HM Revenue & Customs (HMRC), Britain’s tax authority, updated its official policy summary on 2 November, clarifying how importers must calculate Carbon Price Relief under the country’s forthcoming Carbon Border Adjustment Mechanism (CBAM). The mechanism enters into force on 1 January 2027 and covers selected imports of steel, aluminium, cement, fertilisers and hydrogen.
Carbon Price Relief allows qualifying foreign carbon costs to reduce an importer’s UK CBAM liabilities. The guidance requires importers to use emissions consistent with those used to calculate the carbon charge and those used to determine relief, linking the deduction to the relevant product emissions.
Importers must first calculate the effective qualifying foreign carbon price after accounting for compensation, rebates and other adjustments, then apply it to the corresponding embedded emissions. The effective amount may therefore differ from a scheme’s headline rate, particularly where free allowances or compensation reduce actual carbon payments.
Where production involves multiple installations, precursor materials or different carbon-pricing arrangements, emissions and payments may need to be treated separately. The rules do not allow companies to calculate relief simply by multiplying total product emissions by the headline rate of a national carbon tax or emissions-trading scheme.
Eligibility depends on costs and evidence
Britain’s published provisional list of qualifying schemes includes the Serbia Carbon Tax and the Montenegro Emissions Trading Scheme. Inclusion does not automatically make every manufacturer in either country eligible for a deduction: the relevant emissions must have incurred a qualifying carbon cost.
Importers also need sufficient supporting documentation, and independent verification is required for carbon-price evidence used in a relief claim. For Serbian steel and aluminium suppliers, the rules connect domestic tax records and production emissions with the competitiveness of exports to Britain. Montenegrin industrial producers face similar requirements where emissions covered by their domestic scheme can be linked to specific exported goods.
British customers need product-specific data that allows the effective carbon price to be calculated; generic certificates showing participation in an emissions scheme are not enough. Banks financing industrial exporters should not treat a potential deduction as a secure commercial benefit before eligibility and documentation have been established.
The HMRC update clarifies calculation rules but creates no new exemption and does not postpone the January 2027 start date.
