Work out your Carbon Price Relief
Find out how to work out your Carbon Price Relief for the Carbon Border Adjustment Mechanism (CBAM).
To work out your Carbon Price Relief, you’ll need to:
- work out the effective carbon price
- work out the Carbon Price Relief
- convert the Carbon Price Relief figure
Before you start
Before you calculate your relief, you’ll need to check:
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if your CBAM goods have been subject to a qualifying carbon pricing scheme
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you have a completed carbon pricing verification form that’s independently verified for one of the two calendar years prior to the calendar year in which the CBAM good was imported
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you have the publicly available information you need to calculate your Carbon Price Relief
Work out the effective carbon price
Follow the calculation steps to work out the effective carbon price. Do not include the following in your calculations:
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emissions subject to greenhouse gas removals with no public price
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emissions subject to free allowances or thresholds as they have no price
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any compensation, refunds or rebates, as this is done afterwards
Calculation steps
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Find the total installation emissions (tCO2e) on the carbon pricing verification form. You must check this figure was recorded for one of the two calendar years prior to the calendar year in which the CBAM good was imported.
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Identify the number of those emissions in ‘Step 1’ that were subject to different elements of the qualifying carbon pricing scheme, as listed on the carbon pricing verification form.
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Multiply the emissions subject to each element of the qualifying carbon pricing scheme by the price per tCO2e for each element. For emissions subject to a headline carbon price, greenhouse gas removals or graduate carbon price, the price should be publicly available, from the previous calendar quarter, and where not fixed must be mean average over this period. Add together the resulting figures for each of the relevant elements.
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Divide the totalled figure in ‘Step 3’ by the total installation emissions that you found in ‘Step 1’. This gives you the effective carbon price.
If there’s compensation
If the installation has received or is due to receive compensation in the same calendar year as the emissions in ‘Step 1’ and it’s listed in the same carbon pricing verification form, you need to adjust the effective carbon price by:
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dividing the compensation by the total installation emissions from ‘Step 1’
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subtracting this from the effective carbon price worked out in ‘Step 4’
This net figure is now the effective carbon price.
For an example where compensation is received or due, read section ‘Example of compensation’.
Example of working out the effective carbon price
The following is an example of an effective carbon price calculation. This example may not apply to every CBAM import.
Step 1 You import a CBAM good in October 2030. The carbon pricing verification form shows the installations emissions recorded for 2028 were 100,000 tCo2e. The installation was subject to a qualifying carbon pricing scheme that prices emissions in dollars ($).
Step 2 The 100,000 tCO2e emissions were subject to the following different elements of the qualifying carbon pricing scheme:
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the headline carbon price — 60,000 tCO2e
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free allowances — 20,000 tCO2e
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greenhouse gas removals — 20,000 tCO2e
Do not calculate for free allowances as their price is $0, so it will not impact on the final effective carbon price.
Step 3 The prices per tCO2e for each element in the previous calendar quarter (July to September 2030) are:
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headline carbon price at $15.50 per tCO2e
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greenhouse gas removals at $45 per tCO2e
Multiply the price by emissions relevant to each element:
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headline carbon price at $15.50 per tCO2e × 60,000 tCO2e = $930,000
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greenhouse gas removals at $45.00 per tCO2e × 20,000 tCO2e = $900,000
Add the amounts together:
$930,000 + $900,000 = $1,830,000
Step 4 To find the effective carbon price, divide the total figure from ‘Step 3’ by the total emissions from ‘Step 1’:
$1,830,000 ÷ 100,000 tCO2e = $18.30 per tCO2e
Example of compensation
The following example will explain how to calculate the effective carbon price if compensation is due in the same calendar year as the emissions.
The installation received or was due $800,000 compensation for the calendar year 2028.
Divide this compensation by the by the total emissions from ‘Step 1’:
$800,000 ÷ 100,000 tCO2e = $8 per tCO2e
Subtract $8 that from the effective carbon price calculated at ‘Step 4’ to get the new effective carbon price:
$18.30 per tCO2e – $8 per tCO2e = $10.30 per tCO2e.
Work out the Carbon Price Relief
You’ll need to multiply together the:
- effective carbon price — the amount you’ve worked out in the calculation steps
- embodied emissions subject to a qualifying carbon pricing scheme — the amount of emissions that rate applies to
Do this for each CBAM good you wish to claim relief for. This includes where a CBAM good was used in manufacture and processing of another CBAM good.
If your Carbon Price Relief figure is in a foreign currency, you must convert it to sterling (GBP) so you can subtract it from your CBAM tax liability.
Convert your Carbon Price Relief figure
If you do not convert the Carbon Price Relief figure into sterling (GBP), you will not be able to claim the relief, and you’ll need to pay your full CBAM tax liability.
You must use exchange rates we’ll publish to convert your Carbon Price Relief into sterling (GBP).
The exchange rates will be published from 1 January 2027 and be made available at the beginning of the quarter for which they will apply.
You must check and use the exchange rate for the calendar quarter prior to the point of import.
The calendar quarters are:
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1 January up to and including 31 March
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1 April up to and including 30 June
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1 July up to and including 30 September
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1 October up to and including 31 December
Example
If your good was imported into the UK on 1 June 2030, you must use the exchange rate published for the period January to March 2030.
Where a CBAM good was subject to multiple carbon prices in different jurisdictions, including carbon prices on precursor emissions, the correct exchange rate for each currency must be used.
Following conversion, you must round down to two decimal places.
The total relief claimed cannot exceed the amount of CBAM liability due.