CBAM: EU Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (CBAM) is a European Union regulation that places a carbon price on imports of certain carbon-intensive goods, so that their embedded emissions are charged at a level comparable to the EU carbon price. Its purpose is to prevent carbon leakage, the risk that production simply moves to countries with weaker climate rules, undermining the EU's own decarbonisation.

CBAM mirrors the carbon cost that EU producers already bear under the EU Emissions Trading System (EU ETS), extending it to imports so that domestic and foreign goods face a similar carbon price.

Current status: the definitive regime

After a transitional reporting-only phase that ran from 2023 to 2025, the CBAM definitive regime entered into force on 1 January 2026. From this point CBAM goes beyond reporting and creates a financial obligation linked to the embedded emissions of covered imports. Sales of CBAM certificates start on 1 February 2027 and cover emissions embedded in goods imported during 2026, which are therefore paid for retroactively.

Products covered

In its current scope, CBAM applies to imports of:

• Cement
• Iron and steel
• Aluminium
• Fertilisers
• Electricity
• Hydrogen

The 2025 simplification

In 2025 the EU adopted Regulation (EU) 2025/2083, which simplified CBAM ahead of the definitive phase. The main change is a new annual mass-based exemption threshold of 50 tonnes of covered goods per importer, applying to iron and steel, aluminium, cement and fertilisers. This exempts roughly 90% of importers, mostly small operators, while still covering around 99% of the emissions embedded in CBAM goods. Imports of electricity and hydrogen are not covered by this 50-tonne threshold.

How CBAM works

• Authorisation: importers above the threshold must be registered as authorised CBAM declarants. Those who applied by 31 March 2026 may keep importing while their application is assessed.
• Reporting: importers determine and report the emissions embedded in each shipment.
• Certificates: authorised declarants buy CBAM certificates priced in line with the EU ETS, and must hold at least 50% of their accumulated emissions at the end of each quarter.
• Deduction: a carbon price already paid in the country of production can be deducted, avoiding double charging.
• Annual declaration: the CBAM declaration and the surrender of certificates are due by 30 September of the year following importation.

Calculation methodology

• Based on emission-quantification methodologies defined by the European Commission, consistent with life cycle accounting principles such as ISO 14067.
• Covers direct emissions and, for some goods, certain indirect emissions; full value-chain Scope 3 emissions are not the basis of the charge.

How companies can prepare

• Map the embodied carbon of products exported to or imported into the EU.
• Set up robust emissions reporting and data verification with suppliers.
• Invest in decarbonisation and renewable energy to reduce future CBAM costs.

CBAM is part of the European Green Deal and the Fit for 55 package, aligning trade policy with the EU's climate ambition. At Manglai we help companies measure their carbon footprint and prepare their sustainability reporting and CBAM data. Discover how Manglai can help you.