A Follow-up to Last Month’s Piece on the Green Claims Code.

UK CBAM (the Carbon Border Adjustment Mechanism) is a charge on the carbon contained in certain goods imported into the UK. It starts on 1 January 2027.

What it Covers

CBAM applies to imports of iron and steel, aluminium, cement, fertilisers and hydrogen. The threshold is £50,000 of imports in any 12-month period. If you’re below that, you are out of scope. Glass, ceramics and imported electricity are not included.

Most UK SMEs will not pay CBAM directly. But, the businesses that do are importers, large industrial buyers, and supply chain intermediaries.

Why This Still Matters if you are Not Directly Liable

CBAM puts a carbon price on imported materials that are used widely across the economy. The price varies by source. Imports from countries with cleaner production (Norway, much of the EU) carry a small carbon cost. Imports from countries with high-carbon production (much of China and India) carry a larger one. UK-made products are unaffected, because UK industry already pays a domestic carbon price.

For your business this matters because:

  • Any construction, refurbishment and fit-out projects use steel, cement and aluminium, and some of these costs will rise from 2027.
  • Manufactured goods you buy often contain the taxed materials. Suppliers facing higher input costs will pass some of that through.
  • Different suppliers face different exposure depending on where they source from. Some will absorb the change better than others.

How Quickly this Lands

The financial impact phases in between 2027 and 2034. In year one, it is modest. By 2034, when free allowances to UK domestic producers under the UK Emissions Trading Scheme are fully withdrawn, the full embedded carbon of imports is exposed to the price.

The first UK reporting period runs from 1 January to 31 December 2027, with payment due by 31 May 2028.

What the EU Equivalent Has Already Shown

EU CBAM moved into its definitive period on 1 January 2026. Five months in, three things are worth noting:

  • Suppliers without verified emissions data are treated as the worst polluters in their sector. That inflates the levy applied to imports from them.
  • EU buyers are starting to prefer suppliers with documented carbon data over those without, because it lowers the buyer’s tax bill.
  • The differences are small in year one. They will widen each year as the levy phases in.

The UK regime starts in January with the same architecture and the same trajectory.

What to Do

For most UK SMEs, this sits with procurement, not with sustainability. Three things are worth doing in the next few months:

  • Identify whether any of your direct inputs are in CBAM scope (iron and steel, aluminium, cement, fertilisers, hydrogen).
  • Ask your major suppliers, particularly contractors, fabricators and merchants, where they source their materials and whether they hold carbon data on them.
  • For longer-term contracts, factor in that some input costs are on a rising trajectory through to 2034.
Unloading Steel Pipes at Port

How this Connects to Green Claims

Our April Newsletter covered the updated Green Claims Code. The regulator wants any sustainability claim you make to be substantiated. CBAM creates a separate, official source of carbon data on goods moving across borders. Over time that data becomes part of what substantiates, or contradicts, what businesses say about their supply chain emissions.

The practical implication is that the same supplier carbon data now does two jobs: it informs your procurement decisions, and it helps stand up the claims you make publicly.

The Bottom Line

UK CBAM will not pull most SMEs directly into scope. It will change the price of some imported materials, and therefore the cost of some things you buy. The early impact is small. The direction is clear.

If you would like an opinion on which of your inputs are affected, and how to start planning to reduce any impacts then speak to Eight Versa.