Carbon price relief

Two conditions

Regulation 5 of SI 2026/809 lets an importer claim relief where the good was manufactured or processed by an installation participating in a qualifying carbon pricing scheme, including voluntarily, and where the verification requirements in Part 4 have been met. Both must hold. A mill in a country with no scheme cannot generate relief however much it spends on abatement, and a mill in a qualifying scheme cannot generate relief unless a verifier has completed the form.

What qualifies

Regulation 6(1) requires a scheme to be administered by or for a public body, from a city to a supra-national organisation, with the use of the revenue determined by that body; to require, as a matter of law, that installations making CBAM goods participate; to impose a cost on relevant emissions, directly or indirectly; and to make its rules, scope and headline price public. A company's internal carbon price, an offset purchase and a scheme whose price is not public do not qualify. HMRC's list of 27 August 2026 names sixteen schemes as guidance; the schemes page reproduces it with the test.

The verified data and the form

Regulation 7 requires four items to be verified: the installation's relevant emissions for a calendar year, the emissions subject to an element of the scheme, any monetary support received, and, for an indirect scheme, the emissions factors. Regulation 8 requires a verifier accredited by a full member of the Global Accreditation Cooperation Incorporated and independent of the installation, the importer and the authorities that run the scheme. Regulation 9 requires the importer to obtain a carbon pricing verification form completed by the verifier. HMRC has published it as Annex I on the force of law notices page, where its own pages call it the carbon pricing verification form and the form itself carries the reference CarbonVP1 and the date 07/26 on its face. A separate form is completed for each installation that contributed to a complex good. HMRC's policy summary states, as guidance, that the data must come from one of the two calendar years before the year of import.

The five steps to the effective carbon price

Regulation 12(1) sets five steps. Step 1 identifies the installation's relevant emissions for the year. Step 2 identifies the emissions subject to an element of the scheme, where the elements under regulation 11 are the headline price, free allowances, any threshold, graduated pricing and, on conditions, rebates and removal payments. Step 3 multiplies the emissions under each element by the price for them, treating a free allowance as a zero price, and adds the products. Step 4 divides the total by the step 1 emissions. Step 5 deducts any monetary support divided by the step 1 emissions. A mill with a million tonnes of emissions, seven hundred thousand under a headline price of 30 units and three hundred thousand under free allowances, with one million units of compensation, has an effective carbon price of 20 units per tonne; every figure is illustrative.

The relief and the cap

Regulation 13(1) gives the relief as A multiplied by B, where A is the effective carbon price and B is the emissions embodied in the good, disregarding emissions not subject to a qualifying scheme. A price not in sterling is converted under regulation 14 at the rate in a Commissioners' notice, which HMRC's guidance states is the rate published for the calendar quarter before the quarter of import. Regulation 13(6) caps the relief at the liability to CBAM on the good: where the foreign price exceeds the sectoral domestic price, the importer pays nothing on that good and receives nothing back. Regulation 12(3) requires a separate effective carbon price for each precursor made under a qualifying scheme.

The records

Regulation 15 requires the importer to keep, for six years from the day after the accounting period of the return that claimed the relief, the evidence that the scheme qualifies and of its elements, the form, the working for the effective carbon price and the working for the relief, including precursor emissions.

The four-question test

Before relief is entered on a return: is the installation's scheme one that meets regulation 6, shown from its public rules and headline price; is form CarbonVP1 held, completed by a verifier meeting regulation 8 for a permitted year; has the effective carbon price been calculated by the five steps and the relief by regulation 13, converted and capped; and is the working filed with the form for six years. A claim that fails any question is a claim an officer will disallow.