The United Kingdom’s Carbon Border Adjustment Mechanism, or CBAM, is moving from policy design to implementation.
In a significant step for importers and exporters, the UK government has published a list of carbon-pricing systems that currently meet the criteria to be treated as qualifying carbon pricing schemes under UK CBAM. The list includes the EU Emissions Trading System, Montenegro’s emissions trading scheme and Serbia’s carbon tax, alongside schemes in countries including Australia, Canada, China, India, Japan, Kazakhstan, Korea, New Zealand, Singapore, South Africa, Switzerland and Taiwan.
This does not mean that imports from these jurisdictions are automatically exempt from UK CBAM. It means that, where conditions are met and evidence is available, a liable importer may be able to claim carbon price relief for eligible carbon costs already paid abroad.
For businesses trading carbon-intensive goods into the UK, the development adds urgency to a task that many organisations have delayed: mapping emissions, gathering supplier data and creating a defensible record of carbon prices paid throughout relevant supply chains.
What the UK CBAM is designed to do
The purpose of CBAM is to address carbon leakage.
Carbon leakage can occur when production shifts from a jurisdiction with a carbon price or tighter climate policy to one with weaker or lower-cost environmental requirements. It can also occur when imported goods undercut domestic producers that are subject to carbon costs.
The UK government’s approach is to apply a carbon charge to specified imported products in sectors regarded as particularly exposed to this risk. The UK CBAM is scheduled to take effect from January 2027 and will cover specified imports in the aluminium, cement, fertiliser, hydrogen and iron and steel sectors.
The policy is not identical to the European Union’s CBAM.
The EU CBAM began its definitive phase on 1 January 2026. The UK mechanism starts a year later and has a different product scope and administrative design. The UK scheme does not include electricity among its covered sectors, but it includes ceramics and glass. Unlike the EU approach, the UK CBAM will operate as a direct tax rather than requiring importers to purchase and surrender CBAM certificates.
These differences matter for multinational businesses. A company supplying or importing goods across both UK and EU markets may need separate compliance processes, even where the underlying production facilities are the same.
Why Serbia and Montenegro matter
The inclusion of Montenegro’s emissions trading scheme and Serbia’s carbon tax is notable because it shows that the UK system is not limited to major established carbon markets.
Montenegro introduced a national emissions trading system in 2020. Serbia introduced greenhouse-gas and carbon-intensive product import taxes from 1 January 2026, with the reported price set at EUR 4 per tonne of carbon dioxide equivalent.
Under UK CBAM, the key question is not simply whether a country has a climate policy. It is whether the emissions embodied in the specific imported goods have been subject to a qualifying carbon price and whether the importer can demonstrate the amount effectively paid.
The UK’s published list provides useful planning certainty, but it is provisional. It is based on information available as of 19 June 2026 and is intended to be updated as more schemes are assessed. A listed scheme could also cease to qualify if relevant features change.
Importers should therefore treat the list as an important compliance tool, not as a substitute for transaction-level evidence.
Carbon price relief: the practical principle
Where an imported CBAM good has already been subject to an eligible carbon price in another country, the importer may be able to claim carbon price relief. The relief reduces the UK CBAM liability, helping to avoid double carbon pricing while retaining the incentive for comparable carbon costs across competing goods.
However, the relief depends on the effective carbon price, rather than a simple nominal headline rate.
The UK government’s guidance sets out a calculation process that broadly requires an importer to:
Identify the relevant emissions embodied in the imported good.
Establish which emissions were subject to qualifying carbon-pricing elements.
Calculate the applicable carbon cost per tonne of carbon dioxide equivalent.
Account for relevant rebates, refunds or compensation.
Retain verification documentation and other supporting evidence.
This means free allowances, rebates or financial compensation can reduce the relief available. A carbon price may exist in law, but the effective price paid by a particular installation may be lower than the headline rate.
That is where compliance becomes operationally complex.
The data challenge for importers
For many businesses, the biggest CBAM challenge will not be paying a tax. It will be collecting reliable information from suppliers.
An importer may need to obtain data from overseas production sites on:
The quantity and classification of imported CBAM goods
The direct emissions embodied in the goods
Emissions from relevant precursor materials
The production installation and country of origin
The carbon-pricing scheme that applied
Carbon payments made by the installation
Free allocation, rebates, refunds or other compensation received
The evidence and verification records supporting each calculation
The challenge can be particularly acute where goods move through multiple processors, traders or jurisdictions before entering the UK.
A UK importer of fabricated steel, for example, may source from a distributor rather than directly from a steelmaker. The distributor may not hold installation-level emissions information or evidence of carbon pricing paid. The importer must then decide whether to renegotiate data requirements, seek contractual assurances, change sourcing arrangements or accept a higher level of compliance uncertainty.
This is why CBAM should be treated as a supply-chain governance issue, not solely as a tax issue.
Five actions for UK importers
Businesses with potentially affected imports should begin preparing now.
1. Identify exposed imports
Map imported products against the UK CBAM product scope and commodity codes. Do not rely only on broad product descriptions such as “steel components” or “aluminium materials”.
2. Map the supply chain
Identify the producing installations, not just immediate suppliers. CBAM-related emissions and overseas carbon prices may be determined at the installation level.
3. Build a supplier-data process
Issue structured questionnaires and contractual data requests. Suppliers should understand the evidence needed, the timing of reporting and the implications of incomplete information.
4. Assess carbon-price-relief eligibility
For each relevant sourcing jurisdiction, determine whether a qualifying scheme exists and whether the supplier can demonstrate an effective carbon price paid. A jurisdiction’s inclusion on the government list is helpful, but it is only the first step.
5. Put governance around claims and records
Assign ownership across procurement, tax, customs, sustainability, finance and legal teams. Keep records that support calculations, verification and future audit or review.
A wider signal for trade and climate policy
The inclusion of carbon-pricing systems from the EU, Serbia, Montenegro and other jurisdictions reflects the growing connection between trade policy and climate policy.
For exporting countries, domestic carbon pricing may increasingly affect market access and competitiveness. For UK importers, carbon intensity will become a commercial variable alongside cost, quality, delivery time and supplier resilience.
That shift creates risk, but it also creates opportunity.
Companies that can accurately measure embodied emissions, engage suppliers early and secure robust carbon-price evidence may be better positioned to manage CBAM liabilities and make more informed procurement decisions. Suppliers that can provide transparent emissions and carbon-pricing data could become more attractive commercial partners.
The immediate lesson is straightforward: January 2027 may still appear distant, but CBAM readiness requires information that is often difficult to obtain retrospectively. The time to start building the data trail is now.
Sources
UK Government, “Carbon border adjustment mechanism: policy summary”
UK Government, “List of current qualifying carbon pricing schemes”
UK Government, “Factsheet: Carbon border adjustment mechanism”
UK Legislation, “The Carbon Border Adjustment Mechanism Regulations 2026”
Balkan Green Energy News, “UK recognises Serbian, Montenegrin carbon pricing within its CBAM”