The British government published legislation on April 25 for the proposed British CBAM in Great Britain. The draft law follows the government's announcement in November that it will introduce a British CBAM from January 1, 2027 – a year after the EU CBAM is to be fully functional.
The British CBAM will impose certain imported goods from sectors from sectors with the risk of a “carbon injury” – whereby companies shift production and the associated emissions to countries that apply no or low carbon prices in order to avoid carbon costs in Great Britain. The mechanism ensures that imported goods bear comparable carbon costs for the CO2 costs produced in the context of the British emission trade program (UK ETS) and aims to support decarbonization in Great Britain by preventing emissions.
The legal process (52-page / 1,749 kb) charges a control fee for the import of certain goods in aluminum, cement, fertilizer, hydrogen and iron and steel sectors and in Appendix 1 of the law for legislative known as CBAM goods. The CBAM fee applies to the amount of embodied greenhouse gas emissions in the imported goods.
It is proposed that a CBAM fee arises when CBAM goods are imported in Great Britain. In most cases, the British CBAM is paid by the importer who is responsible for registration at HMRC as a CBAM declarer. Submission of the quarterly CBAM return of the amount and embodied emissions in imported; And ultimately to pay a due CBAM fee.
The fee will apply from January 1, 2027 with a period of May 31, 2028 to report and pay obligations for the first 12 months of the CBAM. After the first period of 12 months, it is intended that accounting will be a quarterly basis after a quarter of two months. CBAM does not apply if the importer imports CBAM goods with a value of less than 50,000 GBP over a period of 12 months.
The CBAM load is calculated by using the amount in tons of embodied emissions -both directly and indirectly and including embodied emissions in progenitors, with which the CBAM goods are manufactured, are used in the imported goods by the corresponding British CBAM rate for the sector in which the goods fall. The British CBAM rate, which is based on the average price per ton of certain emissions within the framework of the British ETS, and the CBAM rates per sector are published quarterly.
For each explicit carbon price, a credit is given that has already been paid in the country of origin in order to avoid double taxation, and the person who pays the CBAM fee must result in reviewed evidence for this explicit carbon price.
The HMRC will have the authority to issue punishments for the non -payment of CBAM. Unless independently checked whether the actual embodied emissions are available, the CBAM load is based on the standard emission values for the corresponding CBAM goods.
Those who, at the end of supply chains, which ultimately passed on the CBAM costs paid by importers in the form of higher prices for CBAM goods, consider that they buy goods where actual embodied emission data and reviewed data are available via a applicable explicit carbon price.
The draft law is subject to a technical consultation that ends on July 3, and the HMRC is expected to publish guidelines in the coming months.
Dr. Totis Kotsonis, a commercial law expert at Pinsent Masons, welcomed the design of the suggestions, but warned that “the position in terms of British CBAM and your registration remains uncertain what is not helpful for many contractors and other parties that are involved in infrastructure and real estate projects that may need to import CBAM goods.” He said that further details will be published this summer this summer this summer.
Since the publication of the draft law, Great Britain and the EU have announced their intention to link the EU ETS and UK ETS and to provide mutual CBAM exceptions after the signing of a historical trade agreement in Great Britain in May. Further details have not yet been announced. It also remains unclear how the orientation of the United Kingdom with the EU via CBAM and the ETS could affect the relationship between the United Kingdom as an important energy trade partner in the United States.
Kotsonis said that there must be further clarification of how the respective EU and UK sets work and how this could affect the carbon price for British CBAM. He said the confirmation of the “mutual liberation mechanism for EU/UK CBAM” was urgently needed to help companies prepare and avoid potential “trade freight”.
The EU CBAM scheme came into force in the phase in October 2023 and is scheduled to come into force from January 2026. At the beginning of this month, the European Council and the European Parliament temporarily agreed that a proposal that they say will reduce the costs and the compliance burden for all importers from CBAM. Periods for which the payment is due.
Siobhan Cross, an expert in real estate, climate and sustainability at Pinsent Masons, said it is important that contractors in the construction industry and the developer keep up to date on the advance of the proposed British CBAM and other developments in connection with the laws. “Despite the uncertainty, important construction contracts are now signed that will still be available in 2027 if the CBAM is to come into force, since construction contracts often include projects that take 10-15 years,” she said.
Cross said that many of these projects will also include importing CBAM goods in Great Britain. “Despite the uncertainty, contractors and developers still have to think about the British CBAM how this affects the expense of goods and projects and how CBAM problems should be managed within the framework of the contract,” she said. “If imports are necessary, it becomes increasingly attractive that low carbon versions of CBAM goods with low carbon versions minimize the likely cost increases that would bring higher carbon versions.”
For construction contracts that were carried out before CBAM came into force, companies must check which party is liable for the risk of higher prices for CBAM goods.
In the case of fixed price contracts, the price increase is prevented from the contractor, provided that the contract does not contain more often in complex projects, but contains a price adjustment mechanism that reacts to the cost increases of the supply chain. The parties should check which early warning obligations and requirements for the announcement in relation to the effects on their ability to reproduce their obligations from the contract, as well as the early inclusion with contracting parties and the supply chain help to understand and alleviate this risk.
The change in the legal clauses usually deals with the effects of new laws and changes to the existing laws. It should be carefully considered whether you limit the change in law to the law of the contract or the area in which the contract is delivered and whether there is a limit for changes in the law that are “unpredictable”.
In the case of future contracts, a consideration should be taken into account, which means “unpredictable”. Specific conversions for the effects of future CBAM costs can be endeavored to expressly bring them into the category of a change in the law that entitles the contractor to request increased costs or expressly exclude them.
For construction contracts that are now being negotiated in the future, the parties should pay particular attention to how the proposed British CBAM will affect every party. The parties would like to take different types of clauses into account – namely every price adjustment, compulsory level or change in the legal clause – in detail and ensure that the risk of increasing the price of the proposed CBAM is tackled.
In a related consultation, which was published on June 3, the government requests views on a political framework to expand the British market for industrial carbon industrial products with a focus on steel, cement and concrete. In conjunction with the at the beginning of this week to support the reduction of energy prices for energy -intensive industries, this can mean that in the coming years there will be plenty of supply with low carbon versions of these most important building materials in Germany. In this way, contractors and developers may not have to be concerned with UK CBAM, said Cross.