What it does to margin
UK CBAM charges aluminium, steel, cement and fertiliser imported from 1 January 2027: tonnes times an emissions intensity times a quarterly rate. At HMRC's default value and illustrative rate, an aluminium extrusion carries 39 pounds a tonne in 2027, or 46 euros.
The base company is the one in every Insights post: 100 million euros of revenue at a 10% cash profit margin, here an aluminium extruder selling 15% of its output in the UK at 5,200 euros a tonne, or about 2,900 tonnes a year.
| Case | Euros a tonne | Cost a year | Margin points |
|---|---|---|---|
| 2027, default value | €46 | €0.13 million | −0.13 |
| 2027, verified intensity at half the default | €23 | €0.07 million | −0.07 |
| 2027, default, UK ETS at £80 | €63 | €0.18 million | −0.18 |
| 2030 phase-out factor, default, at £58.15 | €153 | €0.44 million | −0.44 |
| No UK free allowances, default, at £58.15 | €273 | €0.79 million | −0.79 |
Source: Pragmon AI calculation from HMRC default values and illustrative rates, 16 October 2026, read 19 October 2026. Assumptions under Arithmetic and sources.
A UK buyer faces the same sum from the other side: imported extrusion costs 39 pounds a tonne more in 2027 unless the supplier proves lower emissions or claims relief.
What an exporter can do
Contract terms. Name who is the importer of record and who bears the charge. On delivered duty paid terms the exporter registers, files and pays; elsewhere, agree a CBAM clause that passes the published quarterly rate through at cost.
Actual emissions. Get the plant's 2027 emissions intensity verified to the UK rules. These are designed to work alongside the EU CBAM method, so one monitoring system can serve both.
The EU ETS deduction. Check the plant's EU allowances against its verified emissions in the EU registry. At July to September 2026 prices, a plant that paid for more than 14% of its emissions owes the UK nothing on aluminium or steel. A plant fully covered by free allowances gets no relief.
Price list. Quote UK prices with the CBAM charge as a separate line that resets each quarter, so each rise from 2028 passes through.
UK CBAM against EU CBAM
| Feature | UK CBAM | EU CBAM |
|---|---|---|
| Charge starts | 1 January 2027 | 1 January 2026 |
| Threshold | £50,000 of imports a year | 50 tonnes of imports a year |
| How it is paid | Tax return to HMRC | CBAM certificates, sold from 1 February 2027 |
| First payment | 31 May 2028, for 2027 | 30 September 2027, for 2026 |
| Price | UK ETS auction average, quarterly, net of free allowances | EU ETS auction price, quarterly in 2026 and weekly from 2027 |
| Free-allowance adjustment | Inside the rate | Deducted from emissions, by benchmark |
| Default values | One per product, any origin | Set by country of origin |
| Emissions covered | Direct only | Direct; indirect also for cement and fertiliser |
| Electricity | Out of scope | In scope |
Source: HMRC, CBAM policy summary, 16 October 2026; Regulation (EU) 2023/956, consolidated to 20 October 2025: Articles 6(1), 7(1), 20(1), 21(1) and 21(1a), 31, Annex II, Annex IV point 4.1, Annex VII, 16 October 2026; read on EUR-Lex 19 October 2026.
The linking question. If the UK and EU link their emissions trading systems, goods from each side would be exempt from the other's CBAM. Finance Act 2026, section 156, already lets the Treasury make that exemption. No agreement has been signed. The Prime Minister told the House of Commons on 12 October 2026 that a deal on emissions trading is on the table at the UK-EU summit in Brussels on 20 November. Even a signed deal needs EU and UK legislation before it applies, so EU goods should plan to pay from 1 January 2027.
Questions people ask
Does UK CBAM apply to imports from the EU?
Yes, until a UK-EU emissions trading link is agreed and written into law. Carbon paid under the EU ETS can be deducted, but emissions covered by EU free allowances cannot.
What does UK CBAM do to an EU exporter's margin?
For an aluminium extruder with 100 million euros of revenue that sells 15% of it in the UK and absorbs the charge: 0.13 points of margin in 2027, rising towards 0.79 points as UK free allowances go.
Arithmetic and sources
The typical exporter
| Revenue | 100 million euros |
|---|---|
| Cash profit margin | 10% |
| Product | Aluminium extrusion, solid alloy profile (7604 29 90) |
| UK share of sales | 15% (15 million euros) |
| Realised price | 5,200 euros a tonne, our estimate. Built from LME cash aluminium at 2,808 euros (July to September 2026 average, World Bank Pink Sheet, converted at ECB monthly rates), the European billet premium at 951 euros (Fastmarkets, 6063 billet delivered North Germany, 1,070 to 1,135 dollars on 28 August 2026) and a conversion premium of 1,439 euros (Eurostat trade values for solid aluminium alloy profiles, April to June 2026, less metal and billet). Total 5,198 euros, rounded |
| Emissions intensity | HMRC default, 4.014 tonnes of carbon dioxide equivalent a tonne |
| Relief claimed | None |
| Pass-through to the UK buyer | None |
Source: Pragmon AI typical exporter, 19 October 2026.
Arithmetic
Tonnes to the UK: 15 million euros ÷ 5,200 euros = 2,885 tonnes. The 2027 charge is 0.9% of the 5,200 euro price (45.9 ÷ 5,200).
2027 charge: 45.9 euros a tonne (39.30 pounds ÷ 0.856 pounds a euro, the ECB mean for July to September 2026). × 2,885 tonnes = 0.132 million euros = 0.13 points of 100 million euros.
Half the default: 2.007 × 9.79 = 19.65 pounds = 23.0 euros a tonne; 0.066 million euros.
UK ETS at 80 pounds: rate 80 × 0.1684 = 13.47 pounds; 4.014 × 13.47 = 54.06 pounds = 63.2 euros a tonne; 0.18 million euros.
2030 factor: 130.9 pounds = 152.9 euros a tonne; 0.44 million euros.
No free allowances: 4.014 × 58.15 = 233.4 pounds = 272.7 euros a tonne; 0.79 million euros.
Relief breakeven: UK aluminium rate 9.79 pounds = 11.44 euros. EU auction average July to September 2026, 82.18 euros. 11.44 ÷ 82.18 = 13.9% of emissions paid for.
Realised price, our estimate: LME cash, World Bank Pink Sheet monthly averages July 3,161, August 3,251, September 3,283 dollars a tonne; at ECB monthly averages 1.1417, 1.1593, 1.1513 dollars a euro that is 2,769, 2,804 and 2,852 euros, mean 2,808. Billet premium: Fastmarkets 6063 extrusion billet, delivered North Germany, 1,070 to 1,135 dollars on 28 August 2026, midpoint 1,102.5 dollars ÷ 1.1593 = 951 euros. Conversion premium: Eurostat Comext, EU27 intra-EU arrivals of solid aluminium alloy profiles (CN 7604 29 90), April to June 2026, 1,098 million euros over 201,000 tonnes = 5,459 euros a tonne; less LME 3,067 euros (April to June average) and Hydro's Q2 extrusion ingot premium of 1,109 dollars ÷ 1.1632 = 953 euros; remainder 1,439 euros. Sum 2,808 + 951 + 1,439 = 5,198, rounded to 5,200. Cross-check: Eurostat extra-EU imports of the same code, 5,545 euros a tonne in July and 5,402 in August 2026 (mean 5,470); intra-EU arrivals in July 5,688 euros. The estimate sits 5% below imports because the trade code includes finished and coated profiles.
Sources
- HMRC, Carbon Border Adjustment Mechanism (CBAM): policy summary, updated 16 October 2026. https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary
- HMRC, CBAM: list of current qualifying carbon pricing schemes, 27 August 2026 (information as of 19 June 2026). https://www.gov.uk/government/publications/uk-cbam-current-qualifying-carbon-pricing-schemes
- Finance Act 2026, Part 5, including section 156. https://www.legislation.gov.uk/ukpga/2026/11/part/5
- The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026 (SI 2026/809), regulations 4, 11 and 12. https://www.legislation.gov.uk/uksi/2026/809/contents/made
- EEX, EU ETS primary market auction report 2026, T3PA auctions to 19 October 2026. https://public.eex-group.com/eex/eua-auction-report/emission-spot-primary-market-auction-report-2026-data.xlsx (read 19 October 2026)
- European Central Bank, euro reference rate, pound sterling, monthly average, July to September 2026. https://data.ecb.europa.eu/data/datasets/EXR (read 19 October 2026)
- World Bank, Commodity Price Data (Pink Sheet), aluminium, monthly averages July to September 2026 (read through Pragmon AI indicator worldbank-aluminium-usd-t, 19 October 2026)
- Fastmarkets, European aluminium billet-ingot premium spread slowly narrows, 7 September 2026 (assessment of 28 August 2026). https://www.fastmarkets.com/insights/european-aluminium-billet-ingot-premium-spread-slowly-narrows/
- Eurostat, Comext EU trade since 1988 (DS-045409), CN 7604 29 90 solid profiles of aluminium alloys, April to August 2026, extracted 19 October 2026. https://ec.europa.eu/eurostat/databrowser/product/page/DS-045409
- Norsk Hydro, second quarter report 2026, extrusion ingot premium (EU duty paid), 1,109 dollars a tonne. https://www.hydro.com/globalassets/06-investors/reports-and-presentations/quarterly-reports/2026/q2k9pev/second-quarter-report-2026.pdf
- Prime Minister's statement to the House of Commons, 12 October 2026. https://www.gov.uk/government/speeches/pm-statement-to-the-house-of-commons-12-october-2026
- Mayer Brown, "EU adopts CBAM simplification regulation: 10 key amendments", October 2025, summarising Regulation (EU) 2025/2083. https://www.mayerbrown.com/en/insights/publications/2025/10/eu-adopts-cbam-simplification-regulation-10-key-amendments-and-challenges-ahead
- Regulation (EU) 2023/956 (CBAM), consolidated to 20 October 2025. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02023R0956-20251020
