HMRC publishes illustrative UK carbon border rates below £10 a tonne

HM Revenue & Customs has published illustrative rates for the UK’s forthcoming carbon border levy, with all five covered sectors showing charges below £10 per tonne of emissions. Trade Finance Global reported that the figures offer an indication of how the mechanism would work using current data, but HMRC cautioned that they are neither forecasts nor amounts that importers must pay.

The UK Carbon Border Adjustment Mechanism is due to take effect on 1 January 2027. It aims to discourage carbon-intensive production from relocating abroad as Britain reduces its emissions, by charging imported goods in line with the carbon costs faced by domestic manufacturers. The illustrative rates were published on 16 October, according to Trade Finance Global.

Aluminium has the highest indicative rate, at £9.79 per tonne of carbon dioxide equivalent, followed by iron and steel at £9.69 and hydrogen at £9.24. Cement’s rate is £8.78, while fertiliser is substantially lower at £1.45. Each figure is well below the average UK Emissions Trading Scheme auction price of £58.15 a tonne recorded between July and September.

That gap reflects the free emissions permits still allocated to domestic industry. Under the UK ETS, companies need permits covering every tonne they emit, but only some of those permits are bought at government auctions. The border charge is adjusted for free allocations so that it reflects what British producers actually pay, rather than imposing the full auction price on imports.

For cement, free allowances cover 87.1% of direct emissions. Applying the 2027 phase-out factor of 97.5% leaves importers facing roughly 15% of the full carbon price. Rates will be updated quarterly to account for ETS price movements and the progressive withdrawal of free permits, which is expected to push levies higher over time.

Trade Finance Global reported that the calculation methodology is established in the Finance Act 2026, with the free-allowance withdrawal schedule set through secondary legislation. HMRC also warned that operators’ emissions data, supplied through the ETS baseline reporting exercise, remains under review by the UK ETS Authority and may be revised.