The UK Carbon Border Adjustment Mechanism (CBAM) is designed to address the risk of carbon leakage as the UK decarbonises its economy. It does this by applying a carbon price to imported goods in covered sectors that reflects the carbon price faced by comparable domestic production.

Unlike most taxes, CBAM does not have a single headline rate set out in primary legislation. Instead, the rate is determined using a methodology that combines recent carbon pricing data, sector-level emissions information and the extent to which domestic producers continue to receive free allowances under the UK Emissions Trading Scheme. This methodology is set out in law, via the Finance Act 2026.

The purpose of this note is to explain how sector-level CBAM rates are calculated under the CBAM rate methodology. It is intended as a transparency tool to help businesses understand how UK CBAM rates are determined and provide an indication of the potential scale of future CBAM liabilities.

The figures presented in this document are illustrative and represent the rates that would apply from 1 January 2027 based on current and preliminary data. The data used to produce these figures are subject to change prior to 1 January. They are intended solely to demonstrate the methodology and provide an indication of the potential scale of future CBAM rates. They do not create or imply any tax liability for any business. The first CBAM rates will be published before the end of the year, with rates updated and published on a quarterly basis thereafter.

The CBAM rate methodology applies the methodology set out in legislation to determine the rate for each CBAM sector, using data on carbon prices, emissions and free allowance coverage. Rates will be recalculated quarterly using updated inputs and will change over time as those inputs evolve.

The methodology calculates sector-level rates for covered CBAM sectors. Currently, these are the following sectors:

Further information about the methodology used can be found on GOV.UK.