The European Union has introduced the Carbon Border Adjustment Mechanism (CBAM) to ensure that certain imported goods are subject to a carbon cost comparable to those produced within the EU under its Emissions Trading System (ETS). This is intended to discourage companies from moving production to countries with weaker climate policies to avoid carbon costs.

CBAM began with a transitional phase starting on 1 October 2023 and running through 31 December 2025. This phase focuses on emissions reporting only, without any financial obligations. From 1 January 2026, the full system takes effect, requiring the purchase of CBAM certificates based on the carbon content of imported goods.

Which goods are affected?

CBAM currently applies to high-emission product categories known as CBAM goods. These include cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. Most imports from non-EU countries are included, except those from countries linked to the EU ETS, such as Norway, Switzerland, and Iceland. Imports from the UK must be reported during the transitional period.

Who needs to comply?

The main businesses impacted by this are importers of CBAM goods into the EU. During the transitional phase, any importer, or one of their customs representatives must report emissions data for their shipments. From 2026 onwards, only authorised CBAM declarants will be allowed to import CBAM goods and will have added financial and compliance responsibilities.

Reporting obligations during the transitional period

From October 2023 to December 2025, importers must submit quarterly reports on the greenhouse gas emissions embedded in CBAM goods. These reports must include both direct and indirect emissions and are submitted through the CBAM Transitional Registry, an electronic platform set up by the European Commission. Access to this system is coordinated through national authorities.

To complete reports, importers need emissions data from non-EU producers. The EU provides a standard template to help gather this information, and foreign producers can also submit data directly through a dedicated section of the CBAM Registry. Reports are due within one month after each quarter ends, and corrections can be made within two months. If no CBAM goods were imported during a given quarter, no report is required. Late or missing reports may result in penalties.

Obligations in the definitive period (From 2026)

Once the definitive period begins, only authorised CBAM declarants will be permitted to import CBAM goods. Applications for authorisation started on 31 March 2025. For importers outside the EU, indirect customs representatives must apply. If an importer expects to exceed the annual 50-tonne threshold for CBAM goods, early registration is encouraged.

Each year, authorised CBAM declarants must submit a CBAM declaration (proposed deadline: 31 August) that details the embedded emissions of their imported goods. They must then purchase and surrender CBAM certificates that match these emissions. The certificate price is tied to the average weekly auction price of EU ETS allowances.

To manage compliance throughout the year, importers must ensure their CBAM Registry account holds at least 80% of the certificates needed for all imports made since January. This 80% requirement will not apply in 2026 to ease the initial burden. Records must be kept for four years after a CBAM declaration is submitted.

Where carbon costs have already been paid in the country of origin, importers can request a reduction in the number of certificates they are required to surrender. In most cases, emissions data must be verified by accredited third parties, unless the data comes from registered foreign installations.

The role of non-EU producers and verifiers

Installation operators in third countries can register in the CBAM Registry and make their verified emissions data available to EU importers. They can also disclose the carbon price already paid in their country. Accredited verifiers play a key role in reviewing emissions declarations submitted by EU importers and must also be registered in the system.

National competent authorities

Each EU Member State has a National Competent Authority (NCA) responsible for overseeing CBAM compliance. These authorities manage the authorisation process for declarants, monitor CBAM certificate transactions, and may revoke authorisation if conditions are not met. They are also in charge of penalty enforcement and revenue collection.

Proposed simplifications to CBAM

To reduce administrative burdens without weakening environmental impact, several simplifications have been proposed:

• A new 50-tonne annual import threshold would exempt about 90% of importers while still covering 99% of CBAM-related emissions. This replaces the existing per-consignment EUR 150 exemption.
• Importers may delegate technical reporting tasks to third parties while remaining legally responsible.
• Default carbon prices will be available when actual values are unavailable, and simplified emissions benchmarks will be used where needed.
• The reporting deadline is proposed to move from 31 May to 31 August, offering more time for compliance.
• Clarity is being added around registration rules for third-country operators, including privacy options for sensitive data.
• CBAM certificate sales are postponed to February 2027 to give importers more preparation time. These will cover 2026 emissions, with prices based on quarterly ETS averages.
• During the first year of implementation, the 80% certificate holding rule will be waived to support smoother onboarding.
• A more flexible penalty structure will consider whether violations were intentional or due to negligence.
• The definition of “importer” will be updated to include entities using simplified customs processes.

Preparing for what’s next

Importers should now review their supply chains to identify CBAM goods, start collecting emissions data, and determine whether they need to apply for authorised status. The success of CBAM compliance will depend on early preparation, transparent supplier relationships, and robust data reporting systems.