The UK Carbon Border Adjustment Mechanism (CBAM) represents a significant shift in the European Union’s approach to managing CO2 emissions and combatting climate change. The measure is designed to place a comparable carbon cost on imported goods and those produced in the UK, helping to prevent “carbon leakage” and support the transition to a lower-carbon economy.
The EU started their CBAM reporting in January 2026. The UK is now following a similar path, with its own CBAM due to come into force on 1st January 2027. It directly impacts manufacturers in the aerospace and defence sectors. It brings new obligations for businesses importing carbon-intensive goods into the UK and business need to be informed on how the rules may affect their supply chains, procurement decisions and costs.
Government support
To help businesses prepare, the Government launched a series of webinars explaining the requirements ahead of implementation. These are available on demand.
- CBAM Overview (Monday 12 October) Registration link
- Monitoring, Reporting and Verification (MRV) Overview (Monday 19 October) Registration link
- Carbon Price Relief (Monday 26 October) Registration link
However, if you’re wondering how this impacts the aerospace and defence sectors in particular, we’ve asked Adam Smith from Inspiring Group, an SC21 Provider with extensive experience supporting businesses with customs, trade compliance and regulatory change, to answer some of the most common questions.
In this Q&A, Adam cuts through the complexity to explain what CBAM is, who is likely to be affected, the challenges businesses may face, and the actions manufacturers can take today to prepare for January’s introduction.
Q: What is UK CBAM and who will be affected?
A: The UK Carbon Border Adjustment Mechanism (CBAM) is a new regulation designed to place a carbon cost on certain imported goods, helping to ensure that overseas manufacturers face a similar carbon-related burden to UK producers. Businesses importing products within scope are likely to have reporting and financial obligations from 2027 onwards.
Q. Which products are included in UK CBAM?
A: The UK Government has announced that CBAM will apply to imports of materials and goods containing aluminium, iron and steel, cement, fertilisers, and hydrogen. Coverage is determined by commodity codes and product definitions rather than broad industry categories, making this a crucial piece of work to get right. The simple decision tree graphic below provides a good starting point.
Q. Is there a minimum threshold before UK CBAM applies?
A: Yes. Businesses importing a minimum of £50,000 p.a. of CBAM-covered goods will have registration and compliance obligations under UK CBAM. However, the rules are more complex than a simple annual threshold calculation, making it important to understand how the legislation applies to your specific imports and supply chain.
Q: Is it just another tax on UK businesses?
A: Not really. It’s about trying to protect UK businesses from ‘dumping’ by suppliers in countries that are using cheaper manufacturing processes with higher emissions. It’s also about supporting the climate target of limiting global temperature increases. UK organisations are often leading the way when it comes to cleaner manufacturing technologies, but it’s recognised that our energy prices are amongst the highest in the world, therefore CBAM is trying to help level the playing field and support UK manufacturers.
Q. What information will importers need to collect?
A: UK importers are expected to obtain supplier emissions related information associated with the manufacture of affected materials and goods. This data will be required to calculate CBAM obligations and demonstrate compliance with the legislation. If the actual emissions data is not obtained then importers will have to pay based on UK government calculations, which are likely to result in a higher cost burden to importers.
Q. When should businesses start preparing for UK CBAM?
A: Now! Whilst affected importers won’t have to pay the UK government anything until 2028, the collection of data must start on 1st January 2027. Importers will need to keep records, understand the financial implications, and make accruals ready to pay in 2028. Engaging with existing suppliers to get them on board, identifying where you can switch to more advantageous supply sources, and understanding what costs you might need to pass onto customers, are key action areas.
Q. How will UK CBAM affect our business costs?
A: The impact will vary depending on the products imported, their embedded carbon emissions and future carbon pricing arrangements. Some businesses may experience minimal impact, while others could face significant additional costs that affect sourcing decisions and profit margins. For example, goods imported from EU manufacturers are likely to attract lower CBAM payments because the UK manufacturer will have paid for emissions within the EU scheme. Unfortunately, you need to do the analysis to understand the impact on your own business.
Q. Who should look after CBAM in my company?
A: Effective compliance requires accurate product classification, reliable emissions data, documented processes and appropriate record keeping. Businesses should also ensure they have a clear understanding of their supply chain and any potential compliance gaps. Many organisations discover that CBAM affects multiple departments, including procurement, finance, customs, sustainability and operations, making a coordinated approach essential.
Summary
Preparing for CBAM requires more than understanding legislation. It requires practical procurement expertise, supplier engagement and commercial planning.
As CBAM transitions towards full implement, understanding its framework and preparing for the forthcoming reporting and financial obligations become paramount. With information and support, UK businesses can navigate the complexities of CBAM, ensuring their products remain competitive in the EU market while contributing to the global effort to mitigate climate change.
Find out more about the Inspiring Group.
They help organisations:
- Assess their exposure by performing CBAM audits.
- Review supplier readiness and procurement risks.
- Strengthen procurement strategies and governance.
- Build practical compliance and data gathering frameworks.
- Strengthen procurement strategies and governance.
- Turn regulatory change into a commercial opportunity.
