UK CBAM and refinery products: petrol, diesel and jet fuel

What was announced

The UK CBAM starts on 1 January 2027 for five sectors: aluminium, cement, fertiliser, hydrogen, and iron and steel. At Budget 2025 the government said it would consider the case for adding refinery products. On 28 October 2026, alongside Budget 2026, HM Treasury and HMRC published a consultation on doing so.

In the foreword, Financial Secretary to the Treasury James Murray confirmed that the government intends to deliver the expansion, subject to consultation on both feasibility and impacts. HMRC's Budget 2026 overview of tax legislation says the government will consider the responses before bringing forward any legislation needed.

The government says applying a CBAM to refinery products would be a world first. Refinery products are not in the EU CBAM, and the consultation notes that the EU has made no proposal on how it would include them.

Why refineries

The government says it has only ever considered CBAM for products in sectors covered by the UK Emissions Trading Scheme, and refining is covered. The consultation says making refinery products carries a material risk of carbon leakage because of the sector's trade intensity and carbon intensity, and refining is on the Carbon Leakage List used by the UK ETS Authority.

The UK has four major refineries: Pembroke in Wales, Fawley on the south coast, Stanlow in Cheshire and the Humber in Lincolnshire. The consultation points to declining UK refining capacity and sustained reliance on imported fuels, from countries with varying levels of carbon pricing.

Which products could be covered

CBAM applies to goods listed by commodity code in primary legislation. One option in the consultation is to start with fuels and blending components made at refineries, which it says cover most refinery output. It lists these 8-digit codes:

The heavy oils listed are those not containing biodiesel. The consultation asks whether any codes should be added or removed. More products could be brought in later, as the scope of CBAM stays under review.

Biofuels and blends

One approach in the consultation is to leave 'neat' low carbon fuels out at first, to keep things simple. The codes that could be excluded are ethanol (2207 10 00 undenatured, 2207 20 00 denatured) and FAME biodiesel (3826 00 10 and 3826 00 90).

Blended fuels are harder, because the commodity code may not show whether a fuel contains a low carbon part, or how much. Sustainable aviation fuel, for example, can be declared under 2710 19 21, kerosene jet fuel. One option is to exclude the low carbon share on a mass balance basis: for E10 petrol, which contains between 5.5% and 10% ethanol, CBAM would apply only to the petrol share. Importers would need evidence of that share.

The consultation names four blended codes that may need this approach: 2710 19 42 (gas oils with at least 80% bio-based carbon) and 2710 20 11, 2710 20 16 and 2710 20 19 (gas oils containing biodiesel).

How emissions would be measured

As for the current sectors, the importer would report embodied emissions in tonnes of CO2 equivalent, using either independently verified actual emissions or, where those are not available, default values set by the government. CBAM will initially apply to direct emissions only: the government confirmed at Budget 2025 that indirect emissions from electricity are delayed until 2029 at the earliest. The consultation asks whether refineries can work out direct and indirect emissions separately.

The difficulty is that a refinery makes many products at once. The consultation sets out two options for splitting a refinery's emissions between its products, the first with a variation:

Hydrogen, already a CBAM good, could count as a precursor to refinery products, for example in hydrocracking. Where a refinery buys hydrogen from a separate plant, those emissions would need to be added; hydrogen made and used on site is already in the refinery's own emissions.

Default values for refinery products would be calculated and published before any start date. The EU has no refining default values to draw on, so the government asks for data sources. For the current sectors, country-specific default values are planned from 2029.

Proving where a fuel came from

The UK importer would be the liable person. To use actual emissions, it would need to evidence the refinery of origin; with default values, it may need to evidence the country of origin. The consultation notes this is hard for fuels, which are often blended or commingled at hubs such as Amsterdam, Rotterdam and Antwerp, and where the importer may have no direct relationship with the refinery.

Evidence it suggests could help includes commercial contracts, bills of lading, import declarations, voluntary certification schemes (already used for low carbon fuels) and chemical testing. The importer would meet the cost of any testing.

The rate and carbon price relief

The government proposes using the same rate method as for the current sectors: the UK ETS auction price reduced by the sector's share of free allowances, adjusted each year as free allocation is phased out. Refining would get its own sector rate, calculated from free allocation data. It also proposes the same approach to carbon price relief, which reduces the charge where a fuel has already paid a qualifying carbon price abroad.

The consultation expects initial liabilities to be modest, because the rate accounts for the free allowances UK producers receive. It also says CBAM could affect prices paid by importers, distributors and end users, depending on how much cost is passed on, and asks about regional effects such as on households that heat with kerosene. See UK CBAM rates for how the rates for the current sectors are worked out.

How to respond and what happens next

• The consultation runs for 12 weeks, from 28 October 2026 to 23:59 on 20 January 2027.
• Responses go through the online form on GOV.UK. Further evidence can be emailed to HMRC's CBAM policy team at the address given in the consultation.
• It asks 42 questions, from whether CBAM is the right tool for refining to the costs of metering and the effect on trade.
• The government will publish a response and decide the final policy. Any change to scope needs legislation, as the CBAM goods are listed in the Finance Act 2026.

The consultation says the government will learn from the first sectors, with UK CBAM registration opening and the first returns due in 2028. Importers of aluminium, cement, fertiliser, hydrogen, iron or steel should keep preparing for 1 January 2027: see our UK CBAM guide.

Sources

1. HM Treasury and HMRC: Carbon Border Adjustment Mechanism (CBAM): a consultation on sectoral scope expansion to include refinery products (28 October 2026) (checked 4 November 2026)
2. HM Treasury and HMRC: consultation document, CBAM sectoral scope expansion to refinery products (PDF, October 2026) (checked 4 November 2026)
3. HMRC: Budget 2026 overview of tax legislation and rates, paragraph 2.28 (28 October 2026) (checked 4 November 2026)
4. HMRC: Carbon Border Adjustment Mechanism (CBAM) policy summary (updated 2 November 2026) (checked 4 November 2026)