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UK and EU Carbon Border Adjustment Mechanism (CBAM) 2027

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What Data Centres Need to Know

From 2026 in the EU and 2027 in the UK, data centre developers and operators will face a new layer of cost and complexity: Carbon Border Adjustment Mechanism (CBAM).

While CBAM is designed to level the playing field and reduce carbon leakage, it will have significant implications for data centre construction, operations, and insurance.

CBA will introduce carbon taxes on imported materials such as steel, aluminium, cement, and hydrogen with rates expected to reach GBP80 – GBP100 per tonne of CO₂ under the UK Emissions Trading Scheme (ETS), and EUR80 – EUR100 per tonne under the EU ETS.

Below, we explore key areas of impact and what stakeholders should be modelling now.

Inflationary pressure

CBAM will drive up the cost of carbon-intensive materials, with direct consequences for both Shell & Core and M&E budgets:

  • Shell & Core Construction: Steel and cement price hikes of 5-15% could add GBP 300k – GBP 800k per megawatt (MW) to capital expenditure. For hyperscale facilities typically costing ~GBP 10m/MW (EUR 11m/MW) including land, structure, and equipment, this represents a material increase.
  • M&E New Builds/Fit-Outs: Aluminium and copper, critical for cooling and electrical systems, may rise by 5-10%, adding GBP 200k – GBP 500k/MW to fit-out budgets.
  • Labour and Contractor Rates: Broader inflationary pressures across the economy may further increase build costs and contractor fees.

Supply chain impacts

CBAM will also reshape procurement strategies, particularly for materials sourced from non-ETS regions such as Asia:

  • Shell & Core Materials: Steel and cement from non-EU/UK suppliers may face 20-30% longer lead times due to constrained regional supply and CBAM-related bottlenecks. EU CBAM data already shows EUR 10m+ annual cost spikes for steel-intensive sectors.
  • M&E Components: Aluminium and hydrogen shortages could delay delivery of cooling and backup power systems, both essential for AI workloads and high-density compute environments.

Rising operating costs

The impact doesn’t stop at construction. CBAM will also affect long-term operating budgets:

  • Retrofits and Expansions: Higher material costs will inflate future upgrade budgets, with 3-7% increases in OPEX likely.
  • Cooling and Backup Power: Aluminium and hydrogen price rises could push up energy-related operating costs by 5-8%, especially in regions already facing grid volatility. The US precedent suggests potential for EUR 5bn+ in cumulative cost increases.

Insurance valuations and premiums

As build costs rise, so too will reinstatement values with direct implications for insurance:

  • Valuation Reassessment: Data centre owners should engage professional valuers (e.g., CBRE) to reassess new build and retrofit values. These figures will feed into property and terrorism insurance schedules.
  • Premium Impact: Higher reinstatement values will inevitably lead to premium increases. Insurers and financiers will expect documentation and justification of these revised figures.

What data centres should do

To stay ahead of CBAM, data centres must act decisively.

Firstly, they need to model the financial impact of carbon taxes across capital expenditure, operating costs, and supply chain timelines – this will be critical for budgeting and board-level planning.

Additionally, they should review procurement strategies to reduce exposure to non-ETS imports and consider sourcing from ETS-compliant regions to avoid delays and cost spikes.

Engage specialist professional valuers, like CBRE, early to ensure that insurance reinstatement values reflect CBAM-adjusted build costs and proactively share these insights with insurers to support underwriting and renewal discussions. In this new landscape, preparation isn’t optional, it’s a strategic imperative.

At Price Forbes, we don’t just place risk, we anticipate it. CBAM is complex, but it’s also an opportunity to lead.

Phil Bower
Global Data Centres Insurance Practice Leader
Price Forbes
Phil.Bower@priceforbes.com