Draft regulations: Carbon Border Adjustment Mechanism (CBAM)

HM Revenue & Customs (HMRC) has officially closed its technical consultation on the draft secondary legislation for the UK Carbon Border Adjustment Mechanism (CBAM). The consultation ran from 10 February 2026 to 24 March 2026, and the government is currently analyzing the feedback submitted by stakeholders.

Background and Objective

The UK government previously confirmed that a UK CBAM will be introduced on 1 January 2027 to place a carbon price on specified goods imported to the UK from sectors that are at risk of carbon leakage. Following the introduction of primary legislation in the Finance Bill 2025 to 2026, this technical consultation set out the draft secondary legislation that will come into effect alongside the tax.

The primary aim of the consultation was to gather feedback on the drafting of the secondary legislation to ensure that it delivers the policy correctly and effectively, allowing the tax to operate as intended while providing for all necessary administrative matters.

Contents of the Draft Legislation

The draft secondary legislation includes the legislative requirements associated with the administration of the tax. Key areas covered include, but are not limited to:

• Administrative requirements relating to registration for CBAM

• Tax returns and required content

• Reimbursement arrangements

• Methodologies for determining the weight of CBAM goods

• Record-keeping obligations

In addition to the main administrative provisions, HMRC published draft notices which will have the force of law to support an understanding of how all of the CBAM legislation will read together. The consultation also included drafts on the calculation of the CBAM rate, the determination of carbon price relief, and transitory provisions.

Affected Sectors and Next Steps

The draft legislation is of primary interest to UK importers bringing in goods from the aluminium, cement, fertilisers, hydrogen, and iron and steel sectors, as well as downstream producers that use these goods in their supply chains. It also impacts international partners with an interest in UK CBAM policy.

With the public feedback window now closed, HMRC is analyzing the responses. The outcome of this public feedback will be published by the government in due course, which will help shape the final secondary legislation ahead of the 1 January 2027 implementation date.