The Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) is an EU climate policy tool designed to prevent carbon leakage—when companies move production to countries with weaker climate rules to avoid paying carbon costs.

CBAM places a carbon price on certain imports into the EU, making sure they face the same carbon costs as goods produced inside the EU under the EU Emissions Trading System (EU ETS).

Key points

• Who it affects: Importers into the EU of certain carbon-intensive goods, including cement, iron & steel, aluminium, fertilizers, hydrogen, and electricity.
• Why it matters: Encourages cleaner production globally by making high-carbon imports less competitive.
• Timeline:
  
  • Transitional phase: October 2023 – December 2025. Importers report embedded emissions quarterly, but no payments yet.
  • Full implementation: From 1 January 2026, importers must purchase and surrender CBAM certificates matching the carbon emissions of their imports.
• Goal: Level the playing field for EU industries and drive global decarbonisation.

1. Who needs to comply with CBAM?

Any importer into the EU of goods covered by CBAM’s scope—regardless of company size—must follow reporting and payment rules.

2. Which products are currently covered?

Cement, iron & steel, aluminium, fertilizers, hydrogen, and electricity. Over time, CBAM may expand to more products.

3. What do I have to do during the transitional period (2023–2025)?

Submit quarterly reports detailing the embedded emissions in your imports and any carbon price already paid in the country of origin.

4. How are embedded emissions calculated?

Using actual emissions data from the producer where available, or default values published by the European Commission if actual data is unavailable.

5. When do I start paying for CBAM?

From January 2026, you’ll need to purchase CBAM certificates—priced in line with the weekly average EU ETS carbon price.

6. What are CBAM certificates?

Digital units representing the cost of CO₂ emissions embedded in imported goods. They must be bought via the CBAM registry and surrendered annually.

7. What happens if I don’t comply?

Non-compliance can result in significant financial penalties, reputational damage, and potentially losing import permissions.

8. Can I reduce my CBAM costs?

Yes—by sourcing from producers with lower-carbon processes, improving supply chain transparency, or negotiating lower-carbon production methods with suppliers.

9. How does CBAM interact with other carbon pricing systems?

If a carbon price is paid in the exporting country, it can be deducted from the CBAM obligation (to avoid double-charging).

10. Where can SMEs get help to comply?

The EU provides guidance, calculation tools, and reporting templates. Trade associations and sustainability consultancies can also help with data gathering and emissions calculation.

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