Will a new carbon tax on specified imported goods affect your clients?

From January 2027, new carbon pricing rules could affect businesses importing key industrial materials, with potential implications further along the supply chain.

A new carbon tax on specified imported goods is due to come into force on 1 January 2027.

Known as the Carbon Border Adjustment Mechanism (CBAM), the measure aims to ensure that specified goods imported into the UK face a comparable carbon price to goods produced domestically.

For brokers working with businesses in construction and related industries, it’s another development worth understanding, particularly where clients rely on imported materials or complex supply chains.

Which materials are affected?

CBAM will apply to specified goods within five industrial sectors:

· Aluminium

· Cement

· Fertiliser

· Hydrogen

· Iron and steel

Businesses importing £50,000 or more of specified goods over a relevant 12-month period will be directly affected.

Businesses using these materials within their supply chains may also experience indirect effects, even where they aren’t responsible for paying the tax themselves.

Why is the tax being introduced?

CBAM is designed to address what’s known as carbon leakage. This happens when production and associated emissions move from one country to another because of differences in carbon pricing and decarbonisation requirements.

UK manufacturers can already face carbon costs through the UK Emissions Trading Scheme (ETS). CBAM aims to create a more comparable position for specified imported goods.

The wider objective is to support genuine reductions in global emissions rather than simply moving carbon-intensive production overseas.

What could it mean for businesses?

The introduction of CBAM may prompt affected businesses to review how they source materials, manage import costs and work with overseas suppliers.

For businesses that rely on steel, aluminium or cement, understanding potential cost and supply-chain implications could be particularly useful.

Importers may also need to consider the information they hold about the goods they purchase, including relevant emissions data.

What should brokers be discussing with clients?

Although CBAM is a tax rather than an insurance requirement, changes to sourcing arrangements, material costs or business activities can provide a useful opportunity to review a client’s wider risk profile.

For brokers, potential conversation starters include:

· Does the business rely on specified imported goods covered by CBAM?

· Could changing material costs affect project budgets or contractual arrangements?

· Are clients reviewing their supply chains or changing suppliers?

· Could any resulting changes to business operations affect existing insurance arrangements?

These discussions can help brokers understand whether clients’ circumstances have changed and whether an insurance review would be appropriate.

An underwriter’s perspective

“Changes to material costs and supply chains can have wider implications for construction businesses. It’s worth brokers checking whether clients are sourcing materials differently, taking on new activities or seeing changes to project values. These conversations can help identify where existing insurance arrangements might need another look.”

Emma Thomas | Senior Development Underwriter, Focus

Always happy to talk

Changes to the business environment can raise new questions for brokers and their clients.

If your clients are reviewing their activities, supply chains or insurance arrangements, the Focus underwriting team is always happy to discuss individual risks.