CBAM: EU Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (CBAM) is a European Union regulation designed to prevent carbon leakage by taxing imports of certain products according to their carbon intensity.

It will enter full application in 2026, after a transitional reporting period that started in 2023.

Products covered (initial phase)‍

Cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen.

How it works‍

- Quarterly declaration: importers report the embedded emissions of each shipment.
- Purchase of CBAM certificates: priced in line with the EU ETS.
- Deduction: if the foreign producer has already paid a comparable carbon price.

Calculation methodology‍

- Based on ISO 14067 standards and specific methodologies developed by the European Commission.
- Covers Scope 1 and 2 emissions; Scope 3 is excluded in the first phase.

Expected impacts‍

- Encourages global decarbonisation of supply chains.
- Protects the competitiveness of European industry.
- Risk of trade tensions and challenges for exporting SMEs.

How companies can prepare‍

- Map the embodied carbon footprint of products exported to the EU.
- Set up reporting systems and verify data.
- Invest in decarbonisation and renewable energy to reduce future costs.

CBAM represents a paradigm shift in climate-related trade policy, aligning international trade with the ambition of the European Green Deal.