This paper examines the UK CBAM through five analytical lenses.
1. Design and implementation architecture.
2. Effectiveness in preventing carbon leakage.
3. Compatibility with WTO law.
4. Alignment with UNFCCC just transition principles.
5. Fiscal impact on the 56 Commonwealth countries, with detailed case studies of Sierra Leone and Trinidad and Tobago.
Global temperatures are projected to exceed 1.5°C above pre-industrial levels within the next decade. The industrial sector, encompassing steel, cement, chemicals and aluminium, accounts for 25–30 per cent of total global carbon emissions, making its decarbonisation critical. In response, developed economies have adopted carbon pricing
instruments, including Carbon Border Adjustment Mechanisms to prevent carbon leakage and align domestic and import costs.
The United Kingdom’s CBAM, effective from1 January 2027, imposes a carbon tax, administered by His Majesty’s Revenue and Customs (HMRC), on imports of aluminium, cement, fertiliser, hydrogen, and iron and steel. Unlike the European Union’s (EU’s) certificate-trading approach, the UK CBAM calculates liability by multiplying embodied
emissions by the effective UK carbon price, with deductions for overseas carbon pricing already paid.
This paper finds that, while the UK CBAM has a defensible rationale in preventing carbon leakage, its effectiveness is constrained by design limitations including widespread use of default emission values, vulnerability to ‘resource reshuffling’, and weak alignment with principles of international equity enshrined in the UN Framework Convention on
Climate Change (UNFCCC) and Paris Agreement.
