The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026

Explanatory Note

(This note is not part of the Regulations)

These Regulations make provision in connection with the introduction of a new tax called the carbon border adjustment mechanism (“CBAM”). CBAM was introduced by Part 5 of the Finance Act 2026 (“FA 2026”).

Part 1 deals with preliminary matters.

Part 2 clarifies two of the steps involved in the calculation of the sectoral domestic price applicable in respect of a CBAM good, which is one element of the calculation of the CBAM rate set out in section 149 of FA 2026.

Part 3 sets out the conditions for claiming carbon price relief and defines qualifying carbon pricing schemes.

Part 4 sets out requirements relating to verification of certain data used in the calculation of the effective carbon price and the accreditation of verifiers and imposes an obligation on importers to obtain a carbon pricing verification form completed by the verifier, where they intend to claim carbon price relief.

Part 5 makes provision about the calculation of the effective carbon price for a CBAM good and the calculation of the carbon price relief due.

Part 6 addresses the conversion of carbon price relief into sterling.

Part 7 makes provision about record keeping requirements in relation to the calculation of carbon price relief.

A notice made under a power created by these Regulations will be published at https://www.gov.uk/government/collections/carbon-border-adjustment-mechanism. A person unable to access the notice electronically may access it by inspection free of charge at HMRC, 100 Parliament Street, London, SW1A 2BQ.

A Tax Information and Impact Note covering this instrument was published on 26th November 2025 alongside Budget 2025 and is available on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.