EU CBAM Explained: What It Means for Importers and Their Suppliers

The EU's Carbon Border Adjustment Mechanism (CBAM) moved into its definitive phase on 1 January 2026, and it now puts a real cost on the carbon embodied in certain imports. CBAM affects two groups: the businesses that import these goods into the EU, who carry the charge directly, and the much larger group of suppliers across the supply chain who are now being asked to provide emissions data. This article covers what it means for both. 

‍What is the EU CBAM?

CBAM is an EU climate policy designed to stop carbon leakage, which is when companies move production to countries with weaker climate rules to avoid paying for their emissions. It puts a carbon price on certain imports into the EU, so they face the same carbon cost as goods made inside the EU under the EU Emissions Trading System (EU ETS). The aim is to level the playing field for EU producers and encourage cleaner production worldwide. 

‍Which goods are in scope?

CBAM currently applies to imports of carbon-intensive goods across six sectors:

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

These were chosen because their production is emissions-heavy and at the highest risk of carbon leakage. The scope is expected to widen to more products over time.

‍How the EU CBAM works

CBAM rolled out in two stages. During the transitional phase, from October 2023 to December 2025, EU importers reported the embedded emissions of their CBAM goods each quarter, with no payment due. Since the definitive phase began on 1 January 2026, importers must buy and surrender CBAM certificates to cover emissions from that date, priced in line with the EU ETS carbon price, and payable by September 30th 2027. Coverage is being phased in, with full embedded emissions covered from 2034. 

‍If you import CBAM goods into the EU

If your business imports any of these goods into the EU, you are the party liable for CBAM. In practice that means calculating the embedded emissions of what you import, buying and surrendering certificates to cover them, and keeping the records to back it up. You can base the emissions on actual data from the producer, or on default values published by the European Commission. As we will come to, that choice has a direct effect on cost. Any carbon price already paid in the country of origin can be deducted, to avoid being charged twice. 

‍Why suppliers are being asked for carbon data, and why it pays to provide it

This is where CBAM reaches well beyond the businesses directly regulated by it.

To work out their bill, importers can use the producer's actual emissions data or fall back on the EU's default values. Those defaults are not neutral estimates. Where reliable data is missing, they are based on the highest-emitting exporting countries, and they carry a mark-up that rises from 10% in 2026 towards 30% by 2028, with a lower rate of 1% for fertilisers. In other words, defaults are deliberately the expensive option.

That design choice is what pushes the request down the chain. Importers have a clear financial reason to obtain actual, verified emissions data, and that data can only come from the producers and suppliers who made the goods. So if you supply any of these goods, or the materials that go into them, expect your EU customers to start asking for your product-level emissions data, even if you sit several steps from the EU border or sell through traders.

For suppliers, this cuts two ways. If you can provide credible emissions data showing a footprint below the default, you become the cheaper, more attractive option, and you can compete on it. If you cannot, your goods carry the marked-up default, and you become the more expensive supplier to buy from. Carbon data has quietly become a commercial input, not just a sustainability metric.

Getting your emissions data right

CBAM is built on embedded emissions, meaning the carbon tied to a specific product rather than your whole business. That level of detail is hard to reach with spend-based estimates, which apply average factors to how much you spend and track spend rather than real activity. Activity-based data, built from real figures like the weight of materials, energy used in production, and distances shipped, gives a far more accurate and defensible picture, and is the kind of data importers and their auditors expect to see. For any business likely to face these requests, getting product-level emissions data into good shape now is worth doing ahead of the questions arriving.

The bottom line

CBAM is live in its definitive phase. The charge sits with EU importers, but its real reach is the pressure it puts on the whole supply chain to produce credible emissions data. The mark-up on default values means importers will keep pushing for actual figures, and suppliers who can provide clean, product-level data will be better placed, and better priced, than those who cannot. Getting that data right is the practical takeaway, whichever side of the border you sit.

Frequently asked questions

What does CBAM stand for?

CBAM stands for Carbon Border Adjustment Mechanism. It is an EU policy that places a carbon price on certain imports into the EU.

Which goods does CBAM cover?

Iron and steel, aluminium, cement, fertilisers, hydrogen and electricity. The scope may expand to more products over time.

Who actually pays for CBAM?

The EU importer is liable, and must buy and surrender CBAM certificates to cover the embedded emissions of the goods they import. Suppliers are not charged directly, but are increasingly asked to provide the emissions data importers need.

Why would an importer ask a supplier for emissions data instead of using default values?

Because default values are set deliberately high and carry a mark-up, rising towards 30% by 2028, so they are the more expensive basis for the charge. Using a supplier's actual, verified data is usually cheaper, which is why importers push for it.

Does CBAM affect businesses outside the EU?

Yes, indirectly. Any business supplying in-scope goods, or the materials in them, to EU customers can expect requests for emissions data so those customers can keep their CBAM costs down, wherever in the world the supplier is based.

How are embedded emissions calculated?

Using actual emissions data from the producer where available, or the EU's default values where it is not. Supplying accurate producer data gives a more precise, and usually lower, figure than the marked-up default.

Seedling helps businesses measure an accurate, full-scope carbon footprint with expert support, so you have credible, product-level emissions data ready when customers ask for it.

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