The UK government is assessing whether refinery products should enter its carbon border adjustment framework, while keeping them outside the initial regime scheduled for 2027.
Government opens consultation on refinery emissions
The UK Treasury and HM Revenue & Customs published a 44-page consultation on 28 October 2026 examining the potential inclusion of refined petroleum products in the country’s planned Carbon Border Adjustment Mechanism (CBAM).
The consultation explores whether extending carbon-border pricing to refinery products could address carbon-leakage risks affecting domestic producers. It does not establish a new import charge or confirm that refinery products will be included when the UK regime begins.
The government’s assessment follows recognition that British refineries face carbon-related operating costs while competing with imported products from countries applying different climate policies. The consultation seeks views on whether a border adjustment could address this competitive imbalance without undermining security of supply.
Petroleum products remain outside the initial 2027 regime
The UK CBAM is scheduled to begin on 1 January 2027, covering specified goods in the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Refined petroleum products are excluded from this initial scope.
Any extension to refinery products would therefore require a subsequent policy decision. The consultation represents an assessment of potential future coverage rather than an adopted measure establishing additional obligations for fuel importers.
The proposed extension would bring a different industrial sector into the carbon-border debate, raising questions about emissions allocation, international fuel trading, domestic refining competitiveness and the potential effect on prices paid by downstream consumers.
Refinery emissions allocation presents technical challenges
Refineries process crude oil into multiple outputs with different commercial uses and values, including transport fuels and industrial feedstocks. Determining the emissions attributable to individual products requires allocation methods that account for energy consumption, shared utilities, processing units and co-products.
These methodological choices could materially affect the carbon charge associated with an imported product. The challenge becomes more complex when petroleum products are blended, reprocessed or traded through several ports before reaching their final destination.
Refineries may also share hydrogen production, steam generation, cogeneration and other utilities across several processing units. Different allocation approaches can therefore change the emissions attributed to individual product streams without changing the facility’s total emissions.
The government will need to consider methods that allow independent verification while remaining practical for international commodity trading. Where verified actual-emissions data are unavailable, the design of default values will be particularly important in determining the potential costs faced by importers.
Carbon-border pricing could affect fuel costs and supply security
The consultation raises a policy tension between protecting domestic industrial production and limiting additional costs for consumers and businesses.
A border measure could support investment in UK refining by reducing the competitive advantage of imported products from jurisdictions with lower or different carbon-related costs. However, additional charges on imported fuels could also affect transport, manufacturing and distribution costs.
Excluding imported products from carbon pricing could leave domestic refineries at a disadvantage if they bear emissions-related costs that overseas competitors do not face. Conversely, introducing a charge would not automatically resolve other competitive pressures affecting British refining.
Crude-oil availability, refinery complexity, energy prices and maintenance requirements also influence operating costs and competitiveness. Assessing the potential extension would therefore require consideration of several scenarios involving import volumes, wholesale fuel prices, refinery investment and security of supply.
Traders would need traceable emissions data
A future inclusion of refinery products would require clear rules governing when liability is calculated and what documentation importers must provide to establish emissions intensity.
Internationally traded cargoes can contain products sourced from multiple installations or modified through blending. Although customs declarations identify products and their declared origins, tracing the underlying refinery and reconstructing the relevant production data may be more difficult across complex trading chains.
Importers would need workable procedures for obtaining emissions information, including where several facilities contribute to the final product. Reliable default values and credible routes for demonstrating actual emissions would be important to limit administrative costs and disputes.
The practical design of these requirements would influence how easily fuel suppliers could incorporate carbon-border obligations into existing trading, documentation and customs processes.
UK and EU carbon-border frameworks remain distinct
The European Union entered CBAM’s definitive phase on 1 January 2026, but its current product coverage differs from the sectors covered by the UK’s initial regime and the possible British refinery extension.
If the UK subsequently adds refined petroleum products, suppliers operating across both markets would need to monitor the separate national frameworks rather than assume that the two systems apply identical product lists and methodologies.
The consultation also raises questions about the recognition of carbon prices paid abroad and the prevention of double counting. The eventual approach would need to account for foreign carbon costs while maintaining the objectives of the UK’s domestic carbon-pricing policy.
Refinery investment depends on regulatory predictability
The possible extension also has implications for investment in emissions reduction at British refineries. Available industrial measures include improving energy efficiency, electrifying equipment, reducing methane and process emissions, and evaluating carbon capture.
Such investments require capital and are generally influenced by expectations about future regulation. The consultation gives the government an opportunity to assess whether a carbon-border adjustment could provide sufficient long-term protection for domestic refining and whether additional energy or infrastructure policies would be necessary.
The government is seeking responses from importers, agents, overseas suppliers and industry organisations. Any decision to include refined petroleum products would follow at a later stage, leaving fuel suppliers to assess potential UK carbon-border exposure as part of their longer-term commercial planning.
