CBAM — EU Carbon Border Adjustment Mechanism

CBAM (Carbon Border Adjustment Mechanism) is the EU’s tool for preventing carbon leakage by putting a carbon price on imports of carbon-intensive goods - ensuring imported products face a comparable carbon cost to those produced domestically under the EU Emissions Trading System (ETS). The legal obligation falls on EU importers (or their indirect customs representatives). However, non-EU producers are deeply involved because they must supply installation-level emissions data for the goods they export to the EU. Without that data, importers must rely on default emission values - which are intentionally set high and get more punitive each year (a 10% top-up in 2026, 20% in 2027, 30% from 2028). So while CBAM is technically an importer obligation, it practically creates a data requirement that flows upstream to every non-EU supplier in scope.

CBAM currently covers six sectors: cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen. These were selected for their high emissions intensity and carbon leakage risk. In December 2025, the Commission submitted a legislative proposal to extend scope to approximately 180 additional downstream products with high steel and aluminium content, with implementation targeted for January 1, 2028. Sectors like chemicals and polymers are also being considered for future inclusion. If you import goods containing significant steel or aluminium content - even finished products - you should start monitoring the scope expansion timeline now.

The CBAM Omnibus Regulation (EU 2025/2083), in force since October 2025, introduced several key simplifications ahead of the definitive phase that started January 1, 2026. The most important changes: a new de minimis threshold exempts importers bringing in 50 tonnes or less of CBAM goods per year (replacing the old €150-per-consignment exemption). CBAM certificate sales are postponed to February 1, 2027 - meaning no certificates need to be purchased in 2026, but 2026 imports still create cost exposure. The annual declaration deadline is moved to September 30 of the following year (so the first declaration covering 2026 imports is due September 30, 2027). And the quarterly certificate-holding requirement is reduced from 80% to 50% of embedded emissions to date, easing cash flow pressure.

You can use either, but the economics strongly incentivize primary data. The Commission has published country- and product-specific default emission values for all CBAM-covered goods. These defaults are based on the highest emission intensities among countries with reliable data - and they increase by 10–30% per year through 2028 as a deliberate incentive to shift toward actual verified emissions. If your supplier’s real emissions are lower than the default (which they often are for producers in countries with cleaner energy grids or more efficient processes), you’ll pay significantly more in certificates by relying on defaults. Primary (actual) data requires third-party verification by an accredited verifier, but the cost savings on certificates typically outweighs the verification cost. The practical challenge is getting non-EU suppliers to provide installation-level emissions data in the EU’s prescribed methodology - which is where structured supplier data collection workflows become essential.

CBAM certificate prices mirror EU ETS allowance prices. For 2026, the price is calculated based on the quarterly average of ETS auction prices for each quarter. From 2027 onward, it shifts to a weekly average of auction closing prices. The number of certificates an importer must surrender is based on the embedded emissions of imported goods, minus an adjustment factor that reflects the free allowances still allocated to EU producers under the ETS (these free allowances are being phased out from 2026 to 2034). If a carbon price was already paid in the country of production, importers can claim a deduction - either using verified actual amounts or default carbon price references the Commission will publish for third countries with carbon pricing mechanisms. Failure to surrender the required certificates results in a penalty of €100 per excess tonne of CO₂.

There’s meaningful data overlap, but each has its own methodology and boundaries. A Product Carbon Footprint (PCF) under ISO 14067 or an LCA under ISO 14044 can provide high-quality emissions data at the product level, but CBAM has its own prescribed calculation methodology, system boundaries, and reporting format - so a PCF or EPD doesn’t automatically satisfy CBAM requirements. That said, the underlying data (energy consumption, material inputs, process emissions at installation level) is largely the same. If you’ve already invested in LCA or PCF capability, you have a strong data foundation that can be adapted to CBAM’s specific rules. For CSRD/ESRS, CBAM-related costs increasingly show up as a climate-related financial risk that needs to be disclosed - both the direct cost of certificates and the indirect cost of supplier engagement to obtain primary emissions data.