The UK government has released its draft emissions and verification regulations, establishing the framework for calculating embedded emissions in goods covered by its Carbon Border Adjustment Mechanism (CBAM). The mechanism is set to enter into force on January 1, 2027, and will apply across the entire UK, including Northern Ireland.
This is in addition to other second draft of rules setting out details of the administrative requirements, CBAM rate and carbon price relief, as SteelOrbis reported previously.
Key definitions and calculation methodologies
The draft regulations express emissions in metric tons of carbon dioxide equivalent (CO₂e) and permit two calculation approaches.
Where default values are used, emissions are calculated by multiplying the weight of the CBAM good by the applicable default value. Where actual emissions data is available, a step-by-step methodology applies, including identifying the monitoring period, calculating total production emissions, converting them into carbon dioxide equivalent, incorporating emissions from precursor goods, determining emissions intensity, and multiplying by the product weight.
The framework clarifies how emissions from precursor goods are incorporated into total emissions. Actual data is used where available, while default values apply in the absence of verified information. An emissions conversion data is also included in the regulations, enabling the conversion of non-carbon gases such as nitrous oxide and fluorinated gases into carbon dioxide equivalent values.
Monitoring and verification requirements
Emissions must be monitored over a defined calendar year, with specific rules depending on the import timing of goods. Verified emissions data must be assessed by independent accredited verifiers. These entities are required to evaluate emissions data, perform verification procedures, and issue reports covering installation details, monitoring periods, and the accuracy of emissions calculations. Accreditation bodies will oversee verifiers, ensuring compliance with technical standards, competence, and independence.
Importers of CBAM goods will be required to retain detailed records for six years. These include information on production installations, operators, emissions intensity, monitoring periods, and verification reports. These requirements form part of the UK CBAM’s implementation as a tax mechanism under the Finance Act 2026.
Industry concerns over competitiveness
UK-based trade association UK Steel has warned that the proposed CBAM design could unintentionally disadvantage domestic producers.
Under the UK Emissions Trading Scheme, UK steelmakers already face high carbon costs based on verified emissions. However, imported steel, often produced with higher emissions, could enter the UK at a significantly lower effective carbon cost. This imbalance stems from several design issues. Imported products may be assessed using default global emission values rather than actual verified emissions, which can substantially reduce their calculated carbon liability. In addition, some downstream steel-containing products may fall outside the current CBAM scope, allowing them to avoid carbon costs altogether. Industry stakeholders have called for several revisions to address these concerns. Proposals include adopting more conservative default values aligned with EU practices, introducing product- and production route-specific benchmarks, and expanding CBAM coverage to downstream steel products.
There are also calls to address export-related challenges to maintain the international competitiveness of UK producers. Without such adjustments, stakeholders warn that the mechanism could risk undermining decarbonization efforts and weakening domestic supply chains rather than supporting the transition to low-emission steel production.
