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CBAM - Frequently Asked Questions Answered (FAQ)

Shubhra Dixit

Jul 7, 2025 8:23:00 AM

CBAM - Frequently Asked Questions Answered (FAQ)

📌This article, written by ESG researcher Shubhra Dixit, is a FAQ that answers the most frequently asked questions about the EU’s Carbon Border Adjustment Mechanism, explaining what it is, which products are covered, key timelines, reporting obligations, and how importers can prepare for compliance from 2026 onward.

What is CBAM?

CBAM is the EU system that applies an EU-equivalent carbon price to certain imported goods to prevent carbon leakage and support industrial decarbonization. CBAM stands for Carbon Border Adjustment Mechanism.

What is carbon leakage?

Carbon leakage happens when industries transfer production to countries with weaker climate policies, causing global greenhouse gas emissions to rise. The EU’s CBAM addresses this risk by applying carbon pricing to imports, preventing relocation and promoting fair competition.

Which products are covered under CBAM?

CBAM currently covers cement, iron & steel, aluminum, fertilizers, electricity and hydrogen (plus some precursors and limited downstream goods).

What’s the timeline for CBAM?

Transitional phase (report-only): 1 Oct 2023 - 31 Dec 2025

importers submit quarterly CBAM reports, no certificates or payments

Definitive phase (with certificates): from 1 Jan 2026

CBAM becomes fully operational with annual declarations and certificates (details set by implementing acts; watch updates)

What do you as an importer do during the transitional phase?

You file quarterly CBAM reports in the CBAM Transitional Registry showing how much you imported into the EU and the embedded emissions: no certificates or payments yet.

Starting 2026, what new CBAM obligations apply?

From 1 Jan 2026, you (as an authorized CBAM declarant) will submit an annual CBAM declaration and surrender CBAM certificates for the verified embedded emissions of your imports. If a carbon price was already paid abroad, you can deduct it.

When will certificates be purchased/surrendered for 2026 imports?

The system goes live on 1 Jan 2026. An EU proposal under discussion would open certificate sales for 2026 imports in Feb 2027, with surrender by 31 Aug 2027, so you should plan budgets and timelines accordingly and watch for final adoption.

Do you need to be “authorized” now?

Not yet. During the transitional phase you only report. But from 2026, you’ll need to be an authorized CBAM declarant to import CBAM goods.

Are some countries excluded?

CBAM applies by product, not by country. Where a carbon price is effectively paid in a third country, a deduction may apply in the CBAM calculation. Linkage to the EU ETS could affect treatment, so monitor official updates.

What are the penalties if I don’t report correctly (transitional phase)?

Member States may apply penalties around €10 - €50 per tonne of unreported emissions during the transitional phase. Stricter penalties will apply in the definitive phase for failure to surrender certificates.

Where and how do I report?

Via the CBAM Transitional Registry (for quarterly reports in 2023–2025) and, from 2026, via the definitive CBAM systems, which is underway in several member states.

What can you do now to prepare for CBAM?

If you are an importer established in a Member State, importing 50t or more of CBAM goods per calendar year, you must apply for the status of Authorised CBAM Declarant now to continue importing CBAM goods into EU from 1st January 2026.

In addition to applying for the status of Authorised CBAM Declarant, you must also register as a reporting declarant (or appoint an indirect customs representative) and file your quarterly reports via the Transitional Registry.

Where can I find more documentation and support?

European Commission CBAM Portal — the primary and most authoritative source for CBAM updates, official communications, and implementation details taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism