Policy & Compliance
Update on forthcoming UK carbon emissions taxation
The UK Carbon Border Adjustment Mechanism, which will come into force on 1 January 2027, will tax certain carbon-intensive goods when they are imported into any part of the UK from countries with looser environmental rules that reduce manufacturing costs
T he UK Carbon Border the carbon emissions generated in production, adjusted to re fl ect the gap between the carbon price (the tax or equivalent paid) applied in the country of manufacture and the carbon price (tax due) applied in the UK. The manufacturing industries that will be required to report emissions under the UK CBAM are: • Aluminium Adjustment Mechanism (CBAM) tax will be based on Products from the ceramic and glass sectors will not be in scope of UK CBAM from 2027, as had initially been proposed, but will be considered for future inclusion. The primary legislation implementing the UK CBAM was included in the Finance (No 2) Bill 2025-26, which is available on the UK parliament website. Critical divergence While both the UK and EU CBAM target carbon-intensive imports, a critical divergence lies in their treatment of indirect emissions, which are the greenhouse gas • Cement • Fertiliser • Hydrogen • Iron • Steel. (GHG) emissions from the electricity used during manufacture. Under the EU CBAM, reporting and payment for indirect emissions through CBAM certificates is mandatory for cement and fertilisers. In contrast, the UK CBAM has deferred the inclusion of
“ The UK Emissions Trading Scheme (ETS) will expand to include domestic maritime emissions from 1 July 2026, targeting vessels of 5,000 gross tonnage (GT) or more
all sectors’ indirect emissions until 2029 at the earliest. Emissions Trading Scheme The UK Emissions Trading Scheme (ETS) will expand to include domestic maritime emissions from 1 July 2026, targeting vessels of 5,000 gross tonnage (GT) or more. This regime covers domestic voyages, which include voyages from one UK port to another UK port, and voyages that start and end at the same port in the UK. It must be noted that all emissions while at anchor or moored are included, regardless of whether the ship’s journey is domestic or international. The regime for maritime emissions starts on 1 July 2026, with the first reporting year spanning 1 July 2026 to 31 December 2026 covering carbon dioxide (CO ₂ ), methane (CH ₄ ), and nitrogen dioxide (N ₂ O) emissions from ships.
For 2026, verified emissions reports are due by 31 March 2027. To assist with transition, the concept of double surrender has been applied. Allowances for both 2026 and 2027 emissions are due to be surrendered by 30 April 2028. Members should be mindful that the UK ETS will apply to all shipments being transported. Based on the experience of the EU ETS, carriers will impose freight surcharges to cover their additional costs. Also, for customers who are reporting carbon dioxide equivalent (CO ₂ e) emissions, Members should ensure that they are able to provide the relative emissions data to their customer. The expansion aims to align UK maritime emissions pricing with broader climate goals, and there is potential for future inclusion of international voyages, but at the moment the government does not seem to have any appetite to further extend the UK maritime ETS.
16 | March 2026
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