The EU will not exempt anyone from the CBAM mechanism – European Commissioner

There may be an exception for the UK, provided that the parties' carbon markets are merged

The European Union may exempt the United Kingdom from the CBAM tax later in 2026, but this is unlikely to happen before the mechanism comes into force in January. This was reported by Politico.

As European Commissioner for Climate Action Wopke Hoekstra said at a press conference, the EU is not exempting anyone from the new cross-border carbon adjustment mechanism. However, provided that the carbon markets of the bloc and the UK are fully linked, there will likely be an exception. This already applies to countries such as Switzerland, which has taken the appropriate step.

Hookstra said that the EU is in good talks with the UK on merging the ETS emissions trading systems, which were separated after Brexit.

The European Commissioner also assessed the potential costs that CBAM will have on British heavy industry. In particular, he noted that the UK’s energy system is already sufficiently decarbonized.

Hookstra also did not specify whether British manufacturers would bear the costs until the merger – according to current plans, they may be reimbursed by the bloc.

In a joint statement, the parties said they would complete the ETS merger before the EU-UK summit in 2026 – the latter does not yet have a set date, but is likely to take place in the middle of the year.

A British government official told Politico that he does not expect any transitional agreement with the EU to be implemented until the ETS merger is complete. At the same time, an EU official, speaking on condition of anonymity, said that the companies and sectors affected by the CBAM are very limited, as there is a general exemption for small and medium-sized enterprises, etc. In addition, this impact will be very short-lived.

The UK plans to introduce its own cross-border carbon adjustment mechanism in 2027.

It should be noted that the EU is strengthening CBAM by adding a wide range of goods, namely 180 new products. The bloc has presented a new package of measures to address gaps in the mechanism.