CBAM is the EU's carbon border tax. It requires importers of certain goods into the EU to purchase CBAM certificates reflecting the embedded carbon in their imports, equivalent to the carbon price EU producers pay under the ETS. This prevents 'carbon leakage' — companies moving production to countries without carbon pricing.

Which products are covered?

CBAM currently covers iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen. In December 2025 the Commission proposed adding 180 downstream products with high steel or aluminum content from January 2028. The Council and Parliament adopted their negotiating positions in 2026 and must now agree a final text.

How does CBAM affect non-EU manufacturers?

Non-EU manufacturers exporting to the EU will need to provide emissions data to their EU importers. If they can demonstrate that a carbon price has already been paid in their home country, this is deducted from the CBAM liability. Companies in countries without carbon pricing face the full CBAM cost — creating a competitive incentive to decarbonize.

CBAM: Carbon Border Adjustment Mechanism

Status, September 2026: CBAM's definitive period began on January 1, 2026. A simplification regulation adopted in October 2025 exempts importers bringing in 50 tonnes or less of covered goods a year; certificate sales open February 1, 2027, and certificates for 2026 imports must be surrendered by September 30, 2027. Source: ICAP.

What Is CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is the EU's policy to prevent carbon leakage by placing a carbon price on imports of certain carbon-intensive goods. It ensures that imported products face the same carbon costs as products manufactured within the EU under the Emissions Trading System (ETS).

CBAM is designed to maintain the competitiveness of EU industry as carbon prices rise under the ETS, while encouraging trading partners to adopt their own climate policies.

Who It Applies To

EU importers of CBAM-covered goods: From 2026, those bringing in more than 50 tonnes a year must be authorized CBAM declarants, report embedded emissions, and purchase CBAM certificates (the 50-tonne exemption does not apply to electricity or hydrogen)
Non-EU manufacturers: Must provide emissions data to EU importers
Covered sectors: Iron and steel, aluminum, cement, fertilizers, electricity, hydrogen

Key Requirements

Transitional period (October 2023 - December 2025):

EU importers must submit quarterly CBAM reports detailing embedded emissions in imported goods
No financial obligation during this period — reporting only
Default values could be used freely until July 31, 2024; from January 2025 only the EU calculation method was accepted

Definitive regime (January 2026 onwards):

EU importers above the 50-tonne threshold must purchase CBAM certificates from their national authority; sales open February 1, 2027
Certificate price linked to EU ETS auction prices: the quarterly average for 2026 imports, then the weekly average
Annual CBAM declaration and certificate surrender by September 30 of the following year, starting in 2027 for 2026 imports
Number of certificates = embedded emissions in imported goods
Deductions available for: carbon prices already paid in the country of origin, free ETS allowances (phased out by 2034)

Emissions calculation:

Direct emissions from the production process
Indirect emissions from electricity used in production (for certain products)
Specific calculation methodologies per product category

Timeline

October 2023: Transitional period began (quarterly reporting)
August 2024: Unlimited use of default values ended
January 2025: Only the EU calculation method accepted in quarterly reports
October 2025: Simplification regulation (EU) 2025/2083 adopted, adding the 50-tonne exemption and moving deadlines
January 2026: Definitive period begins — imports from this date carry a certificate obligation
February 2027: CBAM certificate sales open
September 30, 2027: First annual declaration and certificate surrender, covering 2026 imports
2026-2034: CBAM certificates phased in as free ETS allowances are phased out
2028: Proposed extension to 180 downstream steel and aluminum products would apply (under negotiation)

Compliance Steps

Identify affected imports: Review your supply chain for CBAM-covered products imported into the EU
Engage non-EU suppliers: Request actual emissions data for covered products
Register as authorized declarant: EU importers of more than 50 tonnes a year must obtain authorized declarant status from their national CBAM authority; those who applied by March 31, 2026 may keep importing while a decision is pending
Submit the annual CBAM declaration: By September 30 each year, report the previous year's imports and embedded emissions
Calculate embedded emissions: Use actual data from producers or authorized default values
Purchase CBAM certificates: From February 1, 2027, buy certificates to cover embedded emissions of imports from 2026 onward
Track carbon prices paid abroad: Document any carbon prices paid in the country of origin for deductions

Penalties

Transitional period: Penalties for late or incomplete reporting (€10-50 per tonne of unreported emissions)
Definitive regime: Penalties equivalent to ETS excess emissions penalties for each certificate not surrendered on time (€100 per tonne, adjusted for inflation, plus the obligation to purchase missing certificates); importing above the threshold without authorized declarant status costs three to five times that amount

How Council Fire Can Help

Council Fire helps EU importers and non-EU exporters navigate CBAM compliance — from supply chain mapping and emissions calculation through reporting systems and certificate management. Contact us for CBAM support.