UK Manufacturers Face New Costs & Compliance As The Carbon Border Tax Comes Into Force

20th January 2026

UK manufacturers exporting to the European Union now face a major shift from 1 January 2026, when the EU’s Carbon Border Adjustment Mechanism (CBAM) comes into full effect. The mechanism requires importers to pay for the carbon emissions embedded in certain goods, including steel, aluminium, cement, fertilisers, and, in some cases, electricity and hydrogen. This will have a big impact within our industry sector.

For UK exporters, this means additional costs and stricter reporting obligations. Businesses will need to register as authorised CBAM declarants and submit annual emissions declarations, detailing both direct and indirect carbon emissions associated with their products. Failure to comply could result in denied access to EU markets or fines.

Industry experts warn that high-emission products could become significantly more expensive for EU customers, potentially affecting competitiveness. At the same time, companies with low-carbon production may gain a market advantage, as EU buyers increasingly value emissions transparency and sustainability.

CBAM is expected to drive UK manufacturers to decarbonise production, improve energy efficiency, and invest in low-carbon technologies to reduce the costs of exporting to the EU. Supply chain decisions will also come under scrutiny, as emissions from raw materials now directly influence export costs.

This is both a challenge and an opportunity for UK industry. Firms that can demonstrate low-carbon credentials will be well-positioned, but those relying on high-emission processes must act fast to avoid losing market share.

The EU’s mechanism forms part of the Fit for 55 climate agenda, aiming to cut net greenhouse gas emissions by 55% by 2030, and is designed to prevent carbon leakage — the relocation of carbon-intensive production outside the EU to evade stricter climate rules.

CBAM also creates the first link between trade and carbon pricing, signalling to UK manufacturers that carbon costs will increasingly influence international competitiveness. Businesses were urged to review their carbon accounting, supply chains, and investment in green technologies ahead of the January 2026 deadline and the year will see further changes in how global trade is undertaken.

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