The UK CBAM will not include indirect emissions until 2029

The government also made technical amendments to the relevant legislation

The UK will initially exclude indirect emissions from its Carbon Border Adjustment Mechanism (CBAM).

The budget published on November 26 states that indirect emissions associated with the production of CBAM goods will not be included in the scope of the mechanism when it is introduced on January 1, 2027. This step has been postponed until at least 2029 and reflects continued support for the Energy-Intensive Industries Compensation Scheme (EII).

Given the strategic importance of oil refineries for energy security, a separate request for evidence will be published for the fuel sector, and the possibility of including petroleum products in the UK’s cross-border carbon adjustment mechanism will be assessed in the future.

The government also made technical changes to the CBAM legislation following consultations in April 2025. These changes include, among other things, the calculation of free allowances based on the sector average, the extension of carbon price relief, and the exemption of temporary imports from CBAM requirements. A deadline for refund claims (3 years) has also been set for customers who made a mistake in their declaration and overpaid the relevant levy.

As previously reported, the EU and the UK may conclude an agreement that will exempt British businesses from the carbon tax under the CBAM. According to The Guardian, the parties have been working on mechanisms to protect British exporters from the impact of carbon duties and have been considering the possibility of a temporary agreement next year.