The UK’s upcoming Carbon Border Adjustment Mechanism (CBAM), due to come into force in 2027, is already reshaping conversations across the energy and infrastructure sectors. While much of the attention to date has focused on carbon reporting and compliance, the more immediate challenge for many organisations will be commercial.
For developers, contractors and investors delivering major infrastructure projects, CBAM has the potential to significantly alter the cost profile of internationally sourced materials and components. With new energy projects usually relying heavily on imported steel, aluminium and other carbon-intensive goods, the implications could be substantial.
Why CBAM matters beyond compliance
The mechanism is designed to apply a carbon-linked charge to imported products based on their emissions intensity, helping to prevent so-called “carbon leakage”, where production shifts overseas to avoid stricter domestic climate regulation. Similar policies are already in force across Europe. The EU CBAM has been in its transitional reporting phase since October 2023 and entered its definitive phase on 1 January 2026, applying a carbon price to imports in scope sectors as part of wider efforts to reduce emissions and align trade with domestic climate policy.
The UK regime covers five sectors: aluminium, cement, fertiliser, hydrogen and iron and steel. Both UK and EU scopes are under review for extension to new materials such as polymers, and to downstream goods such as pre-fabricated steel sections and structural assemblies. This direction of travel places further exposure on UK infrastructure.
However, for the UK energy sector, the challenge is less about policy intent and more about delivery impact.
Large-scale programmes such as offshore wind, nuclear and electricity transmission are particularly exposed because of their dependence on global supply chains and steel-heavy assets. Turbine foundations, substations, towers, cable infrastructure and major plant equipment often involve complex procurement routes spanning multiple jurisdictions, making it difficult to fully understand embedded carbon exposure across the supply chain.
At the same time, many of these projects operate over long delivery timelines. As UK ETS free allowances are phased out between 2027 and 2034 and the effective CBAM rate rises, successive procurements over the delivery period face higher carbon costs. Both primary route and secondary route products are exposed, since UK CBAM applies to finished aluminium and iron and steel imports regardless of production method, with embodied emissions intensity determining the liability per consignment. That creates additional uncertainty in an environment already challenged by inflationary pressure, supply chain volatility and tight delivery schedules.
UK industrial policy compounds the exposure. The Steel Strategy imposes a 60 per cent quota cut and 50 per cent out-of-quota tariff from July 2026, six months ahead of CBAM. For infrastructure the three regimes stack on the same material.
The operational risks organisations may overlook
That distinction matters because organisations treating CBAM purely as a compliance exercise may overlook the broader operational and financial risks emerging across procurement and project delivery.
In practice, exposure to CBAM will not sit neatly within a single project team or sustainability function. Instead, it will require closer collaboration between procurement, commercial, legal and programme management teams to understand how carbon pricing could influence sourcing decisions, contract structures and supplier relationships.
For some organisations, this may also trigger a reassessment of operating models and procurement strategies. Supply chains that previously offered the lowest upfront cost may no longer represent the best long-term value once carbon-linked import costs are factored in.
Early action could create long-term advantage
At the same time, there is a significant opportunity for organisations that act early.
At project level, three actions reduce exposure during delivery. First, specify lower-carbon materials and supplier production routes at design stage, where the largest carbon savings sit. Second, write verified emissions data requirements into tender returns rather than rely on default values. Third, allocate carbon-related cost and reporting obligations explicitly in contracts, since standard contract forms do not currently provide for this and require bespoke drafting.
Projects that address CBAM considerations during the design and procurement phase are likely to be better positioned to reduce future exposure. This could include designing out carbon during optioneering and early design, specifying lower-carbon materials, engaging suppliers earlier on emissions transparency and building clearer communication of carbon-related cost allocation and reporting requirements between project stakeholders.
Early planning may also help avoid disputes and delays later in delivery, particularly where responsibility for carbon costs has not been clearly defined between project stakeholders.
For investors and developers, the issue increasingly comes down to resilience. As carbon pricing becomes more embedded within international trade and procurement, organisations that proactively integrate carbon exposure into commercial planning are likely to be in a stronger position to maintain project viability and delivery confidence.
The UK’s energy transition will require significant investment in major infrastructure over the coming decades. But as the market evolves, successful delivery will depend not only on securing supply chains, but on understanding the carbon costs embedded within them.
CBAM may have started as a climate policy tool, but for the energy sector, it is rapidly becoming a commercial reality.
