CBAM: How the EU Carbon Border Mechanism Affects Importers and Producers

Purpose and Relationship with the EU ETS

EU producers in carbon-intensive sectors increasingly bear emissions costs under the EU ETS. If an equivalent product is imported from a jurisdiction without a comparable carbon price, production may shift while global emissions remain unchanged — this is carbon leakage. CBAM complements the EU ETS: the importer declares embedded emissions and surrenders corresponding certificates. The obligation increases gradually as free allowances for EU producers are reduced. A verified carbon price already paid in the country of production may be deducted.

Which Goods Are Covered and the 50-Tonne Threshold

At the start of the definitive regime (1 January 2026), CBAM covers cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen, together with specified precursors and downstream products. The precise CN code — not the commercial product name — determines legal scope. A single annual mass-based threshold of 50 tonnes applies to most goods; importers below this threshold do not require authorisation and do not incur CBAM financial obligations. Electricity and hydrogen are exceptions — authorisation is required regardless of mass.

Authorised Declarant and Embedded Emissions

Goods above the threshold may be imported only by an authorised CBAM declarant — the importer or, in specified cases, an indirect customs representative. Applications are submitted through the CBAM Registry to the competent Member State authority. Embedded emissions are associated with producing the imported goods; actual data normally require information from the non-EU installation operator. Contracts should cover data duties, methodology, timing, audit rights, and error responsibility. Without cooperation, the importer may have to use prescribed values that may be less favourable.

Reporting, Certificates, and Verification in the Definitive Regime

2026 is the first year of the definitive regime. Authorised declarants must submit the annual CBAM declaration for 2026 and surrender corresponding certificates by 30 September 2027. Certificate sales begin on 1 February 2027. Certificate prices are calculated using the quarterly average EU ETS auction price (from 2027: weekly average). From 2027, declarants must maintain a minimum quarterly certificate balance. Actual emissions must be calculated under CBAM rules and — where required — verified by an accredited verifier. Data should be reproducible and reconcile across producer documents, customs declarations, and the CBAM Registry.

Impact on Non-EU Producers and Common Mistakes

CBAM formally obliges the EU importer but changes expectations for exporters — producers need installation- and product-level emissions data prepared under EU methodology. A lower-carbon producer may gain a competitive advantage if it can reliably prove performance. Common mistakes: analysing goods by name without CN codes; treating the 50-tonne threshold as per product line rather than total; relying on a corporate carbon footprint instead of product-level emissions; failing to secure contractual data rights; mixing actual and standard values; submitting authorisation applications too late; and not reconciling customs and CBAM systems.