The Carbon Border Adjustment Mechanism (CBAM) is one of the climate policies introduced by the European Union (EU). It reflects the EU's commitment to reducing greenhouse gas emissions while ensuring that its industries remain competitive.
CBAM aims to prevent carbon leakage, a phenomenon where companies relocate production to countries with weaker environmental regulations or import cheaper goods from such regions.
Chapter 2
CBAM's general principles
CBAM imposes a carbon price on imports of specific goods, aligning their cost with EU-produced goods under the Emissions Trading System (ETS). Importers must purchase CBAM certificates priced at the EU ETS weekly average auction rate (€/tonne of CO₂) to cover embedded emissions. If non-EU producers already paid a carbon price, importers can deduct this amount.
Phased Implementation
Transitional Phase (2023–2025)
Importers report direct and indirect emissions for covered goods (cement, steel, aluminium, fertilisers, electricity, hydrogen) without financial obligations.
Aims to refine methodologies and prepare stakeholders for full implementation.
Definitive Regime (2026 onward)
Gradually replaces free ETS allowances for EU industries, incentivizing decarbonization.
Scope expands to cover >50% of ETS-regulated sector emissions by 2030.
Chapter 3
Purpose & history
Chapter 4
Who is affected?
Historically, the EU addressed carbon leakage through free allocations under its Emissions Trading System (ETS). This approach was transitional and limited in scope, as it did not incentivize non-EU producers to adopt cleaner technologies.
CBAM represents a more comprehensive solution by imposing a carbon price on imported goods based on their embedded emissions.
CBAM has implications for multiple groups of stakeholders:
EU importers: Companies importing goods covered by CBAM must adapt to new reporting requirements during the transitional phase (2023–2025). From 2026 onward, they will need to purchase certificates based on their imports' embedded emissions.
Non-EU exporters: Producers outside the EU must provide detailed data on their production processes and emissions intensity. Those operating in countries with lower environmental standards may face higher costs unless they adopt cleaner technologies.
Global supply chains: CBAM encourages greater transparency across supply chains as businesses are incentivized to track emissions data rigorously.
For businesses operating in regulated sectors*, compliance with CBAM means adapting operations to meet reporting requirements and bearing additional costs associated with purchasing certificates.
*Regulated sectors are: iron & steel, cement, fertilizer, aluminium, hydrogen and electricity.
Chapter 5
The CBAM timeline
The transitional phase
The transitional period (October 2023–December 2025) allows businesses time to prepare for full implementation in 2026 when financial obligations begin. It also provides an opportunity for stakeholders to familiarize with reporting systems and compliance requirements.
During this phase:
Importers must submit quarterly reports detailing embedded emissions in their goods without financial penalties.
A centralized CBAM registry has been established for reporting purposes.
Methodologies for calculating embedded emissions are being refined to ensure accuracy and consistency across sectors.
The definitive phase
For businesses above the 50-tonne threshold, 2026 is the critical preparation year. Securing authorized declarant status by March, establishing verified emissions data channels, and preparing for certificate purchases in 2027 are essential priorities.
January 1, 2026
Definitive Phase begins with financial obligations
Importers must register as authorized CBAM declarants
March 31, 2026
Final deadline to apply for authorized declarant status
February 1, 2027
EU central certificate platform opens for CBAM certificate trading
September 30, 2027
First annual CBAM declaration and certificate surrender deadline
Mandatory certificate purchases begin (minimum 50% of year-to-date emissions)
Chapter 6
A CBAM software solution
Specialized CBAM software that automates emissions data collection, calculation, and reporting is the best way to prepare for CBAM regulations. It helps to streamline the process and additionally gives an advantage towards the competition.
100% Coverage
Improved supply chain coverage
100% Compliance
Streamlined CBAM compliance
100% Automation
Collection, calculations and reporting
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This guide not only provides insights into a digital CBAM solution, but also presents an integrated ESG suite designed to outperform industry standards.
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