UK CBAM: Second Tranche of Draft Legislation Published for Consultation
On 9 April 2026, the UK Government published its second tranche of draft secondary legislation for the Carbon Border Adjustment Mechanism (CBAM). This follows the first tranche released in February, which covered administration, CBAM rate calculation, and carbon price relief. Together, these publications form the bulk of the regulatory framework that will govern UK CBAM when it takes effect on 1 January 2027.
The consultation on this second tranche closes at 11:59pm on 21 May 2026. Responses should be sent to cbampolicyteam@hmrc.gov.uk.
This article summarises the three documents published, what they contain, and what they mean for UK importers.
What has been published?
The second tranche consists of three documents:
1. The Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026 — draft statutory instrument
2. The Carbon Border Adjustment Mechanism: System Boundaries Document — version 1.00 (draft)
3. The Carbon Border Adjustment Mechanism (Emissions and Verification) Force of Law Notice — draft notice with the force of law
Each document serves a distinct purpose. In simple terms: the System Boundaries Document tells you what to measure, the Regulations provide the legal framework and calculation steps, and the Force of Law Notice tells you how to measure it and how it gets verified.
Document 1: The Emissions and Verification Regulations
This is the statutory instrument that gives legal force to the emissions calculation methodology, verification requirements, and record-keeping obligations. It comes into force on 1 January 2027.
Calculating embodied emissions
The Regulations set out two routes for determining the emissions embodied in a CBAM good:
Default values: Where an importer uses a default value, the calculation is straightforward — the weight of the good multiplied by the default value. Default values will be published separately by HM Treasury in a notice. They have not yet been published, and the methodology for calculating them has not been finalised. The government has confirmed that, for 2027, there will be a single default value per commodity code with no differentiation by country of origin. The government is considering whether to move to a more differentiated approach from 2028 onwards.
Actual emissions: Where actual emissions data is used, the Regulations set out an 8-step calculation process:
1. Identify the monitoring period for the imported good
2. Using verified emissions data, identify the relevant emissions from the installation during that monitoring period
3. Convert any non-CO2 emissions into carbon dioxide equivalent (tCO2e)
4. Add together all amounts to produce a total in tCO2e
5. Add precursor emissions where applicable
6. Identify the total weight of that type of good produced during the monitoring period
7. Divide the total emissions by the total weight to produce an emissions intensity (rounded to 5 decimal places)
8. Multiply the emissions intensity by the weight of the imported good
A simplified calculation is available where all precursor goods are produced and consumed within the same installation.
Global warming potential values
The Regulations confirm the conversion factors for non-CO2 greenhouse gases:
- Nitrous oxide (N2O): 265 tCO2e per tonne
- Tetrafluoromethane (CF4): 6,630 tCO2e per tonne
- Hexafluoroethane (C2F6): 11,100 tCO2e per tonne
These are aligned with the IPCC Fifth Assessment Report values and match the EU CBAM.
Monitoring periods
Monitoring periods are based on a calendar year. For goods imported before 1 January 2028, the monitoring period can be either the calendar year in which the good was imported or the calendar year in which it was produced. From 2028 onwards, the monitoring period must be from the two most recent calendar years preceding the year of import for which verified emissions data exists, or the calendar year of production.
Precursor goods can have a different monitoring period from the main CBAM good.
Verification requirements
All verified emissions data must be verified by a verifier who is:
- Independent of the importer, the producing installation, and any precursor installation
- Accredited by an accreditation body that is a full member of Global Accreditation Cooperation Incorporated (GACI)
- Compliant with verification and reporting standards set out in HMRC notices
In the UK, the relevant GACI member is UKAS (the United Kingdom Accreditation Service). This is broadly comparable to the EU approach but uses GACI membership rather than the EU Accreditation Regulation as the gateway.
Importers using actual emissions data must retain records for 6 years. Required records include installation addresses, operator details, monitoring period documentation, verification reports, verifier details, and emissions intensity data.
Document 2: The System Boundaries Document
This document defines, for each type of CBAM good, which production processes and which emissions must be included when calculating embodied emissions. It is a critical reference for overseas operators who will need to monitor and report their emissions.
The document provides a mapping table that assigns every commodity code listed in Schedule 16 of the Finance Act 2026 to an aggregated goods category and specifies the relevant greenhouse gases. It then sets out the system boundaries for each sector.
Aluminium
Two aggregated goods categories: unwrought aluminium and aluminium products. Unwrought aluminium has two production routes — primary (electrolytic) smelting and secondary melting (recycling). For primary smelting, perfluorocarbon emissions from anode effects must be included.
Cement
Four aggregated goods categories: calcined clay, cement clinker, cement, and aluminous cement. Non-calcined clays under commodity code 2507 00 80 are assigned zero embodied emissions. No distinction is made between grey and white cement clinker.
Fertilisers
Four aggregated goods categories: nitric acid, ammonia, mixed fertilisers, and urea. Ammonia has two production routes. The functional unit for certain fertiliser commodity codes is kilograms of nitrogen rather than tonnes of product. Precursor chains are significant in this sector.
Hydrogen
One aggregated goods category with three production routes: steam reforming, partial oxidation, and steam cracking. Hydrogen produced and consumed within a refinery or organic chemical installation is excluded.
Iron and steel
Six aggregated goods categories: sintered ore, pig iron, ferro-alloys (FeMn, FeCr, FeNi), DRI, crude steel, and iron or steel products. This is the most complex sector, with detailed precursor chains throughout. Crude steel has two production routes: basic oxygen steelmaking and electric arc furnace.
Cross-sectoral rules
The system boundaries include both the emissions from the production process and, for complex goods, the embodied emissions of precursor goods. Infrastructure and equipment purchase and maintenance are excluded.
The system boundaries are closely modelled on Annex II of the EU CBAM Implementing Regulation. Importers already collecting data for EU CBAM purposes should find the scope and boundaries largely familiar.
Document 3: The Force of Law Notice
At 106 pages, this is the most substantial document in the package. It has the force of law under the Regulations and serves as the detailed technical rulebook for how emissions are monitored, reported, and verified.
Monitoring requirements for operators
The notice sets out nine monitoring principles: completeness, consistency and comparability, transparency, records retention, accuracy, integrity of methodology, data quality, cost-effectiveness, and continuous improvement.
Operators must use the best available data source, with direct determination preferred over indirect methods. Where a claim is made that a method is technically infeasible or unreasonably costly, this must be justified in the monitoring plan. The cost threshold is calculated against a reference price of £20 per tonne of CO2. Improvements costing up to £2,000 per year are never considered unreasonable.
Monitoring plans must be written in English.
The notice includes detailed technical sections covering CO2 calculation methodologies (standard method and mass balance), criteria for zero-rating biomass, requirements for activity data and laboratory analysis, continuous emissions measurement, perfluorocarbon measurement for aluminium, CO2 transfers between installations, and sector-specific rules for cement clinker and nitric acid production.
Rules are also provided for monitoring heat flows, precursor goods, activity levels, and attributing installation-level data to specific production processes.
Verification and accreditation requirements
The second half of the notice covers the verification framework in detail.
Accreditation bodies must meet specific competence requirements. There is a notable provision for applicants already accredited under EU Implementing Regulation 2018/2067, which should provide a pathway for verifiers currently operating under the EU CBAM.
Verifier requirements cover competency for CBAM auditors and independent reviewers, quality management systems, and detailed rules on impartiality and independence, including provisions on conflicts of interest and limits on consecutive verifications of the same installation.
The verification process itself is comprehensively covered: pre-contractual obligations, strategic and risk analysis, the verification plan, site visits (including conditions under which virtual visits may replace physical visits), materiality levels, data verification, sampling, and how to address misstatements and non-conformities.
The notice includes four annexes: a template for the operator's emissions report, the format of the verification report, a verification summary template, and the scope of accreditation for verifiers.
Key differences from EU CBAM
While the UK CBAM is closely modelled on the EU approach, importers should be aware of several important differences:
No transitional period. The UK moves directly into a definitive phase on 1 January 2027 with financial obligations from day one. The EU had a two-year reporting-only transition from October 2023 to December 2025.
Direct tax, not certificates. The UK CBAM is a tax administered by HMRC, not a certificate purchase and surrender system.
Sector scope. The UK covers aluminium, cement, fertilisers, hydrogen, and iron and steel. It does not cover electricity and has dropped ceramics and glass from the initial scope.
Indirect emissions deferred. Indirect emissions are excluded until 2029 at the earliest. The EU includes indirect emissions for cement and fertilisers from the outset.
Single default value per commodity code. For 2027, a single global default value per commodity code with no country differentiation. The EU publishes country-specific default values with a markup that increases from 10% in 2026 to 30% in 2028.
Registration threshold. The UK uses a £50,000 annual value threshold. The EU uses a 50-tonne mass threshold.
Record keeping. 6 years in the UK versus 5 years under the EU CBAM.
What importers should do now
Read and respond to the consultation. The consultation closes on 21 May 2026. This is an opportunity to flag practical issues before the legislation is finalised.
Engage with overseas suppliers. The monitoring requirements are detailed and will require overseas operators to establish monitoring plans, collect emissions data, and engage with accredited verifiers. This takes time to set up.
Do not wait for default values. Default values will be a single global figure per commodity code and are likely to be set conservatively. Importers who invest in obtaining actual verified emissions data will almost certainly face lower CBAM costs.
Consider your verification strategy. The verifier market for UK CBAM is still developing. Organisations with existing UKAS accreditation under ISO 14065 and ISO 17029 are best positioned, but formal approval for UK CBAM verification is not yet in place.
Map your precursor chains. The system boundaries define detailed precursor relationships for each sector. Understanding which precursor goods feed into your imported products is a critical first step.
This article is based on draft legislation published for consultation on 9 April 2026. The final legislation may differ from the drafts described here. Importers should monitor GOV.UK for updates.