirmed. Guidance expected before 2027.

Practical advice: even without a formal requirement, having verifiable data strengthens your commercial position and future-proofs your compliance.

Use Tool 5: Supplier data request template (DOC, 21KB) from the SME Toolkit. It provides a covering letter and structured form capturing: direct emissions, precursor emissions, indirect emissions, carbon price paid, and methodology used.

Tip: make data provision a condition of payment in your contracts. Suppliers who cannot provide data should be treated as a supply chain risk.

Yes. If your overseas supplier builds a product using precursor materials that were originally produced in the UK - for example, UK-rolled steel used in an overseas fabrication - the emissions attributable to that UK-origin precursor are deducted from the embodied emissions of the finished good before UK CBAM is calculated. You do not pay CBAM twice on carbon that has already been exposed to the UK ETS.

Practical advice: To claim this deduction, your supplier must be able to provide evidence of the quantity and origin of the UK-produced precursor used. Tool 5: Supplier data request template (DOC, 21KB) includes a field for this information. Start asking now - retrofitting the data after the goods have arrived is difficult.

For the EU system: The European Commission publishes default emissions values by country and product type through the CBAM Registry and implementing guidance.

For the UK system: HMRC will publish default values and the applicable CBAM rate.

For deduction purposes: To find what carbon price has been paid in the country of origin, ask your supplier directly. Use Tool 5: Supplier data request template (DOC, 21KB), which includes specific fields for the carbon price paid, the scheme under which it was paid, and whether it was rebated on export.

Public monitoring tools: The World Bank Carbon Pricing Dashboard and ICAP (International Carbon Action Partnership) ETS Map provide useful overviews of carbon pricing schemes worldwide.
 

It is likely CBAM will expand to cover more products. The EU’s call for evidence on scope extension closed in August 2025. On 17 December 2025, the Commission published a legislative proposal (COM(2025) 989) to extend CBAM to approximately 180 downstream steel and aluminium-intensive products from 1 January 2028. These include machinery, vehicle components, domestic appliances, and construction equipment. The proposal is now undergoing the ordinary legislative procedure. Further extensions to other sectors (cement, fertilisers, hydrogen downstream) are under consideration for future legislative revisions.

Advice: treat the current product list as a starting point. If your business handles materials adjacent to the current scope, begin preparing emissions data systems now.
 

ETS linkage means the UK and EU formally recognising each other’s Emissions Trading Systems as equivalent, creating a “mutual exemption” from CBAM.

For NI, this would be transformative: UK-origin goods sold to the EU would no longer need CBAM declarations. The administrative burden would be eliminated. The GB–NI “at risk” goods concern would be resolved.

Current status: Both sides have expressed willingness but no formal agreement exists. Plan on the assumption that both systems operate independently for the foreseeable future.

NI and ROI share the Single Electricity Market (SEM). NI generators are already covered by the EU ETS under SEM provisions.

The anomaly: electricity from GB into ROI may attract a CBAM charge. If CBAM extends to NI electricity under the Windsor Framework, GB–NI electricity flows could be affected too.

Energy UK estimates CBAM could add up to £200m/year on GB–NI trade in CBAM-relevant products, and up to ~£130m/year on SEM electricity costs (potentially ramping up to ~£45 per NI household in the 2030s).

What this means: even outside CBAM sectors, higher electricity costs could affect your input costs. This is another reason ETS linkage matters for NI.
 

If you export to the EU/ROI: Ensure all invoices and data packs include emissions data. EU CBAM costs are now live.

If you import from overseas: Map your CN codes using Tool 2: CN code look-up (XLS, 197KB). Check the UK £50k threshold. Begin requesting supplier data using Tool 5: Supplier data request template (DOC, 21KB). UK CBAM goes live 1 January 2027.

For everyone: Set up your evidence filing system using Tool 4: Evidence pack structure (DOC, 202KB). Run a cost estimate using Tool 6: Cost modeller (XLS, 209KB). Factor a CBAM “shadow price” into long-term pricing. Prioritise decarbonisation to reduce your carbon intensity.