UK - Carbon Border Adjustment Mechanism (CBAM)
An Introduction & Guide
Introduction This guide is written for our clients to help make you aware of this incoming regulation and its impact. At Ayesa Engineering, we work across infrastructure and industry, supporting clients with carbon, engineering and delivery challenges. We see how regulation turns into real decisions on projects, costs and risk. UK CBAM will become part of everyday decision making. Organisations that act early will be better placed to manage cost, reduce risk and strengthen their carbon strategy. Ayesa Engineering supports clients from early strategy through design, delivery and operation. We bring together our expertise to turn regulatory change into practical, workable solutions. This guide is a starting point for that conversation.
What is CBAM? The UK Carbon Border Adjustment Mechanism (CBAM) is a major change in how carbon is treated in international trade and in how projects across infrastructure, construction and industry will be planned and delivered.
What is its impact? CBAM will influence material choices, procurement strategies, supply chains, cost models and carbon reporting. It will also change how projects are specified, priced and delivered. For many organisations, the key challenge is not just understanding the rules, but knowing what actions to take. From 2027, UK CBAM will place a carbon price on certain imported goods based on their embedded emissions. The aim is to prevent carbon leakage, support UK decarbonisation, and create a fairer market between UK and overseas producers. While the principle is straightforward, the impact on organisations will be significant.
Ayesa Engineering: UK CBAM
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UK CBAM: Summary (Carbon Border Adjustment Mechanism) The UK CBAM mechanism is been designed to (1) target the most carbon intensive imports, (2) promote decarbonisation of high-emitting industries by discouraging use of carbon-intensive materials and incentivising cleaner production methods, and (3) level the playing field and eliminate unfair competition between imported and domestic goods.
When does it start? 1st January 2027
What imports are covered?
Who qualifies in the UK? • Companies exceeding the minimum EU import threshold of £50,000 over a 12month period qualify for UK CBAM
Ayesa Engineering: UK CBAM Overview
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Steel Iron Aluminium Cement Fertiliser Hydrogen
What are the requirements? • Registration with HMRC • Submission of annual report • Payment of CBAM liability 3
UK CBAM: Breakdown Further guidance is expected to be released by the UK government later in 2026
DATA REQUIREMENTS
PRICING
• Actual emissions data if available and verifiable
• UK CBAM rates in £ / tCO2e will be published in due course.
• Fallback if unavailable would be the default emission/tonne figures to be published by HMRC shortly before 1st January 2027.
• These rates will be based on sector averages and will be reviewed and revised by HMRC on a quarterly basis.
• Emissions covered by UK CBAM are Scope 1 (i.e. direct emissions from the manufacturing process) and Scope 2 (i.e. indirect emissions from electricity consumed during production), plus direct and indirect embodied emissions for select precursors (e.g. clinker, coke, sinter, ammonia, etc.).
• It is anticipated that the UK CBAM rates will go down over time as the UK domestic industry decarbonises.
Ayesa Engineering: UK CBAM Overview
• Any carbon liabilities that suppliers are subject to should be taken into account to avoid double taxation.
REPORTING AND PAYMENT
• Submission of one final annual report, followed by one liability payment for the year much the same way any other corporate tax is paid • For 2027, companies will have 5 months after 31st December 2027 to submit the annual report and pay the UK CBAM liability.
PENALTIES
• Non-compliance with UK CBAM obligations will attract penalties. • This will include failure to register for the UK CBAM, failure to submit UK CBAM returns and failure to keep records. • The government intends to apply existing HMRC enforcement powers, including a general regulatory penalty specific to UK CBAM offences. • For late submissions and payments, the penalty framework is expected to align closely with the VAT penalty points system.
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Preparing for UK CBAM: Next Steps Qualification assessment Determine whether you qualify for UK CBAM, i.e. whether imports are over the threshold of £50,000 worth of goods per 12-month rolling period
Enrolment Register with HMRC when the system goes live
Mapping EU imports Map out supply chain to identify imports and countries of origin; produce a register of all ‘in scope’ products, suppliers, locations, and typical import quantities
Questionnaire template Create a questionnaire with all information required from suppliers, e.g. embodied carbon emissions, precursors, carbon taxes/liabilities.
Supplier engagement Share questionnaire with suppliers as early as possible in 2026 to allow time to identify and address data gaps
Ayesa Engineering: UK CBAM Overview
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Impact assessment Estimate total emissions from EU imports, with available information from suppliers
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Addressing gaps Use default emissions values associated with each product type provided by HMRC where supplier information not available
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Liability estimation Estimate total liability to be paid at the end of 2027 using CBAM rates released by HMRC for each product type
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Internal reporting process Establish an internal process for reporting under UK CBAM; assign roles and responsibilities
Reporting to HMRC Disclose information to HMRC, pay UK CBAM liability, and prepare UK CBAM compliance statement for your annual report
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People First: People are at the Heart of Ayesa • We encourage growth through equal opportunities • We promote diversity, equity, and inclusion Empowering Our Team to adopt a Positive Mindset •Driven by strong workplace culture and values •Supported by ongoing investment into continuous professional development and personal development through leadership and wellness programs. Community Impact •Contributing to social and community projects through the Ayesa Foundation • Our Employees volunteering across our 23 countries helping bring local impact to local communities
As leaders in the new economy, we are responsible for driving change that prioritises people, the planet, and good governance. Our goal is not just to just protect the planet, but to improve it.
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