Consultation on refinery products and UK CBAM scope
The UK Treasury and HM Revenue & Customs published a 44-page consultation on 28 October 2026 examining whether refined petroleum products could be included in the country’s planned Carbon Border Adjustment Mechanism (CBAM). The document assesses potential inclusion within the framework that the UK is developing, while keeping refinery products outside the initial regime scheduled for 2027. It does not establish a new import charge or confirm that refinery products will be covered when the UK CBAM begins.
The consultation examines whether carbon-border pricing for refinery products could address carbon-leakage risks affecting domestic producers. It also reflects recognition that British refineries face carbon-related operating costs while competing with imported products from countries applying different climate policies. The government seeks views on whether a border adjustment could address this competitive imbalance without undermining security of supply.
Initial 2027 regime excludes refined petroleum products
The UK CBAM is scheduled to start on 1 January 2027, covering specified goods in the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Refined petroleum products are excluded from this initial scope. Any future expansion to include refinery products would require a separate policy decision at a later stage.
The consultation is framed as an assessment of potential future coverage rather than an adopted measure creating additional obligations for fuel importers. It also notes that bringing refinery products into the carbon-border debate would raise questions related to emissions allocation, international fuel trading, domestic refining competitiveness and potential impacts on prices paid by downstream consumers.
Emissions allocation methods for refinery outputs
Refineries process crude oil into multiple outputs with different commercial uses and values, including transport fuels and industrial feedstocks. The consultation states that determining emissions attributable to individual products requires allocation methods covering energy consumption, shared utilities, processing units and co-products. It says methodological choices could materially affect the carbon charge associated with an imported product.
The document adds that complexity increases when petroleum products are blended, reprocessed or traded through several ports before reaching their final destination. It also highlights that refineries may share hydrogen production, steam generation, cogeneration and other utilities across multiple processing units. Different allocation approaches can change emissions attributed to individual product streams even if total facility emissions remain unchanged.
The government indicates it would need approaches that support independent verification while remaining practical for international commodity trading. Where verified actual-emissions data are unavailable, default values would be important in determining potential costs faced by importers. The consultation links these design choices to how emissions information could be used in cross-border transactions.
Potential effects on fuel costs and supply security
The consultation describes a policy tension between protecting domestic industrial production and limiting additional costs for consumers and businesses. It notes that a border measure could support investment in UK refining by reducing the competitive advantage of imported products from jurisdictions with lower or different carbon-related costs. At the same time, it states that additional charges on imported fuels could affect transport, manufacturing and distribution costs.
The document says excluding imported products from carbon pricing could leave domestic refineries at a disadvantage if they bear emissions-related costs not faced by overseas competitors. It also notes that introducing a charge would not automatically resolve other competitive pressures affecting British refining. It further points to factors such as crude-oil availability, refinery complexity, energy prices and maintenance requirements as influences on operating costs and competitiveness.
It states that evaluating a potential extension would require considering scenarios involving import volumes, wholesale fuel prices, refinery investment and security of supply. This includes how different combinations of those factors could affect outcomes for domestic producers and downstream users.
Documentation requirements for traders and importers
A future inclusion of refinery products would require rules specifying when liability is calculated and what documentation importers must provide to establish emissions intensity. The consultation notes that internationally traded cargoes can contain products sourced from multiple installations or modified through blending. While customs declarations identify product categories and declared origins, it says tracing underlying refineries and reconstructing relevant production data may be more difficult across complex trading chains.
It states importers would need workable procedures for obtaining emissions information, including cases where several facilities contribute to the final product. The consultation highlights that reliable default values and credible routes for demonstrating actual emissions would be important to limit administrative costs and disputes. It also links practical design of these requirements to how easily fuel suppliers could integrate obligations into existing trading, documentation and customs processes.
Interaction with EU CBAM coverage
The European Union entered the definitive phase of CBAM on 1 January 2026, but its current product coverage differs from the sectors covered by the UK’s initial regime and any possible British refinery extension. If the UK later adds refined petroleum products, suppliers operating in both markets would need to track separate national frameworks rather than assume identical product lists and methodologies apply across systems.
The consultation also raises questions about recognising carbon prices paid abroad and preventing double counting. It states any eventual approach would need to account for foreign carbon costs while maintaining the objectives of the UK’s domestic carbon-pricing policy. This includes how cross-border charges might interact with national compliance requirements.
Implications for refinery decarbonisation investment
The possible extension has implications for investment in emissions reduction at British refineries. The consultation lists measures including improving energy efficiency, electrifying equipment, reducing methane and process emissions, and evaluating carbon capture. It states such investments require capital and are generally influenced by expectations about future regulation.
The document indicates it provides an opportunity to assess whether a carbon-border adjustment could offer sufficient long-term protection for domestic refining. It also notes whether additional energy or infrastructure policies might be necessary alongside any border measure affecting refined petroleum products.
The government is seeking responses from importers, agents, overseas suppliers and industry organisations. Any decision on including refined petroleum products would follow at a later stage, leaving fuel suppliers to assess potential UK carbon-border exposure as part of their longer-term commercial planning.