Why the UK refining sector needs a CBAM
UK refiners operate in a global market where many international competitors face no equivalent carbon costs. This creates a structural disadvantage for UK production, increases the risk of carbon leakage and de‑industrialisation, and undermines long‑term investment in domestic refining.
A UK Carbon Border Adjustment Mechanism (CBAM) would help level the playing field by ensuring imported fuels face a comparable carbon cost to those produced in the UK.
Background
In mid-2025, Fuels Industry UK, working with Wood Mackenzie, submitted a feasible, robust and practical methodology for applying a Carbon Border Adjustment Mechanism (CBAM) to refined fuels.
Now, with energy security and the UK’s growing reliance on imported fuels under heightened public scrutiny, the sector is awaiting a decision from HM Treasury Ministers on if, and when, they will include fuels in the UK CBAM.
This important step would mitigate a large part of the disproportionate carbon‑cost disadvantage faced by UK refineries and help make them investable.
Key features of the proposed methodology
- Simple and pragmatic approach - This method provides a clear, practical way to apply a CBAM to the refining sector without adding unnecessary complexity.
- Single carbon intensity for similar fuels - Fuels with similar carbon intensities are assigned a single value, supporting simplicity and consistency.
- Uses only existing data - The approach relies on data that is already available (Data requirement is emissions figures that are already collected by the ETS authority and fuel volume figures collected by HMRC for tax purposes.)
- Framework for assessing overseas refineries - Where overseas refinery data, systems or assurance processes are not available, default factors can be applied, ensuring the mechanism remains workable and fair.
View the Methodology here
A well‑designed CBAM for fuels ensures that UK decarbonisation does not come at the cost of UK industrial decline. It supports:
- A level competitive playing field
- Long‑term investment in domestic refining
- UK energy security