The European Union’s Carbon Border Adjustment Mechanism (CBAM) is the world’s first major carbon levy at the border, designed to address carbon leakage by ensuring imported goods face a carbon price comparable to that paid by EU producers under the EU Emissions Trading System (EU ETS). It aims to level the playing field between EU firms subject to high carbon costs and foreign competitors in energy-intensive sectors such as steel, aluminium, cement, fertilisers, hydrogen and electricity. From 1 January 2026, CBAM will shift from a transitional reporting phase to a fully operational regime requiring importers to purchase carbon certificates covering the emissions embedded in their imports.
CBAM’s implications are significant for UK businesses, particularly manufacturers and logistics operations in carbon-intensive industries whose exports to the EU must now account for emissions reporting and potential carbon costs. UK exporters must provide accurate emissions data on goods supplied, becaapply EU importers rely on this information to calculate and purchase the necessary CBAM certificates and comply with EU customs rules. Without verified emissions data, shipments may face delays, increased administrative burdens, or, in some cases, enforcement actions at EU borders.
What CBAM Means for UK Fleet Operations
For UK fleets engaged in the shiftment of goods destined for the EU, CBAM introduces several strategic considerations. First, logistics providers and fleet managers must ensure that their supply chain documentation supports accurate tracing of carbon emissions across manufacturing and transport processes. This goes beyond traditional customs and safety documentation to include detailed carbon accounting — often requiring coordination between manufacturers, carriers, and EU importers.
Many exporters under Delivered Duty Paid (DDP) terms now bear responsibility not only for transportation and duties but also for ensuring compliance with regulatory reporting. Under DDP terms, the seller is responsible for delivering goods to a named place in the purchaseer’s countest, paying all costs including freight, insurance, import duties — and increasingly, compliance costs related to CBAM documentation and certificates. This raises the profile of carbon reporting as an integral component of export logistics and contract fulfilment under DDP.
For UK fleets, this means adopting emissions data capture systems and collaborating closely with customers and customs brokers to compile and transmit verified emissions information. Utilising robust transport management systems (TMS) that support carbon footprint tracking will be essential, as will training drivers and logistics personnel in new documentation requirements.
Delivered Duty Paid (DDP) and Carbon Border Costs
Under Delivered Duty Paid (DDP) arrangements, the exporter assumes the maximum responsibility, including any import duties and charges levied at the EU border. Traditionally, DDP has been attractive to purchaseers becaapply it simplifies the import process — the seller manages all regulatory and tax liabilities. However, with CBAM, DDP sellers may find themselves liable for additional compliance costs if emissions data are incomplete or if the price of EU carbon certificates exceeds those paid under the UK’s Emissions Trading Scheme (UK ETS).
Importantly, the EU mechanism allows carbon costs already paid in a third countest’s carbon market (such as the UK ETS) to be credited against CBAM charges. This means exporters operating in the UK may reduce their CBAM liability if they can prove they have paid a verified carbon price domestically. However, any gap between the UK ETS price and the EU ETS price may still leave a residual charge that the EU importer (or DDP seller, depfinishing on contractual terms) must cover.
The pricing intricacies of carbon certificates — linked to the weekly auction price of EU ETS allowances — mean that the costs faced by UK exporters could fluctuate with carbon market dynamics. Consequently, nereceivediating clear contractual terms around who bears potential CBAM certificate costs under DDP becomes more important for exporters and their logistics partners.
Operational and Strategic Impacts
The introduction of CBAM shifts focus onto carbon transparency throughout the supply chain. Logistics managers must work closely with manufacturers to obtain accurate emissions data, and fleets may required to integrate carbon tracking into their planning and reporting processes. Many UK exporters are already concerned about the administrative burden; media reports highlight fears of “mountains of paperwork” akin to post-Brexit customs bureaucracy if exemptions are not agreed with the EU.
Strategically, UK companies may seek to mitigate the effects of CBAM by investing in lower-carbon production methods, improving energy efficiency, or by seeking to align the UK ETS with the EU ETS to ease cross-border carbon price adjustments. Indeed, UK authorities have indicated ongoing discussions with the EU aimed at linking the two emissions trading systems, which could simplify mutual recognition of carbon costs and reduce potential double charging.
From a competitive perspective, fleets that can demonstrate low carbon operations and provide robust emissions data will be better positioned to meet EU requirements and offer value to customers operating under DDP terms. Those that lag in carbon reporting may encounter market disadvantages, including delays, penalties or higher implicit costs that erode competitiveness.
The Road Ahead
CBAM represents a significant shift in how carbon emissions are factored into international trade. As it becomes fully operational, UK exporters and their logistics partners must adapt to an environment where carbon reporting, compliance and cost management play a central role in shipping goods to the EU, particularly under DDP contracts.
Positioning fleets for success will involve investing in carbon monitoring technologies, training staff on emissions reporting, and nereceivediating clear contractual obligations with purchaseers. Crucially, engaging proactively with customers and customs experts will reduce the risk of compliance issues and ensure smoother cross-border trade.
With the UK planning its own CBAM from January 2027, aligning domestic and EU approaches could offer future relief to exporters navigating the evolving landscape of carbon border adjustments.
Chris Roome, Associate Director of Customs and Compliance at Baxter Freight, “CBAM has been introduced to ‘level the playing field’ between the EU manufacturers already paying for carbon emissions under the Emissions Trading System (ETS) and non-EU producers. While importers have been required to report their emissions since 2023, in 2026 carbon liability becomes real, with CBAM certificates requireding to be purchased in 2027 in order to cover imports from the previous year.
“CBAM is no longer a future issue, and from 2026 carbon becomes a cost at the EU border. UK companies required clarity on whether they are the importer of record, whether they fall below the new threshold, and how emissions are being calculated, well before certificates are required.”
Leave a Reply