New Carbon Tax from January 2027

With the UK Carbon Border Adjustment Mechanism (CBAM) set to come into effect on 1 January 2027, construction businesses face a new set of regulatory, financial and supply chain considerations when importing carbon-intensive materials.

The UK Carbon Border Adjustment Mechanism (CBAM) will impose a carbon price on high-emission industrial imports, including aluminium, cement, ceramics, fertilisers, glass, hydrogen, iron, and steel.

The UK CBAM is a new carbon tax on certain imported carbon-intensive goods. Its purpose is to prevent “carbon leakage”, where production moves overseas to countries with lower environmental standards, undermining UK decarbonisation efforts. CBAM will ensure imported products face a carbon cost broadly equivalent to that paid by UK manufacturers under the UK Emissions Trading Scheme (UK ETS).

From January 2027, CBAM will apply to imports from the following sectors:

• Iron and steel
• Aluminium
• Cement
• Fertiliser
• Hydrogen

While direct impacts will be for importers of these materials (where they exceed £50,000 annually), there will likely be indirect impacts on the wider construction industry, including increased costs for these carbon intensive materials.

This puts an even greater focus on minimising embodied carbon and considering sourcing of materials produced in lower carbon ways or more local sourcing where viable (e.g. UK steel and cement have been paying the UK ETS for a long time and reducing their emissions).

For more information on the tax levied by CBAM, see the UK Government CBAM policy summary.

For more information on the legislation for CBAM, see the legislation on legislation.gov.uk.