The UK government has made several technical amendments to its upcoming Carbon Boundary Adjustment Mechanism (CBAM). The changes follow a consultation launched in April and are intended to align CBAM with the broader UK carbon pricing framework while reducing administrative pressure on businesses.
A key amendment confirms that indirect emissions related to CBAM products will not be included when the mechanism becomes operational on January 1, 2027. Their possible inclusion will not be considered until 2029, reflecting continued support for the Energy-Intensive Industries Compensation Scheme (EII).
The Government has also recognized the strategic importance of the oil refining sector for national energy security and will collect evidence on the fuel sector. The feasibility and potential consequences of including petroleum products in CBAM at a later stage are also being considered.
Updated rules for free quotas and lower carbon prices
The adjustment related to free quotas will now be based on the industry average of emissions covered by the free allocation during the base period, updated annually in line with the gradual phasing out of free quotas in accordance with the UK ETS.
Carbon price reductions are being expanded to recognize carbon costs paid under other CBAM regimes to avoid duplicate charges.
The new exemption ensures that emissions contained in UK-made precursor products are reimported as part of a comprehensive CBAM.
