TOPICS·SUSTAINABILITY

EU Carbon Border Adjustment Mechanism (CBAM)

Imposes carbon costs on imports of carbon-intensive goods to prevent carbon leakage. Definitive phase with financial obligations began January 2026.

EUUpdated May 2026

IN A NUTSHELL

What

EU carbon border tax on imports of carbon-intensive goods, designed to prevent carbon leakage and level the playing field for EU producers subject to EU ETS carbon costs.

Who

EU importers of iron/steel, aluminium, cement, fertilisers, electricity, and hydrogen importing above 50 tonnes per year. Indirectly affects non-EU producers of these goods. Proposed expansion to 180 downstream steel/aluminium products.

When

Transitional reporting phase Oct 2023 -- Dec 2025. Definitive phase with certificate purchase obligations since 1 January 2026. First surrender deadline: 30 September 2027.

Penalty

Penalties linked to EU ETS allowance price from 2026. Default value markup of 10% in 2026, rising to 30% by 2028, penalises reliance on estimated rather than actual emissions data.

OVERVIEW

The EU Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026, marking the transition from a reporting-only regime to one with real financial teeth. After a two-year transitional period during which importers submitted quarterly emissions reports without financial consequences, authorised CBAM declarants must now purchase certificates for every tonne of CO2 embedded in their imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen.

The first quarterly certificate price was published on 7 April 2026 at EUR 75.36 per tonne of CO2 equivalent, reflecting the average EU ETS auction price for Q1 2026. This price will fluctuate quarterly and is expected to track above EUR 70 as the ETS cap tightens through the decade. For importers, this translates to material cost increases: a typical shipment of 1,000 tonnes of steel with embedded emissions of approximately 1.8 tCO2e per tonne would require certificates worth roughly EUR 135,000, less any free allocation adjustment and third-country carbon price deductions.

A central tension in the definitive phase is the choice between actual and default emissions values. Importers who obtain verified actual emissions data from their suppliers can potentially demonstrate lower carbon intensity and reduce certificate costs. However, verification requires in-person site visits to each production facility in the supply chain, creating logistical bottlenecks -- facilities cannot calculate their 2026 emissions until year-end, and importers must submit their data by September 2027. Default values, while simpler, carry a punitive markup: 10% in 2026, rising to 30% by 2028, designed to incentivise the collection of actual data. For fertilisers, the markup is only 1% given the complexity of chemical supply chains.

CBAM operates in lockstep with the phase-out of EU ETS free allocations for covered sectors. In 2026, the free allocation adjustment factor is 97.5%, meaning importers only pay CBAM on 2.5% of what they would otherwise owe. This factor drops steadily -- to 90% in 2028, 51.5% in 2030, and reaches zero in 2034, when CBAM fully replaces free allocation as the mechanism to prevent carbon leakage. The interplay between these two instruments is the economic heart of CBAM: as EU producers lose their free allowances, imported goods face correspondingly higher carbon costs at the border.

In December 2025, the Commission proposed extending CBAM's scope to 180 downstream products with high steel or aluminium content -- machinery, vehicle components, domestic appliances, and construction equipment averaging 79% metal content by weight. A two-step expansion is planned: downstream goods and anti-circumvention measures in 2026-2027, followed by a 2027 review covering indirect emissions for additional sectors and possible extension to chemicals. The October 2025 Omnibus simplification package also streamlined administrative requirements to reduce the burden on importers and third-country producers.

For businesses, CBAM compliance is not merely a customs procedure but a cross-border data, verification, and cost-exposure challenge that requires deep supplier engagement, emissions monitoring infrastructure, and strategic procurement decisions. Companies that proactively invest in actual emissions data from their supply chains will have a structural cost advantage over those relying on default values.

KEY MILESTONES

May 28, 2026

YOU ARE HERE

WHO DOES THIS AFFECT?

Select your company type for tailored compliance guidance.

KEY OBLIGATIONS

☐Register as authorised CBAM declarant with national competent authority

☐Calculate embedded emissions for every import shipment using actual or default values

☐Purchase CBAM certificates quarterly at the published EU ETS-linked price

☐Surrender certificates by 30 September each year for the previous year's imports

☐Engage accredited verifiers for on-site verification of supplier emissions data

☐Maintain CBAM registry account and annual declaration filings

YOUR FIRST STEP

Map all import flows of CBAM-covered goods by CN code, identify supplier facilities, and initiate actual emissions data collection agreements with each producer

KEY COMPLIANCE REQUIREMENTS

Authorised CBAM declarant status

Register as an authorised CBAM declarant with your national competent authority. Only authorised declarants may import CBAM-covered goods above the 50-tonne annual mass threshold.

Embedded emissions calculation

Calculate embedded emissions for imported goods using actual production data verified by accredited verifiers. Where actual data is unavailable, default values apply -- subject to 10% markup in 2026, rising to 30% by 2028.

CBAM certificate purchase

Purchase CBAM certificates at the quarterly EU ETS-linked price (EUR 75.36/tCO2e for Q1 2026). Certificates must be surrendered by 30 September of the following year to cover the previous year's imports.

Third-country carbon price deduction

Claim deductions for carbon prices already paid in the country of origin (carbon tax or ETS) to avoid double-charging. Requires documentary proof from the non-EU producer.

Free allocation adjustment

The number of CBAM certificates to surrender is adjusted downward to reflect the free allocation still provided to EU producers under the ETS. This adjustment factor starts at 97.5% in 2026 and decreases annually to 0% by 2034.

Supplier data collection and verification

Obtain actual emissions data from each facility in the supply chain. Verification requires in-person site visits to each manufacturing facility, in production order. If verification fails, default values apply.

Annual CBAM declaration

Submit an annual CBAM declaration by 31 May each year (starting 2027), reporting the total embedded emissions and CBAM certificates to be surrendered for the previous calendar year.

CBAM registry account

Maintain an active account in the EU CBAM registry for purchasing, holding, and surrendering CBAM certificates. The registry also tracks compliance status.

KEY INTERPRETATIONS & FAQ