How is flagship climate policy shaping UK construction?

As the UK construction sector faces rising costs, tightening regulations and the shift to net zero, new policy interventions are reshaping how projects are planned, procured and delivered.

One of the most significant of these new policy interventions is the Carbon Border Adjustment Mechanism (CBAM), the European Union’s (EU) flagship climate policy, which ensures that importers of certain carbon-intensive products – mainly steel, aluminium and cement – pay a fair carbon price for goods produced within the EU.

Trading partners in the UK who want to stay competitive in the EU market need to consider, and eventually lower, the emissions contained in the products that they export. As one of the world’s largest import markets, the EU has major influence, and CBAM uses this power to motivate industries around the globe to implement cleaner production practices. Organisations must start preparing now for its impact on project viability, risk allocation and reporting requirements.

CBAM serves multiple objectives, each supporting the broader EU climate strategy:

Preventing carbon leakages: Discouraging industries from relocating their manufacturing operations abroad to avoid .

Levelling the competitive playing field:  CBAM ensures that importers of carbon-intensive products are subject to a comparable carbon cost to the EU’s Emissions Trading System.

Encouraging global emissions reduction: International producers have incentives to decarbonise their processes, extending EU’s climate influence globally.

Strengthening transparency and accountability: CBAM mandates the detailed reporting of embedded emissions, making sure that carbon footprints throughout global supply chains are accurately measured, verified and shared.

UK’s adoption of CBAM

The UK is due to introduce its own version of CBAM on 1 January 2027, following the EU’s implementation in January 2026. While the systems are similar, there are a few key differences. The UK CBAM will be a tax-based mechanism based on the quarterly UK Emissions Trading Scheme (ETS) price in the prior quarter. The UK will also only cover direct emissions when it launches in 2027, with the inclusion of indirect emissions being delayed until 2029 at the earliest.

Navigating CBAM to ensure greater viability

Major policy changes can have a significant impact on construction projects, particularly when considered alongside the market pressures and constraints. CBAM has the potential to add both direct and indirect cost pressures:

Material prices

Imported cement, steel and aluminium outside the carbon border will face carbon price adjustments. This may shift procurement to products produced in the UK and boost demand for low-carbon options, potentially causing material supply shortages and price increases if demand exceeds supply.

Working with established supply chains collaboratively and transparently will help secure products and mitigate financial risks.

Reporting obligations

Exporters must measure and disclose UK emissions  from manufacturing. Importers must report embedded emissions for goods entering the UK annually in 2027, then quarterly from 2028.

This increases cost and administrative work, especially if suppliers lack emissions-tracking. To manage this effectively, procurement teams should be knowledgeable, adaptable and offer comprehensive guidance on cost, programme and risk.

Impact on bidding

Imported materials will cost more, impacting bids and project tender prices. To secure work, suppliers must demonstrate emissions transparency in their supply chains, as this is likely to become a procurement requirement written into contracts. While this could create financial and legal risks and costs for companies unprepared for carbon accounting, those with well-established procurement routes with transparent reporting will be less affected and maintain a competitive advantage.

The need to meet CBAM requirements will likely be included in contracts. It represents a risk, and developers and contractors must agree on who is liable for the fluctuation in cost. The appetite for risk along with the market conditions and existing supply chains will inform different approaches and attract differing levels of cost.

Data verification as new standard

If UK emissions trading data cannot be verified or actual emissions data cannot be obtained, importers must show evidence of the efforts they have made to try to acquire it from their suppliers – including outreach, documentation requests and attempts to validate information.

This adds administrative work, but prevents companies from simply defaulting to non-specific data, and aligns with the EU’s approach which limits default values for reporting, moving toward country-specific defaults and prioritising actual emissions data.

As CBAM rules tighten, real emissions data from suppliers will become essential and standard. Navigating this complexity can be minimised by setting clear expectations from the start so that neither time nor cost is wasted by either side.

CBAM marks a key shift in global climate governance, making low-carbon materials and transparent reporting essential for the construction industry.”

More than just a tariff

CBAM marks a key shift in global climate governance, making low-carbon materials and transparent reporting essential for the construction industry. As CBAM becomes fully implemented, companies will need to reassess supply chains and enhance emissions reporting. They must also choose suppliers who can meet the new carbon data standards.

Those that are early to adapt will be best placed to succeed in a global market that increasingly values lower carbon emissions. 

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