The Carbon Border Adjustment Mechanism (CBAM) is an EU regulatory framework designed to ensure that imported goods reflect the carbon emissions generated during their manufacturing process. Its primary objective is to prevent “carbon leakage”—a shift of production to countries with less stringent climate policies—and to maintain fair competition between EU producers and external exporters. As part of the European Green Deal, CBAM operates alongside the EU Emissions Trading System (EU ETS), extending carbon-cost consistency to imported goods.
Scope and Phased Implementation
CBAM currently applies to a number of carbon-intensive sectors, including:
- Steel and iron
- Aluminium
- Cement
- Fertilisers
- Hydrogen
- Electricity
The transition period (2023–2025) requires importers to report embedded emissions without financial obligations. From 1 January 2026, importers will be required to purchase CBAM certificates corresponding to the carbon content of their goods. Future legislative developments may extend the mechanism to additional product categories.
During the transitional period, CBAM includes a 50-tonne CO₂ equivalent threshold. Only importers whose goods exceed 50 tonnes of embedded CO₂ per year are required to submit CBAM reports. Smaller import volumes are exempt, which simplifies compliance for low-volume traders.
Obligations for Importers
Importers of CBAM-covered products must comply with several obligations:
- Quarterly CBAM reporting on direct (and in some cases indirect) emissions.
- Registration as CBAM declarants before importing covered goods under the permanent system.
- Purchase of CBAM certificates from 2026 onwards, based on verified emissions.
- Retention of verifiable supplier data, with third-party verification where applicable.
Non-compliance may result in administrative penalties imposed by the competent national authority.
Customs Valuation and Interaction with CBAM
The introduction of CBAM does not affect the calculation of customs value under the EU Customs Code. Customs value continues to be determined using the transaction value, transport, insurance, and related costs. VAT and customs duties remain unchanged.
However, customs authorities may request CBAM documentation at the time of import declaration. Importers should therefore ensure that supplier information, emissions data, and calculation methodologies are readily accessible for verification.
Financial Impact and Certificate Pricing
CBAM certificates are priced according to the average weekly cost of EU ETS allowances. As these fluctuate with market conditions, importers may experience varying levels of financial exposure. Accurate emissions data can help minimise unnecessary certificate purchases. Companies may also consider long-term supply-chain adjustments, sourcing strategies, or carbon-efficiency improvements to mitigate costs.
Support and Next Steps
Businesses importing products that may fall under CBAM are encouraged to take proactive steps to ensure compliance. Key considerations include:
- Identifying relevant product components – Understanding which parts of a product are covered under CBAM is essential.
- Collecting accurate emissions data – Working with suppliers to obtain verified carbon-intensity information helps ensure proper reporting.
- Estimating potential certificate costs – Planning ahead for the purchase of CBAM certificates can help manage future financial obligations.
- Maintaining thorough documentation – Keeping all records organized and accessible supports transparency and facilitates any future verification by customs authorities.
By taking these measures early, companies can navigate the CBAM framework efficiently, reduce compliance risks, and integrate carbon considerations into their supply chain planning.
In conclusion, the introduction of CBAM marks a significant development in the EU’s environmental and trade landscape, creating a structured approach to incorporating carbon costs into imported goods. For businesses importing materials with potentially covered components, early preparation is essential. By identifying the metal composition of your panels, securing robust supplier emissions data, and planning ahead for the certificate system that begins in 2026, your organisation will be well positioned to comply with regulatory requirements and manage future financial obligations effectively.
We remain at your disposal to support you throughout this process and ensure a smooth and fully compliant implementation.
