Most explanations of UK CBAM stop at "importers will pay a carbon charge from January 2027." That's true, and it's also the least useful part of the story, because it tells you nothing about the number the charge is actually based on, or why that number is a live, contested figure rather than a settled fact. This is for whichever side of the transaction you're on, supplier or UK importer, because the same number determines what either of you pays or is paid.
How the charge is actually worked out
UK CBAM is not a flat tariff on a tonne of steel or a litre of ammonia. It's a charge on the gap between two carbon prices: the UK carbon price that a UK producer of the same goods already pays through the UK Emissions Trading Scheme and the Carbon Price Support mechanism, and whatever carbon price, if any, was already paid on the goods at the point they were produced overseas. If a supplier's home country already prices carbon at a comparable level, the CBAM charge shrinks accordingly. If it doesn't, the full UK carbon price differential applies to the emissions embedded in that shipment.
That means the charge is a function of two separate variables the importer usually doesn't hold themselves: the carbon intensity of the specific goods, and any carbon price already paid on them at origin. Both come from the supplier, or from a default value assigned in the supplier's place.
What a default value is, and isn't
When an importer has no verified emissions data for a shipment, UK CBAM doesn't leave the calculation blank. It substitutes a default value, a figure set at the national and sector average emissions intensity for that product and country of origin. This is the part almost every general explainer glosses over, and it's the part that actually decides whether either side of the transaction has an incentive to act.
A default value is not a discount, and it is not neutral. It is a deliberately conservative, cautious figure, calibrated so it doesn't systematically understate emissions across an entire sector. That has a direct, asymmetric consequence:
- If your facility runs cleaner than your country's sector average, the default overstates your actual emissions, and your buyer pays a UK CBAM charge higher than your real numbers would justify.
- If your facility runs closer to, or above, the sector average, the default may understate what your true position would show, in which case supplying verified data could raise the charge, not lower it.
- Either way, the default value is the outcome of nobody providing better information, not a safe harbour. Both sides are exposed to a figure neither of them chose.
The default value isn't there to be fair to any one supplier. It exists so the system has a number when nobody supplies one.
A worked example
The actual UK ETS price, Carbon Price Support rate and sector-specific default values will be published closer to 2027 and will move over time, so the figures below are illustrative only, built to show the mechanism, not to quote real rates. The shape of the outcome is what matters.
| UK carbon price applied to domestic producers (per tonne CO2e) | A |
| Carbon price already paid at origin, if any | B |
| UK CBAM rate applied to the shipment | A − B |
| Embedded emissions used in the calculation | Verified figure, or default value if none supplied |
| Charge payable | (A − B) × embedded emissions |
The emission shuffling problem
Because default values are set at a national and sector average rather than facility by facility, they create an incentive that policy researchers, including the Chartered Institute of Taxation, have flagged directly: goods can be routed through whichever jurisdiction carries the lowest average, or through an intermediary, rather than through the facility that actually produced them, a pattern usually called emission shuffling. A cleaner producer in a higher-average country has no mechanism to prove it unless they supply their own data, and a less efficient producer in a lower-average country benefits from an average they individually don't meet. National averages were never designed to resolve this at the level of an individual shipment, they were designed to keep the system workable in the absence of better data.
This is precisely why the calculation isn't settled once at launch and left alone. Default values and reporting periods are reviewed on a recurring basis as better data becomes available across sectors, which means a default that's favourable this reporting period may not stay that way, and a supplier who assumed the default was "close enough" has no early warning when it moves against them.
What to do before January 2027
Neither side benefits from waiting for the default value to be published and then reacting to it. The groundwork that actually changes your position is the same work either way, gathering real production and emissions data before it's needed, not after a charge has already landed.
Start with what you likely already have
- Production volumes by product line, for the specific goods exported to the UK
- Fuel and electricity consumption, with grid mix or source where relevant
- Direct process emissions data, calcination, reduction reactions or equivalent, where your sector involves them
- Any environmental or carbon reporting you already hold, even if it wasn't built for UK CBAM
- Confirmation of any carbon price, tax or trading scheme cost already applied to your production in your home country
Map exposure before the threshold forces it
- Track your UK CBAM goods imports against the £50,000 rolling 12-month threshold now, not in the quarter it's crossed
- Identify which suppliers, by spend and volume, would move your number most if they stayed on default values
- Ask those suppliers directly whether they can produce verified data, and by when
- Build a data clause into contracts being renewed between now and 2027, rather than requesting it retroactively
- Decide, per supplier relationship, whether the commercial case justifies commissioning verification work on their behalf
Whichever side initiates it, the work is the same underlying task, replacing an assigned average with a number that actually reflects the shipment, verified in a way a customs authority and a buyer's compliance team can both stand behind. That's the gap between a default value and a defensible one, and it's open to either side to close.