CBAM Carbon Price Relief: How to Claim

CBAM is designed to ensure imported goods face a carbon price equivalent to what UK domestic producers pay. If your supplier has already paid a carbon price in their country of production, you can claim relief against your UK CBAM liability.

This prevents double taxation — paying a carbon price in the country of origin and again under UK CBAM. The relief is deducted from your total UK CBAM liability, reducing the amount you owe.

Carbon price relief is not automatic. You must claim it in your CBAM return and provide evidence of the price paid.

To qualify for relief, the carbon price must meet HMRC's criteria:

• Be a direct price on carbon emissions (e.g., an emissions trading scheme, carbon tax, or levy)
• Be legally enforceable in the country of production
• Be paid by the producer of the goods (not by an intermediary)
• Be calculated per tonne of CO₂e emitted
• Be verifiable through documentation

Examples of qualifying schemes include the EU Emissions Trading System (EU ETS), the Chinese national ETS, and explicit carbon taxes. Electricity price premiums from renewable energy mandates generally do not qualify because they are not a direct price on carbon.

HMRC will publish a list of recognised carbon pricing mechanisms. If your supplier operates in a jurisdiction with a recognised scheme, you can claim relief for the price paid.

The relief is calculated as follows:

Relief (GBP) = Carbon price paid (per tonne CO₂e) × Embedded emissions (tonnes CO₂e) × Exchange rate (local currency to GBP)

The exchange rate used is the prevailing rate at the time the carbon price was paid, not the rate at the time of import or filing. You must document the exchange rate used.

The relief is capped at the UK CBAM liability for those goods. You cannot claim more relief than the UK CBAM liability — the carbon price paid overseas can bring your UK liability to zero, but not below zero.

To claim carbon price relief, you must provide HMRC with:

• Proof of the carbon price paid: A certificate, invoice, or official document from the carbon pricing authority
• Details of the scheme: Name and type of the carbon pricing mechanism
• Amount paid: Carbon price per tonne and total amount paid in local currency
• Production attribution: Evidence linking the carbon price paid to the specific goods imported
• Exchange rate: Documentation of the exchange rate used to convert to GBP
• Verification: Where possible, third-party verification of the carbon price paid

The evidence must be retained as part of your CBAM records. If you are audited, HMRC will expect to see the original documents, not summaries.

Obtaining this evidence can be complex. Your supplier may not routinely document their carbon price payments. You may need to request specific documentation and explain what you need and why.

Several practical challenges arise when claiming carbon price relief:

• Suppliers do not routinely document carbon costs: Provide a template for your supplier to complete, specifying exactly what information you need
• Carbon prices fluctuate: Use the actual price paid for the production period, not an annual average
• Multi-jurisdiction supply chains: If your goods pass through multiple countries, only the carbon price paid in the country of final production qualifies
• Free allowances under ETS: If your supplier received free ETS allowances, the effective carbon price paid is lower than the headline ETS price. You can only claim relief on the allowances actually purchased

Oremly helps by automating the carbon price relief claim process. The system tracks recognised carbon pricing mechanisms, calculates relief based on supplier data, and flags documentation gaps before you file.