UK CBAM 2027: First Rates and What They Mean for India

The UK's own carbon border adjustment mechanism starts on 1 January 2027, a year after the EU's definitive period began. On 16 October 2026 HMRC published the first illustrative rates, so importers and the companies that supply them can see the size of the bill for the first time. The figures do not create any tax liability yet: they show what the rates would be if they were set on today's data.

The illustrative rates

How the rate is set

Each sector's rate starts from the average UK ETS price, £58.15 for July to September 2026. It is then reduced by the share of that sector's emissions UK producers still receive as free allocation, scaled by a phase-out factor of 97.5% for 2027 across all five sectors.

This is the main difference from the EU design. The UK deducts free allocation from the price, giving a low rate per tonne charged on all embedded emissions. The EU deducts it from the emissions, charging the full certificate price on emissions above a benchmark. Both shrink the deduction over time.

What it means for an Indian steel exporter

Trade publication EUROMETAL worked through Indian hot-rolled coil (CN 72083700). On the UK default value of 3.314 tCO2e per tonne, the indicative UK liability is about £32 per tonne. On the EU side, the 2027 default of 5.136 tCO2e per tonne less an adjusted benchmark of 1.302, at the EU's Q3 2026 certificate price of about €82, gives about €314 per tonne: more than eight times the UK figure.

The UK default values in that comparison are averaged across trading partners rather than set per country; EUROMETAL reports that country-specific UK defaults are expected from 2029. As in the EU, an importer can use the actual embedded emissions of the producing installation instead of the default.

What to do now

• Check which of your goods sold into the UK fall in the five sectors, by commodity code.
• Expect UK buyers to ask for embedded emissions per tonne, the same data EU buyers already request. One measurement can serve both.
• Watch for the binding January to March 2027 rates, due before the end of 2026, and the quarterly updates after that.
• Keep the evidence behind your figures: fuel and electricity records, production data and the method used.

ZeroCarbon keeps embedded emissions per installation and product, with each figure linked to its source documents, so the same record can answer an EU and a UK buyer. See also the EU default values for Indian aluminium, cement and fertilisers.