What is the EU CBAM?

What is carbon leakage?

Carbon leakage occurs when companies move carbon intensive production to countries with less stringent climate rules, thereby avoiding domestic costs or regulation.

What is in scope of the EU CBAM?

Goods currently in scope of the EU’s CBAM are:

• iron and steel
• aluminium
• cement
• fertilisers
• hydrogen
• traded electricity

What will the impact be?

Whilst this regulation only directly applies to EU importers, they are likely to seek information from firms in their supply chain to support their compliance with CBAM regulation. For example, EU importers will have to maintain records and track embedded emissions of the goods from the point of import. They will also be required to purchase and surrender CBAM certificates to cover embedded emissions and submit annual declarations (the first being due by May 2027 for goods imported in 2026).

As a result, UK exporters of goods covered by the CBAM may experience border disruption as EU firms adapt to the rules, or if non-compliance leads to blocks at the border. It might also lead to  UK firms being asked to provide emissions data and evidence of a carbon price paid under the UK Emissions Trading Scheme.

Interaction with the UK’s upcoming CBAM

The UK will be implementing its own CBAM in January 2027. An agreement was struck at the May 2025 UK-EU Reset summit to link the two Emissions Trading Schemes, which would create the conditions for goods originating in both jurisdictions to “benefit from mutual exemptions” from both the EU CBAM and UK CBAM, and negotiations are currently underway ahead of the next reset summit in mid-2026.

You can find EU guidance on registry and reporting requirements here.

Find UK government guidance on EU CBAM here.