EU CBAM compliance guide: what importers need to know for 2026

The EU Carbon Border Adjustment Mechanism will impose financial obligations on an estimated 3.4 billion tonnes of CO2 equivalent embedded in goods imported into the European Union each year, according to 2024 European Commission estimates. With CBAM certificates set to carry binding costs from January 2026, importers face a compliance deadline that directly affects profit margins across steel, aluminium, cement, fertilizers, electricity, and hydrogen. The European Commission received over 5.5 million CBAM reports during the transitional period from October 2023 through December 2025, yet a 2025 analysis by the Carbon Market Watch found that roughly 40% of submissions contained data quality issues. For any company importing covered goods into the EU, understanding CBAM is no longer optional.

Why It Matters

CBAM is the EU's primary tool for preventing carbon leakage, the phenomenon where production shifts to countries with weaker climate policies, undermining the effectiveness of the EU Emissions Trading System (EU ETS). As the EU ETS moves toward eliminating free allowances for heavy industry by 2034, CBAM creates a level playing field by pricing the carbon embedded in imports at rates equivalent to those faced by European producers.

The financial stakes are significant. EU ETS carbon prices averaged approximately EUR 65 per tonne in 2025 and are projected to reach EUR 80 to EUR 100 per tonne by 2030 (European Commission, 2025). For a steel importer bringing 50,000 tonnes of hot-rolled coil into the EU annually with an embedded carbon intensity of 1.8 tonnes CO2 per tonne of steel, the annual CBAM certificate cost could reach EUR 5.85 million to EUR 9 million, depending on EU ETS prices and any carbon price already paid in the country of origin.

Beyond direct costs, CBAM reshapes global trade flows. The World Bank estimated in 2024 that CBAM-affected exports from developing countries could decline by up to 1.8% for iron and steel and 0.9% for aluminium if producers do not decarbonize. Countries including India, Turkey, China, and Russia, which together account for over 60% of EU imports in covered sectors, face the greatest adjustment burden.

Key Concepts

Carbon Border Adjustment Mechanism (CBAM) requires EU importers to purchase certificates reflecting the embedded emissions of goods they bring into the customs territory. The certificate price mirrors the weekly average EU ETS auction price, ensuring that imported goods bear an equivalent carbon cost to those produced domestically.

Embedded emissions encompass both direct emissions (Scope 1) from the production process and, for certain products, indirect emissions from electricity consumed during manufacturing. CBAM applies default values when actual production data is unavailable, though these defaults are intentionally conservative to incentivize verified reporting.

CBAM certificates are digital instruments that importers must surrender annually to cover the total embedded emissions of their imports from the prior calendar year. Certificates can be purchased throughout the year but cannot be traded between importers. Unused certificates may be repurchased by the issuing authority at the original price.

Carbon price adjustments allow importers to deduct any carbon price already paid in the country of origin, provided it was effectively paid and not rebated or offset. This prevents double pricing and acknowledges existing climate policies in exporting countries.

KPI	Description	2025 Benchmark
EU ETS Price	Weekly average auction price per tonne CO2	EUR 60 to EUR 70
Default Emission Factor (Steel)	Tonnes CO2 per tonne of product if no verified data	1.8 to 2.3 t CO2/t
Default Emission Factor (Aluminium)	Tonnes CO2 per tonne of product if no verified data	6.0 to 16.0 t CO2/t
Default Emission Factor (Cement)	Tonnes CO2 per tonne of clinker	0.7 to 0.9 t CO2/t
Report Submission Deadline	Quarterly during transition, annual from 2026	Q1 of following year
Certificate Surrender Deadline	Annual surrender for prior year imports	May 31 annually

Regulatory Timeline

October 1, 2023: The transitional period began. Importers were required to submit quarterly CBAM reports detailing the volume, origin, and embedded emissions of covered goods. No financial obligations applied during this phase, but the European Commission used submissions to refine implementation rules.

January 1, 2025: Reporting requirements tightened. Importers could no longer rely on estimated or default values for certain product categories and were required to provide installation-level data from non-EU producers. The European Commission introduced penalties of EUR 10 to EUR 50 per tonne for missing or incorrect reports.

January 1, 2026: The definitive period begins. Importers must register as authorized CBAM declarants, purchase CBAM certificates, and surrender them annually by May 31 to cover the previous year's embedded emissions. Free EU ETS allowances begin phasing out in parallel, increasing at a rate of approximately 10 percentage points per year through 2034.

2034: Free EU ETS allowances reach zero for CBAM-covered sectors, completing the transition from domestic subsidy to border carbon pricing.

Who Must Comply

Any natural or legal person established in the EU who imports goods classified under the following Combined Nomenclature (CN) codes must comply:

Iron and steel: Covers raw materials (pig iron, direct reduced iron), semi-finished products (slabs, billets), and finished products (flat-rolled, bars, tubes, wire). This is the largest category by trade volume, with the EU importing approximately 45 million tonnes of steel products annually.

Aluminium: Covers unwrought aluminium, aluminium powders, bars, tubes, wire, and foil. The EU imported roughly 6.3 million tonnes of aluminium products in 2024, with significant volumes from Russia, Norway, Mozambique, and the Gulf states.

Cement: Covers clinker, Portland cement, and other hydraulite cements. Cross-border cement trade into the EU is relatively small but growing, particularly from Turkey and North Africa.

Fertilizers: Covers ammonia, nitric acid, urea, ammonium nitrate, and mixed fertilizers. Russia, Egypt, and Algeria are major fertilizer exporters to the EU.

Electricity: Covers electricity imported from non-EU countries via interconnected grids. This primarily affects imports from the Western Balkans, Morocco, and the UK (subject to bilateral negotiations).

Hydrogen: Added to the scope in the final regulation. Covers grey, blue, and green hydrogen. While trade volumes remain small, the inclusion signals the EU's intent to shape the emerging global hydrogen market.

Downstream manufactured goods (such as automobiles or appliances containing CBAM-covered materials) are not currently in scope, though the European Commission has committed to reviewing potential expansion by 2030.

Compliance Requirements

Authorized CBAM Declarant registration: Before the first import in 2026, importers must apply for authorization through their national competent authority. The application requires company identification, customs registration, and a description of planned import activities. Processing typically takes 30 to 60 days.

Emissions data collection: Importers must obtain verified emissions data from each non-EU production installation. This includes direct emissions from production, indirect emissions from electricity consumption, and any carbon price paid in the country of origin. The European Commission has published standardized reporting templates and calculation methodologies.

Certificate management: Importers must maintain a minimum balance of CBAM certificates in their account at all times, equivalent to at least 80% of their embedded emissions for the current year. Certificates are purchased at the prevailing weekly EU ETS auction price through the CBAM registry platform.

Annual declaration: By May 31 each year, importers must submit a verified CBAM declaration covering all imports from the preceding calendar year and surrender the corresponding number of certificates.

Verification: An accredited verifier must verify the embedded emissions data in the annual declaration, similar to verification requirements under the EU ETS.

Step-by-Step Implementation

Step 1: Scope assessment. Map all imports into the EU by CN code to determine which products fall under CBAM. Many importers discover that semi-finished goods or components they assumed were exempt actually qualify under the broad product definitions.

Step 2: Supply chain engagement. Contact every non-EU supplier producing CBAM-covered goods and request installation-level emissions data. Establish data-sharing agreements and timelines. Suppliers in countries with advanced emissions monitoring (such as South Korea or the UK) can typically provide data faster than those in regions without mandatory carbon reporting.

Step 3: Data infrastructure. Implement systems to collect, validate, and store emissions data alongside customs declarations. Many large importers integrate CBAM data flows into existing enterprise resource planning (ERP) platforms. Smaller firms may use dedicated CBAM compliance software from providers such as Sphera, Siemens Xcelerator, or PwC's CBAM reporting tool.

Step 4: Financial planning. Model CBAM certificate costs under different EU ETS price scenarios and production emission intensities. Incorporate these costs into procurement decisions, pricing strategies, and supplier negotiations. Factor in the declining free allocation schedule through 2034.

Step 5: Registration and testing. Apply for authorized CBAM declarant status through your national competent authority. Complete test submissions using the CBAM registry platform before the first mandatory declaration deadline.

Step 6: Verification and submission. Engage an accredited verifier to review your emissions data and CBAM declaration. Submit the verified declaration and surrender certificates by May 31.

Common Pitfalls

Relying on default values. The European Commission's default emission factors are set conservatively, often at the 90th percentile of global production. Importers who fail to obtain actual installation data will overpay significantly. For aluminium, default values can be three times higher than data from low-carbon producers using hydroelectric power.

Ignoring indirect emissions. CBAM includes indirect emissions (from electricity) for aluminium and certain other products. Importers who only collect direct emissions data will submit incomplete reports and face penalties or forced use of default values.

Underestimating supplier resistance. Many non-EU producers, particularly small and medium enterprises, lack emissions monitoring infrastructure or view data sharing as a commercial risk. Starting supplier engagement early is critical, as building capacity in the supply chain can take 12 to 18 months.

Misclassifying products. The boundary between CBAM-covered and non-covered products is defined by CN codes, not by material composition alone. Certain alloys, composites, and processed goods may fall inside or outside scope depending on their precise classification.

Failing to claim carbon price adjustments. Importers can deduct carbon prices already paid in the country of origin, but must provide documentation including proof of payment, the applicable carbon pricing mechanism, and confirmation that no rebate was provided. Missing this deduction inflates costs unnecessarily.

Key Players

Regulatory Bodies

• European Commission (DG TAXUD) - Administers CBAM implementation, maintains the registry, and publishes default values and reporting templates.
• EU Member State Competent Authorities - National agencies responsible for registering authorized declarants and overseeing compliance within each member state.
• World Trade Organization (WTO) - Monitors CBAM for compatibility with international trade rules, particularly GATT Article III and XX exceptions.

Industry Associations

• EUROFER (European Steel Association) - Represents EU steel producers advocating for CBAM as a competitiveness tool.
• European Aluminium - Industry association coordinating the aluminium sector's response to CBAM requirements.
• CEMBUREAU (European Cement Association) - Provides sector-specific guidance on embedded emissions calculation for cement and clinker.

Advisory and Compliance Providers

• PwC - Offers CBAM compliance advisory services and digital reporting tools across multiple jurisdictions.
• Deloitte - Provides CBAM readiness assessments and supply chain emissions data collection frameworks.
• Sphera - Software platform for lifecycle assessment and CBAM emissions data management.

Watchdog Organizations

• Carbon Market Watch - Independent NGO monitoring CBAM implementation quality and advocating for stronger enforcement.
• E3G (Third Generation Environmentalism) - Think tank analyzing CBAM's effectiveness and its impact on climate diplomacy.

Real-World Examples

Tata Steel Europe

Tata Steel Europe, one of the largest steel producers operating both inside and outside the EU, illustrates the dual challenge CBAM creates. The company's IJmuiden plant in the Netherlands currently receives free EU ETS allowances that will phase out by 2034, while its Indian operations in Jamshedpur must now provide verified emissions data to EU-based customers importing Indian steel. In 2024, Tata Steel announced a EUR 3 billion investment to convert its IJmuiden blast furnaces to direct reduced iron using hydrogen, partly driven by the need to remain competitive as CBAM raises the cost of carbon-intensive imports. The company's experience highlights how CBAM incentivizes both domestic decarbonization and supply chain transparency.

Norsk Hydro (Aluminium)

Norwegian aluminium producer Norsk Hydro has positioned itself as a beneficiary of CBAM due to its low-carbon production profile. Approximately 70% of the electricity powering Hydro's smelters comes from hydroelectric sources, giving its primary aluminium a carbon intensity of roughly 4 tonnes CO2 per tonne, well below the global average of 12 to 16 tonnes CO2 per tonne. Under CBAM, importers sourcing from carbon-intensive producers in China or the Middle East (where coal-fired power dominates) will face substantially higher certificate costs than those purchasing from Hydro. The company reported in its 2024 annual report that customer inquiries about verified carbon data increased by 300% following the start of the CBAM transitional period, demonstrating how the mechanism is already shifting procurement decisions.

HeidelbergMaterials (Cement)

HeidelbergMaterials, the world's second-largest cement producer, operates plants across 50 countries and has invested heavily in carbon capture to reduce embedded emissions. In 2024, the company inaugurated a full-scale carbon capture and storage facility at its Brevik plant in Norway, designed to capture 400,000 tonnes of CO2 annually. For CBAM purposes, this technology allows HeidelbergMaterials to offer clinker with verified lower embedded emissions than competitors relying on conventional kiln processes. Turkish cement exporters, who supplied approximately 8 million tonnes to the EU in 2024 according to CEMBUREAU data, face a competitive disadvantage unless they invest in similar decarbonization measures or accept that CBAM certificate costs will erode their price competitiveness.

Action Checklist

• Identify all imports into the EU classified under CBAM-covered CN codes for iron, steel, aluminium, cement, fertilizers, electricity, and hydrogen
• Register as an authorized CBAM declarant with your national competent authority before the first 2026 import
• Contact every non-EU supplier of covered goods and request installation-level direct and indirect emissions data using European Commission templates
• Establish data-sharing agreements with suppliers that specify data formats, verification standards, and update frequencies
• Implement internal data management systems to link emissions data with customs declarations and purchase orders
• Model CBAM certificate costs under multiple EU ETS price scenarios (EUR 60, EUR 80, EUR 100 per tonne) to assess financial exposure
• Identify carbon prices already paid in countries of origin and gather documentation required to claim adjustments
• Engage an accredited verifier for the annual CBAM declaration at least three months before the May 31 submission deadline
• Build CBAM costs into procurement evaluations, comparing total landed cost (product price plus CBAM certificates) across suppliers with different carbon intensities
• Monitor European Commission updates on scope expansion, default value revisions, and bilateral agreements with trading partners

FAQ

Q: When do importers start paying for CBAM certificates? A: Financial obligations begin January 1, 2026. The first annual declaration covering 2026 imports must be submitted, and certificates surrendered, by May 31, 2027.

Q: How is the CBAM certificate price determined? A: The price is set weekly based on the average closing price of EU ETS allowances at auction. As of early 2026, this is approximately EUR 65 to EUR 70 per tonne of CO2.

Q: Can importers use default emission values instead of actual supplier data? A: Yes, but default values are set conservatively, typically at the 90th percentile of global production intensity. Using actual verified data from lower-carbon suppliers will result in significantly lower certificate costs.

Q: Does CBAM apply to goods transiting through the EU? A: No. CBAM applies only to goods released for free circulation in the EU customs territory. Goods in transit or under inward processing relief are excluded.

Q: What happens if an exporting country already has a carbon price? A: Importers can deduct the effective carbon price paid in the country of origin from their CBAM obligation. This requires documented proof that the price was actually paid and not rebated.

Q: Will CBAM expand to cover more products? A: The European Commission is mandated to review the scope by 2030, with potential expansion to organic chemicals, polymers, and downstream manufactured goods. The review will assess feasibility and impacts on competitiveness.

Sources

• European Commission. (2023). "Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism." Official Journal of the European Union. https://eur-lex.europa.eu/eli/reg/2023/956
• European Commission, DG TAXUD. (2025). "CBAM Transitional Period Report: Lessons Learned and Implementation Updates." https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
• Carbon Market Watch. (2025). "CBAM Implementation Tracker: Data Quality and Enforcement Gaps." https://carbonmarketwatch.org/publications/
• World Bank Group. (2024). "Carbon Border Adjustment Mechanisms: Economic Impacts on Developing Countries." Washington, DC. https://www.worldbank.org/en/topic/trade/publication/carbon-border-adjustment
• EUROFER. (2025). "European Steel in Figures 2025." Brussels. https://www.eurofer.eu/publications/
• Norsk Hydro. (2024). "Annual Report 2024: Climate and Environment." https://www.hydro.com/en/investors/reports/
• HeidelbergMaterials. (2024). "Sustainability Report 2024." https://www.heidelbergmaterials.com/en/sustainability
• CEMBUREAU. (2024). "Activity Report 2024: The European Cement Industry." https://www.cembureau.eu/