UK CBAM Rate: How It Is Set and What to Expect

The UK CBAM rate is the carbon price applied to imported goods. It is set per sector, per quarter, based on the UK Emissions Trading Scheme (ETS) auction clearing price for that quarter. HMRC publishes the rate for each sector at least one month before the start of the next quarter.

The rate is expressed in GBP per tonne of CO2 equivalent. It is calculated as the average UK ETS auction price for the preceding quarter, with a sector-specific adjustment reflecting the level of free allocation still available to UK domestic producers. Sectors receiving more free allocation have a lower effective CBAM rate.

HMRC has committed to transparency in rate-setting. The methodology, data sources, and calculation steps will be published alongside each quarterly rate announcement. You can expect the rate to move in line with the UK ETS market price, which has ranged from approximately £35 to £85 per tonne since the scheme's inception.

The CBAM rate for each quarter is published no later than one month before the quarter begins. The schedule is: Q1 (January-March) rate published by 1 December of the preceding year; Q2 (April-June) rate published by 1 March; Q3 (July-September) rate published by 1 June; Q4 (October-December) rate published by 1 September.

You use the published rate for the quarter in which your goods are imported, not the quarter in which the supplier's production occurred. If goods are produced in Q1 but imported into the UK in Q2, the Q2 rate applies.

The rate is fixed for the entire quarter. It does not change mid-quarter even if the underlying UK ETS price moves. This provides certainty for importers planning their CBAM costs, while reflecting longer-term carbon price trends.

The UK ETS currently provides free allocation of allowances to domestic industries to protect them from carbon leakage — the risk that production moves overseas to avoid carbon costs. As free allocation is phased out (expected from 2027 onwards, in line with the EU's phase-out schedule), the effective CBAM rate will rise.

During the free allocation phase, the CBAM rate is adjusted downwards to reflect that UK producers are not paying the full ETS price. As free allocation is reduced, the CBAM rate converges on the full UK ETS auction price. By approximately 2034, when free allocation is expected to reach zero, the CBAM rate should equal the full UK ETS price.

This trajectory has two implications for importers. First, CBAM costs will increase over time regardless of your supplier's emissions performance. Second, the financial incentive to obtain verified low-emissions supplier data increases as the rate rises, because every tonne of embedded emissions saved becomes more valuable.

The CBAM rate can differ by sector because free allocation levels vary. A sector receiving 80% free allocation will have a lower CBAM rate than a sector receiving 40% free allocation.

For example, if the UK ETS auction price is £50 per tonne and the steel sector receives 60% free allocation, the steel CBAM rate would be approximately £20 per tonne (40% of £50). The cement sector, receiving 90% free allocation, might have a rate of £5 per tonne (10% of £50). As free allocation is phased out, all sector rates converge on the full UK ETS price.

Oremly's return engine automatically applies the correct sector rate for each product in your import ledger. The system tracks quarterly rate announcements and applies the rate matching the import date, eliminating manual lookup errors.