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Title page 1

Contents 4

Foreword 5

1. About you 6

2. Introduction 8

3. The current carbon pricing environment in the UK 13

4. Overview of the UK CBAM 14

5. Applying the UK CBAM 17

6. Calculating the UK CBAM liability 20

7. Administration, payment and compliance of the UK CBAM 34

8. Glossary of terms 41

9. Assessment of impacts 43

10. Summary of consultation questions 50

11. The consultation process 54

Annex A: Commodity codes within scope of UK CBAM 57

Annex B: Historic Trade flows in sectors within CBAM scope 62

Figures 9

FIGURE 1. OVERVIEW OF UK AND INTERNATIONAL ACTION ON CARBON PRICING AND CARBON LEAKAGE 9

FIGURE 2. OVERVIEW OF THE UK CBAM PROCESS 16

FIGURE 3. STEP 1 OF UK CBAM PROCESS 17

FIGURE 4. THE APPLICATION OF CARBON PRICING ON EMISSIONS BY THE UK ETS COMPARED WITH THE UK CBAM ON THE SAME COMPLEX GOOD 19

FIGURE 5. CALCULATING THE CBAM LIABILITY COVERS THE STEPS OF CALCULATING EMBODIED EMISSIONS, THE UK EFFECTIVE CARBON PRICE... 20

FIGURE 6. THE CBAM LIABILITY CALCULATION 20

FIGURE 7. UK PRICING MECHANISMS CURRENTLY EXPECTED TO BE IN PLACE FOR 2027 BASED ON ANNOUNCED GOVERNMENT POLICY 27

FIGURE 8. DETERMINING THE UK CBAM RATE FOR A GIVEN SECTOR 28

FIGURE 9. ILLUSTRATIVE EXAMPLE OF UK CBAM RATE CALCULATION 28

FIGURE 10. SECOND ILLUSTRATIVE EXAMPLE OF UK CBAM RATE CALCULATION 29

FIGURE 11. EXPLICIT CARBON PRICES 30

FIGURE 12. INFORMATION REQUIRED TO ASCERTAIN CARBON PRICE PAID OVERSEAS PER TONNE OF CO₂E 32

FIGURE 13. ILLUSTRATIVE EXAMPLE OF CARBON PRICE PAID OVERSEAS 32

FIGURE 14. ADMINISTRATION AND PAYMENT OF THE CBAM 34

FIGURE 15. MINIMUM REGISTRATION THRESHOLD TESTS 36

FIGURE 16. TIMETABLE FOR RETURNS AND PAYMENTS (FIRST ACCOUNTING PERIOD) 38

FIGURE 17. TIMETABLE FOR RETURNS AND PAYMENTS (SECOND ACCOUNTING PERIOD ONWARDS) 38

Annex Tables 62

Table 1. CBAM imports by sector 62

Table 2. Top 10 origin markets of CBAM imports, and imports of LDC origin 62

Table 3. Export Dependency of top 10 (in value terms) exporters of CBAM goods to the UK 63

Table 4. Top 5 Importers to the UK of CBAM goods from least developed countries (LDCs) 64