UK plans to expand CBAM to refined products

The UK plans to expand the scope of its Carbon Border Adjustment Mechanism (CBAM) to cover refined products, pending a freshly opened consultation, the government said Oct. 28.

The government said last year it planned to consider the expansion.

"Today, I can confirm that we intend to deliver that scope expansion, subject to consultation on both the feasibility and impacts of doing so," James Murray, Financial Secretary to the UK Treasury, said in a foreword to the consultation, released Oct. 28.

"We are seeking views on the practical, technical, and economic considerations involved in bringing refinery products into scope," Murray said, adding, "We are asking how expansion can be done in a way that is credible, proportionate, and effective in addressing carbon leakage — and all while remaining clear-eyed about the impacts of any change."

The consultation on including refined products in the UK's CBAM closes Jan. 20, 2027.

The initial UK CBAM takes effect Jan. 1. Similar to the EU's CBAM, it aims to ensure that imports of certain carbon-intensive products face the same carbon costs as domestic producers to avert carbon leakage.

From next year, the UK CBAM will apply to imports from the aluminum, cement, fertilizer, hydrogen, and iron and steel sectors.

'Breaking new ground'

The Fuels Industry UK, an industry group, praised the move to expand the scope of the UK CBAM Oct. 28, while also urging greater clarity on implementation targets.

"With carbon costs, which are not paid by importers, set to triple by 2030 and UK refineries already unable to compete on a level playing field with global competitors, the sector urgently needs the UK Government to set a firm timeline toward the introduction of a CBAM for the sector in 2029, which we believe is entirely feasible," said Fuels Industry UK CEO Elizabeth de Jong.

Dan Maleski, director of CBAM and carbon pricing at consultancy EY, stressed the UK's move is "particularly interesting," because it has no international precedent.

"No operational CBAM currently covers refinery products, so if the UK moves ahead, it would be breaking new ground in how carbon border measures are applied to fuels," Maleski said. "We're potentially talking about some of the world's most heavily traded commodities: petrol, diesel, jet fuel, and kerosene. That takes CBAM into a very different part of the economy and potentially much closer to businesses and consumers."

Maleski added, however, that overcoming traceability challenges could be among the biggest hurdles for the expansion.

"Fuels are routinely blended and commingled through hubs such as Amsterdam, Rotterdam, and Antwerp, making it much harder to trace an import back to a specific refinery and its actual emissions," he said.

Platts, part of S&P Global Energy, assessed UK Allowances for December under the UK emissions trading system at £65.80/metric ton of CO₂eOct. 28.