EU Carbon Border Adjustment Mechanism Overview and Details

The EU Carbon Border Adjustment Mechanism (CBAM) is a game-changer for the global carbon market. It's a mechanism that will allow the EU to charge a fee on imports of certain goods from countries outside the EU, based on the carbon content of those goods.

The CBAM will be implemented in two phases, with the first phase starting in 2023 and the second phase in 2026. This will give companies time to adjust to the new rules.

The CBAM will cover imports of certain goods, including steel, aluminum, cement, and fertilizers. The EU has chosen these sectors because they are significant emitters of greenhouse gases and are often produced using fossil fuels.

The revenue generated from the CBAM will be used to support the EU's climate goals and to help vulnerable countries adapt to the impacts of climate change.

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The EU Carbon Border Adjustment Mechanism (CBAM) is a system designed to level the playing field between producers in different countries. It's a tax applied to certain imported goods, based on the amount of carbon dioxide (CO2) emissions released during their production.

CBAM targets industries that are typically emissions-intensive and relatively easy to trade internationally, such as steel, aluminium, and cement. These are the industries that are most likely to be affected by the mechanism.

The CBAM is applied to so-called CBAM goods imported to the EU from outside the EU, and these goods are listed in Annex 1 to the CBAM Regulation by their CN code. The following goods are included: certain iron and steel goods, certain fertilisers, certain aluminium goods, certain cement goods, hydrogen, and electricity.

The mechanism is part of the EU's "Fit for 55" Package, and its objective is for the prices of certain goods imported to the EU to reflect more accurately their carbon content. This is meant to encourage third countries, foreign producers, and EU importers to reduce their emissions.

CBAM works on the basis that climate laws and standards in some nations – usually those in the global north – are tighter than those found elsewhere. This means that the producer of a particular emissions-intensive product might have to pay a domestic carbon price, whereas an overseas competitor might not.

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The CBAM has commenced in its transitional phase as of 1 October 2023, and only reporting obligations arise during the Transitional Period (1 October 2023 to 31 December 2025). Further guidance on the Definitive phase will be made available in due course.

Here are the CBAM goods that are included in the mechanism:

The EU Carbon Border Adjustment Mechanism (CBAM) is a new EU instrument aimed at preventing carbon leakage, which is the shifting of production to non-EU countries with lower or no carbon costs.

The CBAM applies to certain imported goods, including iron and steel goods, fertilisers, aluminium goods, cement goods, hydrogen, and electricity. These goods are listed in Annex 1 of the CBAM Regulation by their CN code.

The CBAM has commenced in its transitional phase as of 1 October 2023, with only reporting obligations arising during this period. The transitional period will last until 31 December 2025.

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Companies importing CBAM-covered goods into the EU will have to declare them in quarterly reports during the transitional period. This list is expected to expand to cover sectors such as ceramics and paper in the future.

CBAM certificates will be introduced in the full compliance phase, starting from 1 January 2026. Companies will have to purchase enough certificates to cover their associated emissions, with the cost of these certificates being the same as the EU ETS market price.

Here are the initial CBAM-covered sectors:

The EU Carbon Border Adjustment Mechanism (CBAM) is a complex system, but it's essential to understand how it affects different sectors. The Commission organized online webinars to provide sectoral information on the CBAM.

The CBAM will initially cover sectors such as cement, iron, steel, aluminium, fertilizers, and hydrogen, as well as electricity transmitted from other countries. These sectors are deemed "at most significant risk of carbon leakage" by the EU.

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The CBAM will expand to cover additional sectors, including ceramics and paper, following further assessments by the EU. This will ensure that all relevant sectors are included in the mechanism.

Companies in these sectors will need to report their emissions in quarterly reports, starting from October 2023 to the end of 2025. The reporting periods are as follows:

The CBAM will eventually cover more than half of the emissions covered by the EU ETS overall, making it a crucial tool in reducing carbon emissions.

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The EU's work on the Carbon Border Adjustment Mechanism (CBAM) is a significant step towards reducing carbon emissions and promoting cleaner industrial production. The CBAM has commenced in its transitional phase as of 1 October 2023, with only reporting obligations arising during the Transitional Period (1 October 2023 to 31 December 2025).

The EU has identified certain goods as being at most significant risk of carbon leakage, including cement, iron, steel, aluminium, fertilisers, and hydrogen, as well as electricity transmitted from other countries. These products are listed in Annex 1 to the CBAM Regulation by their CN code.

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CBAM goods are subject to quarterly reporting, with companies declaring them in quarterly reports. This list is expected to expand, following further assessments by the EU, to cover sectors such as ceramics and paper.

The full compliance phase of the CBAM will begin from the start of 2026, where companies bringing CBAM-covered goods into the EU will have to purchase enough CBAM certificates to cover their associated emissions. The cost of these certificates will be the same as the EU ETS market price.

Initially, exporters in relevant sectors will only have to buy certificates equivalent to 2.5% of the emissions associated with producing their goods. This obligation will rise to 100% by 2034, in line with the removal of free allowances for EU industries.

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The EU Carbon Border Adjustment Mechanism (CBAM) has brought about significant changes in the way goods are imported into the EU. Since July 2024, the EU demands "real data" on how energy-intensive imported goods were produced, while estimated standard values are only allowed for some 20% of the emissions.

Importers must apply for the status of authorised CBAM declarant to continue importing CBAM goods into Ireland from 1 January 2026. Importers who have imported over 50 tonnes of CBAM goods in 2023 and 2024, or expect to exceed this threshold in 2026, should apply for authorisation via the Authorisation Management Module (AMM).

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The CBAM regulation is a new carbon pricing system designed to help the EU fight climate change. It's a targeted approach that addresses a significant issue.

The CBAM applies to goods produced outside the EU, excluding Iceland, Norway, Liechtenstein, and Switzerland. This is a deliberate choice to prevent carbon leakage, where companies move production to countries with less stringent emissions policies.

The CBAM won't set caps on imports or emissions, at least not in its initial form. This is a distinct difference from the EU Emissions Trading System, which uses a 'cap-and-trade' system.

Since July 2024, the EU demands real data on how energy-intensive imported goods were produced, while estimated standard values are only allowed for some 20% of the emissions.

The required data are often not available, either because the suppliers don't collect them in the first place or are not willing to hand them over. This makes it difficult for importers to comply with the CBAM regulations.

Every importer can be held accountable for the data they collect from their suppliers, but often lack the resources to control them all, or the influence to force the suppliers to comply with the CBAM regulations.

The de minimis rule exempts imports up to €150 from CBAM, but VDMA representatives campaign to raise that to €5,000.

National offices which are meant to help companies with problems to obtain accurate data, were often not functional yet. This adds to the challenges faced by importers in complying with the CBAM regulations.

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Importers who have imported in excess of 50 tonnes of CBAM goods in 2023 and 2024, or expect to exceed this threshold in 2026, should apply for authorisation via the Authorisation Management Module (AMM).

Businesses can be fined up to €50/tonne of CO2 imported and released into circulation in the EU for not reporting or not reporting according to the right standard during the CBAM transitional period.

The most common reason for fines being levied will be over-reliance on default values. This highlights the importance of accurate data collection and reporting.

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In 2025, declarants are required to apply for authorised CBAM declarant status to continue importing CBAM goods into Ireland from 1st January 2026.

The EU Implementing Regulation underpinning the authorisation process was adopted on 17 March 2025 and entered into force on 28 March 2025.

The Authorisation Management Module (AMM) was made operational on 31 March 2025.

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To become an Authorised CBAM Declarant, declarants must apply in 2025, as required by Article 5 of Regulation (EU) 2023/956.

In Ireland, the EPA is the National Competent Authority and Revenue (Customs Division) is the Customs Authority for this regulation, and both authorities have contacted importers who may have obligations under this regulation.

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The EU Carbon Border Adjustment Mechanism (CBAM) has a transitional period that started on 1 October 2023 and ends on 1 January 2026. During this time, emissions reporting is required without financial adjustment.

Businesses can be fined up to €50/tonne of CO2 imported and released into circulation in the EU for not reporting or reporting incorrectly. The most common reason for fines will be over-reliance on default values.

The transitional period is divided into two sub-periods: the transitional phase (1 October 2023 to 1 January 2025) and the definitive period (1 January 2025 to 1 January 2026). Here's a breakdown of what to expect during each:

As of 1 January 2025, only the EU method for reporting greenhouse gas emissions will be accepted for imported goods.

Businesses will face fines for not declaring emissions or under-declaring them, with exact fines to be determined but ranging from €10-50 per tonne of carbon dioxide equivalent not declared or under-declared.

During the transition period, importers can declare using default values until July 2024, but after that, primary data will be needed to avoid fines. For up to 20% of precursor emissions, default values can still be used.

Businesses selling to customers in the European Union will have to calculate their CBAM Certificate requirements and plan to mitigate, swallow, or pass on the costs to their customers.

Here's a summary of the CBAM's business implications:

During the CBAM definitive period, businesses will need to get familiar with a new system of purchasing certificates based on the carbon they import into the EU. This system will be based on the EU ETS benchmarks to compare the carbon intensity of materials imported compared to the top 10% of lowest-carbon facilities in Europe.

Businesses will have to account for the difference in carbon intensity via a taxation system. This means they'll need to calculate the amount of carbon they're importing and purchase certificates accordingly.

To avoid fines, businesses will need to accurately declare their emissions. The fines for not declaring or under-declaring emissions will be between €10-50 per tonne of carbon dioxide equivalent not declared or under-declared.

Here's a breakdown of the key actions businesses will need to take during the definitive period:

The Carbon Border Adjustment Mechanism (CBAM) is a new regulation that's been implemented in the European Union, and it's got some significant implications for businesses that import goods from outside the EU.

CBAM applies to all importers of CBAM goods, where the total intrinsic value of the goods within the consignment exceeds €150. This includes imports of goods ordered online and gifts.

If you're an importer, you'll need to declare your emissions, and failure to do so will result in fines. The exact fines are still to be determined, but they'll be between €10-50 per tonne of carbon dioxide equivalent not declared or under-declared.

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During the transition period, which lasts until 1 January 2026, importers can declare using default values, but after July 2024, primary data will be needed to avoid fines.

Here are some key deadlines to keep in mind:

CBAM will be a tax on the goods you sell to customers in the European Union, so you'll need to calculate your CBAM Certificate requirements and plan to mitigate, swallow, or pass them on to your customers.

If you're unsure whether your business is subject to CBAM, check the TARIC database to see if your CN Code falls under the scope of CBAM obligations.

To facilitate reporting and communications, the European Commission has developed an IT system for the transitional period, called the CBAM Transitional Registry. This system is accessible to reporting declarants and all competent authorities in the EU.

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The EU Carbon Border Adjustment Mechanism has sparked a range of reactions from countries around the world.

The European Union's decision to implement a carbon border adjustment mechanism has been welcomed by the United States, which has been working on its own carbon pricing policies. The US has expressed interest in similar measures to address carbon leakage.

Some countries, however, have expressed concerns about the potential impact on their industries and trade relationships with the EU. The European Commission has acknowledged these concerns and is working to establish a fair and transparent system.

The European Commission has announced plans to introduce a new measure to address the risk of carbon leakage for EU-produced goods produced in CBAM sectors.

A public consultation on the scope extension to specific downstream products, anti-circumvention measures and rules for the electricity sector is currently ongoing.

The Commission launched a call for evidence on 28 August 2025 to gather opinions from stakeholders on rules related to CBAM goods.

Importers of CBAM goods are urged to apply for the status of authorised CBAM declarants as soon as possible to submit their CBAM application.

The CBAM definitive period will start on 1 January 2026, and the Authorisation Management Module section should be read carefully to follow the instructions.

The amended Regulation simplifying and strengthening the CBAM has been published in the Official Journal of the European Union.

A provisional political agreement was reached between the European Parliament and the Council on the Commission proposal to simplify and strengthen the EU's carbon border adjustment mechanism (CBAM).

The European Union's approach to carbon border adjustment mechanisms (CBAM) has sparked reactions from developing countries. The EU is committed to supporting developing countries and Least Developed Countries (LDCs) in implementing the CBAM.

Developing countries are calling for adequate support to help them comply with the CBAM, which could include technical assistance, capacity building, or financial incentives for investments in low-carbon technologies. This support is crucial for businesses in these countries to transition to a low-carbon economy.

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According to an Amsterdam legal scholar, the EU should provide adequate support to the LDCs to help them comply with the CBAM. The transition to a low-carbon economy requires technology and investment, which may require investment in countries in the Global South.

Proposed solutions include technology transfer and green finance to help developing countries transition to a low-carbon economy. By providing such support, the EU can ensure that businesses have the necessary resources and knowledge to avoid the risk of carbon leakage.

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The UK CBAM differs from the EU CBAM in a few key ways. The UK CBAM comes into force one year after the EU CBAM.

One notable difference is the lack of a transition period in the UK CBAM. This means that the UK will not have a gradual phase-in period like the EU.

The UK CBAM also has a higher de minimis than the EU CBAM. This is worth noting for businesses that need to comply with these regulations.

The UK CBAM is a distinct entity from the EU CBAM, reflecting the UK's separate approach to climate change policy.

The EU Carbon Border Adjustment Mechanism (CBAM) applies to certain imported goods from outside the EU, specifically those listed in Annex 1 to the CBAM Regulation by their CN code.

CBAM goods include iron and steel goods, such as screws, bolts, and washers, as well as iron ore, certain fertilizers, aluminium goods, cement goods, hydrogen, and electricity.

The mechanism is part of the EU's "Fit for 55" Package and aims to prevent carbon leakage by making the prices of imported goods reflect their carbon content more accurately.

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The EU's carbon border adjustment mechanism (CBAM) aims to level the playing field between producers in different countries by applying an equivalent charge at the border for imported goods.

This mechanism is meant to target industries that are typically emissions-intensive and relatively easy to trade internationally, such as steel, aluminium, and cement.

A CBAM works on the basis that climate laws and standards in some nations are tighter than those found elsewhere, which can give producers in those countries an unfair advantage.

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The EU's CBAM is not yet proposed to apply to a wide range of other products or services, such as automobiles, clothing, food, and animal products.

The mechanism is meant to encourage cleaner industrial production in the nations it imports goods from, but critics say it's more to do with economic protectionism.

The EU frames its CBAM as a means of placing a "fair price" on emissions bound up in imported goods, but a report by the Asian Development Bank suggests it will only reduce emissions a little and harm import to the European Union.

A CBAM is a tax applied to certain imported goods, based on the amount of carbon dioxide (CO2) emissions released during their production.

The EU Carbon Border Adjustment Mechanism (CBAM) applies to certain imported goods, specifically those that are high-emitting and relatively easy to trade internationally.

CBAM goods are listed in Annex 1 to the CBAM Regulation by their CN code, which includes products such as iron and steel goods, fertilizers, aluminum goods, cement goods, hydrogen, and electricity.

Here are some of the specific goods that are applicable under CBAM:

These goods are considered emissions-intensive and are subject to the CBAM's carbon pricing mechanism, which aims to level the playing field between producers in different countries.

The EU's Carbon Border Adjustment Mechanism (CBAM) needs to be compatible with its international obligations under the World Trade Organization (WTO). This means it should not discriminate against any particular country.

The EU should engage in constructive dialogue with its trading partners, including major emitters like China and the United States, to ensure the CBAM is consistent with global climate goals.

Border adjustments for imports but not for exports can lead to reduced global competitiveness for domestic carbon-intensive products.

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