The Treasury and HMRC have made S.I. 2026/809, the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026. Made on 13 July 2026, laid before the House of Commons on 14 July 2026 and due to come into force on 1 January 2027, the instrument supplies the operating rules for two important parts of the new UK CBAM: how part of the CBAM rate is set, and how importers can reduce a charge where a comparable carbon price has already been paid overseas. Under section 157(10) of the Finance Act 2026, the Regulations must still be approved by the House of Commons within 28 days of being made, with the statutory clock adjusted for dissolution, prorogation or adjournment lasting more than four days. The Explanatory Note says the instrument gives effect to the CBAM structure created by Part 5 of the Finance Act 2026 rather than creating a separate tax in its own right.
On the domestic pricing side, regulation 3 tells the Treasury how to identify the average UK Emissions Trading Scheme price used in Step 1 of the section 149 calculation. The default rule is to take the mean of all UK ETS auction clearing prices in the quarter before the relevant quarter. If no allowances were sold in that period, the Treasury must instead use the most recent quarter in which auction sales took place. Regulation 4 then fixes the Step 2 factor by reference to Article 16(14) of Commission Delegated Regulation (EU) 2019/331 for the corresponding scheme year. In practical terms, that means the CBAM calculation uses an established UK ETS-related factor rather than a separate factor devised solely for these Regulations.
Carbon price relief is available only in defined circumstances. Regulation 5 says an importer may claim relief where the good was manufactured or processed by an installation participating in a qualifying carbon pricing scheme and the Part 4 verification rules have been met. The provision expressly allows for participation on a voluntary basis, but only where the underlying scheme satisfies the legal tests in regulation 6. Those tests are detailed. A qualifying scheme may operate at city, regional, national or supra-national level, but it must legally require participation across the relevant class of installations, or across installations above a specified emissions threshold. It must also impose a cost on relevant emissions either directly or indirectly, and its rules, scope and headline carbon price must be publicly available. The Regulations recognise indirect pricing as well, where the carbon cost is embedded in fossil fuel charges and converted using emissions factors drawn from Treasury-approved sources.
The verification rules are a central compliance feature of the instrument. Regulation 7 requires independent verification of the emissions produced by the overseas installation, the share of those emissions affected by different scheme elements, any monetary support the installation has received or is due to receive, and any emissions factors used where the scheme is indirect. The same regulation identifies the scheme features that matter for the calculation, including the headline carbon price, free allowances, thresholds, graduated pricing, rebates or refunds, and payments linked to greenhouse gas removals. Regulation 8 sets the bar for who can sign that data off. A verifier must meet standards specified by HMRC in a notice, be accredited by a body that is a full member of Global Accreditation Cooperation, and be independent not only from the installation and the importer but also from the public authorities administering the overseas scheme. Regulation 9 then requires the importer to obtain an HMRC carbon pricing verification form completed by that verifier.
The calculation of the effective carbon price is set out in regulation 12 and works through five stages. First, the installation identifies all relevant emissions for the calendar year. It then isolates the portion of those emissions actually subject to a qualifying scheme, prices that portion by reference to the scheme's applicable elements, divides the result across total relevant emissions to reach an overall price per tonne, and finally adjusts the figure for any qualifying rebates or refunds. The effect is that the Regulations do not simply accept an overseas headline carbon price at face value. Free allowances, thresholds and graduated pricing are taken into account, while public support connected to emissions can reduce the effective price used for relief. Where a CBAM good is made using precursor goods, the same exercise must also be carried out for each qualifying precursor good.
That system boundaries document, version 1.00 dated 10 July 2026, is central to compliance even though it sits outside the body of the Regulations. According to regulation 2, it defines which emissions and production processes are relevant, which precursor goods must be counted and how the weight of CBAM goods is to be determined. For firms building reporting systems, that document will determine what data must be captured from the supply chain. Regulation 13 provides that carbon price relief is calculated by reference to the good's effective carbon price and its embodied emissions, while disregarding emissions not subject to a qualifying carbon pricing scheme. Where the resulting figure is not in sterling, regulation 14 requires conversion using an exchange rate and procedure published by the Commissioners. The relief can never exceed the importer's CBAM liability on the good.
The instrument also leaves a substantial amount of operating detail to notices published by the Treasury or the Commissioners. Those notices can specify the emissions-factor sources used for indirect schemes, the calendar year to be verified, the accreditation standards for verifiers, the data and methods allowed in the five-step calculation, the use of default values for embodied emissions, and the process for currency conversion. As drafted, the Regulations establish the legal frame, while notices supply much of the day-to-day administration. For importers, the immediate effect is a record-keeping duty that lasts six years from the day after the end of the relevant accounting period. Regulation 15 requires evidence that the overseas scheme qualifies, the completed verification form, and records showing how both the effective carbon price and the relief amount were calculated. Government says the notices will be published through the CBAM collection, and the Explanatory Note points readers to the Tax Information and Impact Note published on 26 November 2025, which it says remains an accurate summary of the expected effects of this instrument.