Full Breakdown
UK Government Plans Carbon Charge on Imported Fuel
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Proposed Green Fuel Tax and Its Mechanics
Chancellor John Healey is reportedly preparing to extend the carbon border adjustment mechanism (CBAM) to refined fuel imports. Under the proposal, imported petrol and diesel would face a “carbon charge” equal to the levy applied to domestically refined products. The Energy Secretary Miatta Fahnbulleh is said to support the expansion, which is scheduled to take effect on 1 January 2027. The charge would be set at £18 per tonne of carbon emissions, matching the domestic rate.
Fiscal Context and Recent Price Trends
Motoring organization RAC notes that the average pump price for petrol has risen to £1.75 per litre, a 31 % increase since the Middle-East conflict began, while diesel has climbed 40 % to a record £2 per litre. The RAC Foundation estimates that the government has collected roughly £1.27 billion in extra VAT on petrol and diesel since 28 February.
Fuel duty was temporarily reduced by 5 pence and the cut has been extended to the end of the current year. The levy on fuel duty is due to rise by 3 pence to 55.95 pence on 1 January and by a further 2 pence on 1 March, adding 6 pence per litre—equivalent to about £3.30 more for a typical family-car fill-up. From April, fuel duty is set to increase in line with the Retail Prices Index, currently 3.9 %.
Official Positions
Elizabeth de Jong, chief executive of Fuels Industry UK, argues that the tax would create a “level-playing field,” preventing carbon and investment leakage and supporting UK energy security. Simon Williams, head of policy at the RAC, suggests the government should use the high VAT receipts to aid motorists.
Potential Impact on Consumers
If the CBAM extension is implemented, the additional £18-per-tonne carbon charge could be passed through to retail prices, compounding the existing tax burden that already accounts for roughly 47 % of a litre of petrol and 43 % of diesel. Compared with other European nations, the UK’s carbon charge remains low—Norway levies €146.23 (£122) per tonne, while the EU average was €53.63 (£44.94) as of 1 April 2026. The combined effect of the new charge, scheduled duty rises, and existing taxes may sustain the current pressure on household fuel costs.