UK Treasury and HMRC publish consultation on refinery product coverage
The UK Treasury and HM Revenue & Customs have published a 44-page consultation dated 28 October 2026 that examines whether refined petroleum products could be brought into the country’s planned Carbon Border Adjustment Mechanism (CBAM). The document focuses on potential future inclusion rather than an immediate change to import rules. It does not set a new import charge and does not confirm that refinery products will be covered when the UK regime starts.
The consultation assesses whether carbon-border pricing for refinery outputs could address carbon-leakage risks affecting domestic producers. It also reflects the position that British refineries face carbon-related operating costs while competing with imported products from jurisdictions using different climate policies. The government is seeking views on whether a border adjustment could respond to this competitive imbalance without affecting security of supply.
CBAM start date and initial sector list exclude refined petroleum products
The UK CBAM is scheduled to begin on 1 January 2027, covering specified goods in the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Refined petroleum products are excluded from the initial scope. Any move to extend coverage to 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 notes that bringing refinery products into the carbon-border debate would involve questions around emissions allocation, international fuel trading, domestic refining competitiveness and potential impacts on prices paid by downstream consumers.
Emissions allocation methods for refinery outputs
Refineries convert crude oil into multiple outputs with different commercial uses and values, including transport fuels and industrial feedstocks. To determine emissions attributable to individual products, the consultation highlights the need for allocation methods that reflect energy consumption, shared utilities, processing units and co-products.
It states that methodological choices could affect the carbon charge linked to an imported product. The issue becomes more complex when petroleum products are blended, reprocessed or traded through multiple ports before reaching their final destination.
The consultation also describes how refineries may share hydrogen production, steam generation, cogeneration and other utilities across several processing units. It says different allocation approaches can change emissions attributed to specific product streams even if total facility emissions remain unchanged.
The government would need approaches that support independent verification while remaining practical for international commodity trading. Where verified actual-emissions data are not available, it says the design of default values would be important in determining potential costs faced by importers.
Potential effects on fuel costs, industry competitiveness and supply
The consultation identifies 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 any competitive advantage held by imported products from jurisdictions with lower or different carbon-related costs.
At the same time, it warns that additional charges on imported fuels could affect transport, manufacturing and distribution costs. It also states that excluding imported products from carbon pricing could leave domestic refineries at a disadvantage if they bear emissions-related costs not faced by overseas competitors.
The document adds that introducing a charge would not automatically remove other competitive pressures affecting British refining. It points to factors such as crude-oil availability, refinery complexity, energy prices and maintenance requirements as elements influencing operating costs and competitiveness.
It says assessing any extension would require consideration of scenarios involving import volumes, wholesale fuel prices, refinery investment and security of supply.
Documentation requirements and traceability for traded cargoes
A future inclusion of refinery products would require rules clarifying when liability is calculated and what documentation importers must provide to establish emissions intensity. The consultation notes that internationally traded cargoes can include products sourced from multiple installations or modified through blending.
It states that although customs declarations identify products and their declared origins, tracing the underlying refinery and reconstructing relevant production data may be more difficult across complex trading chains. Importers would need workable procedures to obtain emissions information where multiple facilities contribute to the final product.
The government highlights the importance of reliable default values and credible routes for demonstrating actual emissions to limit administrative costs and disputes. It also indicates that how these requirements are designed would affect how easily fuel suppliers could incorporate carbon-border obligations into existing trading, documentation and customs processes.
How UK coverage would interact with EU CBAM rules
The European Union entered CBAM’s definitive phase on 1 January 2026, but its current product coverage differs from the sectors included in the UK’s initial regime. The consultation also notes differences from any possible UK extension covering refined petroleum products.
If the UK later adds refined petroleum products, suppliers operating across both markets would need to monitor separate national frameworks. It says they should not assume identical product lists or methodologies apply across the two systems.
The document also raises questions about recognising carbon prices paid abroad and preventing double counting. It states that any eventual approach would need to account for foreign carbon costs while maintaining the objectives of the UK’s domestic carbon-pricing policy.
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 says such investments require capital and are generally influenced by expectations about future regulation. The government indicates that the consultation provides an opportunity to assess whether a carbon-border adjustment could offer sufficient long-term protection for domestic refining.
The document also notes the possibility of needing additional energy or infrastructure policies alongside any border adjustment approach. It states that decisions on including refined petroleum products would follow later, leaving fuel suppliers to assess potential UK carbon-border exposure as part of longer-term commercial planning.