UK exporters are set to face significant new costs after the European Union confirmed it will not grant the UK an exemption from the Carbon Border Adjustment Mechanism (CBAM) unless the two sides formally link their emissions trading systems.
According to UK government estimates, CBAM could cost British industry around £800 million per year, combining direct carbon charges with substantial new administrative requirements such as emissions reporting, verification and certification. The additional paperwork has drawn comparisons with post-Brexit trade bureaucracy.
The EU’s position was reiterated by Wopke Hoekstra, European Commissioner for Climate Action, who stated that exemptions would only follow a full linkage between the UK and EU carbon markets. While talks will continue, industry groups believe an exemption is unlikely before Easter at the earliest, meaning companies must prepare for compliance from 2026, with full administrative impacts expected by January 2028.
Some relief may apply to UK electricity exports, which the European Commission has indicated should not be subject to CBAM charges, as UK power generators already face higher carbon costs than EU counterparts.
Industry representatives warn the mechanism could undermine competitiveness. UK Steel highlighted that even modest carbon costs — estimated at around €13/mt for some steel products — could be decisive in a market where price differences of €5/mt can determine contract outcomes, particularly for small and medium-sized producers.
The UK government has reiterated that securing a UK-EU carbon market linkage remains a priority, noting that such an agreement could shield exports worth approximately £7 billion from CBAM charges.
VietnamSteel by Hoa Sen Group
