EU's New Green Tariff Rules on High-Carbon Goods Come into Force
The European Union's Carbon Border Adjustment Mechanism (CBAM) took effect on 1 January 2026, targeting products such as iron and steel, aluminium, cement, hydrogen, electricity, and fertilisers.
Under the rules, exporters to the EU must demonstrate low-carbon compliance or face fines and are required to purchase certificates that cover the embedded emissions in their goods.
The CBAM aims to create a level playing field by curbing carbon leakage while supporting the decarbonisation and competitiveness of European producers.
Concerns remain around enforcement clarity and potential price rises. Non-EU suppliers, including Chinese steel producers, could be significantly affected.
However, the initial price impact is expected to be modest because not all emissions are covered yet.
The United Kingdom has not secured a deal with Brussels regarding CBAM and plans to implement its own CBAM next year.
Linking the UK and EU carbon markets could exempt British exporters from substantial export charges exceeding £7 billion and would simplify administration.
Policy advocates argue that electricity exports from the UK to the EU should be exempt from CBAM as it would not make sense to discourage the trade of clean electricity.
The CBAM will expand in 2028 to cover more products containing steel and aluminium, such as machinery and electric appliances, to prevent circumvention through relocation.
Industry and think-tank commentary highlights that the scheme supports decarbonisation and domestic industry, with expectations of only mild price impacts in the early years.
The UK cement sector views CBAM as fundamental to its future viability.
