What is UK CBAM Carbon Price Relief?

Carbon Price Relief can reduce UK CBAM where the embodied emissions in an imported good have already faced an eligible carbon price. Its purpose is to avoid charging twice for the same priced emissions, but relief is evidence-based and is not simply the overseas scheme’s headline rate.

Which schemes may qualify?

HMRC’s criteria cover government or supranational carbon taxes, emissions trading schemes and mechanisms pricing imported embodied emissions. The scheme must have publicly available rules and pricing and must impose a cost for relevant emissions.

HMRC publishes a current list to help importers prepare. The list is not exhaustive and can change. Voluntary carbon schemes and ordinary fuel duties do not qualify under the current guidance.

The carbon pricing verification form

The importer must obtain a completed carbon pricing verification form from the installation or supply chain and check that an appropriate independent verifier completed it. HMRC says relief cannot be claimed without the form or when it was not completed by an appropriate verifier.

The form records the installation’s total emissions and how those emissions were treated under the scheme, including headline-priced emissions, free allowances, graduated prices, thresholds and relevant removals. It can also show compensation.

Why the headline price is not the relief

HMRC’s calculation works towards an effective carbon price. Emissions covered by free allowances or zero-price thresholds do not add a paid carbon price. Compensation, refunds and rebates can reduce the effective result.

The effective carbon price is applied to the embodied emissions that were subject to the qualifying scheme. If the result is in another currency, it must be converted to pounds using the HMRC rate for the required quarter. Total relief cannot exceed the UK CBAM liability.

What to ask the supply chain for

1. Identify the installation. Confirm the factory, plant or facility that made or processed the good.
2. Name the scheme. Record the jurisdiction and exact carbon pricing scheme.
3. Obtain the form. Request the completed carbon pricing verification form and verifier details.
4. Keep the calculation trail. Preserve public prices, scheme elements, adjustments, exchange rate and the goods to which relief was applied.

Keep relief separate from emissions verification

The evidence supporting Carbon Price Relief is not necessarily the same as the report verifying actual embodied emissions. Track both requirements separately. A carbon price may have been paid even when the importer uses a default emissions value; the precise calculation should be reviewed against HMRC’s current rules.