Rate watch · illustrative rates published 16 October 2026
The UK CBAM rate: HMRC's first numbers, and what they mean.
On 16 October 2026 HMRC published illustrative CBAM rates for all five sectors, with a worked example of the calculation. They are not the rates that will apply: those are due before 31 December 2026 and will use the October to December 2026 auctions. But they are HMRC's own figures on current data, and every tool on this site now prices at them.
HMRC's illustrative rates
| Sector | Illustrative rate (£/tCO2e) |
|---|---|
| Iron and steel | £9.69 |
| Aluminium | £9.79 |
| Cement | £8.78 |
| Fertiliser | £1.45 |
| Hydrogen | £9.24 |
Source: HMRC, Illustrative CBAM rates (and worked example), 16 October 2026. HMRC's words: the figures “represent the rates that would apply from 1 January 2027 if based on current data” and “do not create or imply any tax liability”.
Why the rate is a sixth of the carbon price
Under the made regulations (S.I. 2026/809), each quarter's sectoral rate starts from the mean UK ETS auction clearing price of the preceding quarter and is then reduced to reflect the free allowances UK producers in that sector still receive. HMRC's cement example shows the arithmetic: the Q3 2026 auction mean of £58.15/tCO2e, a baseline free allocation of 87.1% for cement, and a 2027 phase-out factor of 97.5% give £58.15 × [1 − (87.1% × 97.5%)] = £8.78. Because UK producers still get most of their allowances free, importers pay a correspondingly small share of the carbon price. The discount shrinks every year as free allocation phases out, so the rate rises towards the full ETS price over time.
Fertiliser's £1.45implies a baseline free allocation of close to 100%. HMRC says the sub-installation data behind every sector's percentage is still being checked and may change before 1 January 2027.
The timeline
| 16 October 2026 | Illustrative rates published for all five sectors, with the worked example above. Done. |
| Oct–Dec 2026 | Q4 auctions run (7 October to 16 December) — their mean is the starting point for the first real rate. |
| Before 31 Dec 2026 | HMRC publishes the Q1 2027 rates that create liability. Every tool on this site moves to them the same week. |
| Quarterly after | New rates published by the start of each quarter, from the preceding quarter's auctions and that year's phase-out factor. |
What public price data shows
The official monthly average UK allowance price published on gov.uk (a futures-settlement series — an indicator of where the market is, not the statutory auction mean itself):
| Month | Avg price (£/tCO2e) |
|---|---|
| Dec 2025 | 62.13 |
| Jan 2026 | 68.26 |
| Feb 2026 | 50.83 |
| Mar 2026 | 39.46 |
| Apr 2026 | 46.82 |
| May 2026 | 52.41 |
| Jun 2026 | 57.02 |
| Jul 2026 | 58.68 |
| Aug 2026 | 59.34 |
| Sep 2026 | 60.17 |
Whatever Q4 2026 averages is, near enough, the starting point of your first CBAM rate — before the free-allocation discount takes roughly five sixths of it off.
Know the moment it's real
One email when HMRC publishes the Q1 2027 rates, one when each quarterly rate lands after that. No spam, unsubscribe anytime.
Want the rates applied to your actual imports? Run the liability preview — every line shows which rate and which default value it used and why.
Basis: FA 2026 s.149; S.I. 2026/809 regs 3–4 (made); HMRC, Illustrative CBAM rates and worked example (16 October 2026); HMRC rates guidance (16 October 2026). Rules basis made-2026-10; last reviewed 2026-10-24. General information, not tax advice.