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CBAM decoded

A side-by-side comparison of the EU and UK Carbon Border Adjustment Mechanism (CBAM) regulations and their key differences.

Published on 27 March, 2026

The race to a low-carbon economy is reshaping global trade—and the Carbon Border Adjustment Mechanism (CBAM) is at the centre of the action. With the two-year transitional period now completed, the EU’s CBAM is now fully operational as of January 2026 (with financial obligations taking effect from 2027). In contrast, the UK’s CBAM is set to go live in 2027 with no transitional period.

After covering the fundamentals of the UK CBAM and EU CBAM in our previous articles, this article outlines the key differences between the two complex customs regulations.

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Administrative authorities

EU

European Commission and national CBAM authorities.

UK

HM Revenue and Customs (HMRC) and Department for Environment, Food & Rural Affairs (DEFRA).

Implementation

EU

Transitional phase started on 1 October 2023.
Definitive phase from 1 January 2026.

UK

No transitional phase.
Full implementation to be introduced on 1 January 2027.

Sectors impacted

EU

Iron & steel, cement, fertilisers, aluminium, electricity and hydrogen. 

The list of sectors impacted by CBAM is likely to expand.

UK

Iron, steel, cement, fertilisers, aluminium and hydrogen.

Emission coverage

EU

Transitional phase
(1 October 2023 - 31 December 2025):

Importers are required to report both direct and indirect embedded emissions for all covered CBAM sectors. No financial obligation applies during this period.

Definitive phase
(from 1 January 2026):

Importers will need to report direct emissions for iron, steel, aluminium, and hydrogen. Importers of cement and fertilizers are still required to declare both direct and indirect emissions.

UK

From 1 January 2027, the UK CBAM will cover direct emissions created by the production of CBAM-covered imported goods. Indirect emissions will be deferred until 2029 at the earliest.

Embedded emissions calculation

EU

Importers may declare embedded emissions based on either:

  • Actual emissions data from the installation where the goods were produced.

    When actual emissions are declared, the data must be verified by an independent accredited verifier in accordance with Annex VI of the CBAM Regulation.

or

  • Default values published by the European Commission, where actual data is not available. Default values do not require third-party verification.

UK

Importers may use:

  • Default values published by the UK government.

or

  • Declare actual emissions intensity data for the producing installation.

Reporting period

EU

Starting 1 January 2026, importers will submit CBAM reports annually. The first declaration will be due on 30 September 2027, covering emissions embedded in goods imported during 2026.

UK

The first reporting period will cover 2027 as a whole year. From 2028 onwards, accounting periods will be shifted to a quarterly basis.

Financial obligations

EU

Begins in 2027 with the purchase of CBAM certificates.

UK

Begins at the start of 2027 with a CBAM tax.

Carbon price referencing

EU

Based on the EU Emission Trading Scheme (ETS) price.

UK

Based on the UK Emissions Trading Scheme (UK ETS) price.

Free allowances*

EU

Free allowances for CBAM covered goods will gradually be phased out between 2026 and 2034.

From 2034, 100% of embedded emissions of the CBAM goods will be covered by CBAM certificates and no free allocation will be given under the EU ETS for these goods.

UK

The timeline for phasing out these free allocations for the CBAM goods has not yet been defined.

*The granting of a specific number of European Union Allowances (EUAs) or UK carbon allowances (UKAs) for free. Each allowance typically gives a company at risk of carbon leakage the right to emit one tonne of CO₂ (or CO₂ equivalent).

Exemptions

EU

  • Importers whose total annual net mass of CBAM-covered goods is below 50 tonnes falls outside the scope of CBAM. Electricity and hydrogen are not subject to this threshold.

    The 50-tonne threshold applies per importer, per year, across applicable CBAM sectors, and is intended to reduce the administrative burden on low-volume importers.

  • Goods used for military purposes are excluded from the scope of CBAM.

UK

Imports of CBAM goods totalling less than £50,000 in a 12-month period.

Penalties for non-compliance

EU

Sanctions are aligned with the EU ETS framework and may include financial penalties for each tonne of CO₂ that is incorrectly declared.

Beyond the financial consequences, companies may also face operational risks such as:

  • Delays, blockages, or disruptions in customs procedures

  • Heightened scrutiny and increased inspections by authorities

  • Greater exposure to regulatory audits

UK

The draft UK CBAM legislation creates new criminal offences, including:

  • Fraudulent evasion of CBAM obligations.

  • Misstatements related to CBAM, such as:

    • Producing or using false documents with intent to deceive.

    • Knowingly or recklessly providing false information.

The legislation also introduces antiavoidance measures to stop businesses from artificially splitting their operations to escape CBAM requirements.

Additionally, CBAM could be included within the DASVOIT (Disclosure of Avoidance Schemes: VAT and Other Indirect Taxes) disclosure regime, meaning that any schemes designed to avoid CBAM may need to be formally disclosed to HMRC.

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Navigating CBAM with confidence

The regulatory landscape for international trade is evolving rapidly. With CBAM already in place across the EU and soon to be implemented in the UK, companies must evaluate their imports, quantify their carbon exposure, and integrate compliance measures into their operations without delay.

Our customs clearance experts at Kuehne+Nagel are already helping EU companies meet their obligations with all-in-one CBAM solutions—we’re ready to transition your business under the UK CBAM framework too.

Learn more about the solution

Useful links:

EU CBAM