EU Carbon Border Adjustment Mechanism (CBAM)

This card focuses on the specific operational practice for the obligation to report embedded greenhouse gas emissions in imported goods under the EU Carbon Border Adjustment Mechanism (Regulation (EU) 2023/956, CBAM, including the simplification amending Regulation (EU) 2025/2083) — covering the quarterly reporting required during the transitional period (October 2023 to December 2025), and the annual CBAM declaration required from the start of the definitive period in January 2026. During the transitional period, importers of goods covered by CBAM (iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity) were only required to submit quarterly reports on embedded emissions, with no financial obligation attached. From January 1, 2026, the definitive period requires businesses importing more than 50 tonnes of CBAM goods per year to obtain "authorised CBAM declarant" status; without this status, a business may generally no longer import CBAM goods. The deadline for the annual CBAM declaration (covering total embedded emissions, the number of certificates surrendered, and related data) has been extended from the original May 31 to September 30 under the simplification amendment.

This card focuses on the specific operational practice for the purchase, holding, and surrender (settlement) of "CBAM certificates" under the CBAM Regulation (Regulation (EU) 2023/956, simplification amending Regulation (EU) 2025/2083). CBAM certificates are the mechanism for imposing on importers of CBAM goods a carbon cost equivalent to the EU ETS carbon price. While the charging basis on embedded emissions begins with the start of the definitive period in 2026, the actual obligation to purchase certificates has been pushed back by one year under the simplification amendment, beginning February 1, 2027 via the central platform. From 2027, importers must hold, at the end of each quarter, certificates covering at least 50% (originally 80%) of the emissions embedded in goods imported since the beginning of the year, easing the cash-flow burden on importers. The price of certificates purchased in 2027 (corresponding to 2026 imports) is based on the quarterly average EU ETS certificate price for 2026, after which the weekly average price applies.

This card focuses on the specific operational practice for the pricing methodology of CBAM certificates (Regulation (EU) 2023/956, simplification amending Regulation (EU) 2025/2083), and for the procedure by which a carbon price already paid in the country of origin of CBAM goods is deducted. The price of certificates purchased in 2027 (corresponding to 2026 imports) is based on the average EU ETS allowance price of the quarter in which the goods were imported (Article 21(1a)). Certificates purchased thereafter are priced based on the weekly average closing price of EU ETS auctions, with the European Commission calculating and publishing the price on a regular basis. Where a carbon price (such as a carbon tax or emissions trading system price) has already been paid in the country producing CBAM goods, that amount can be deducted from the number of certificates to be surrendered under the CBAM declaration where actual emissions are used (Article 9(1)); where default values are used, a deduction is possible only by reference to yearly default carbon prices (Article 9(4)). From 2027, the European Commission will also be able to determine and publish default carbon price levels and their calculation methodology in the registry for third countries that have their own carbon pricing systems.

This card focuses on the application conditions and limits for the 'default values' published by the European Commission under the EU Carbon Border Adjustment Mechanism (CBAM: Regulation (EU) 2023/956), and on the accuracy standards and third-party verification requirements for 'primary data' obtained from overseas suppliers. Under CBAM, where an importer cannot obtain reliable measured emissions data from an overseas manufacturing facility, the use of sector- and country-specific default values published by the European Commission is permitted as a fallback under certain conditions. Default values for full application (2026 onward) are set in Implementing Regulation (EU) 2025/2621 (corrected by Implementing Regulation (EU) 2026/1740 of July 20, 2026): the average emission intensity of each exporting country is increased by a mark-up (10% in 2026, 20% in 2027 and 30% from 2028 for cement, iron and steel, aluminium and hydrogen; 1% for fertilisers). Whether actual primary data, measured and verified in line with the EU's Monitoring, Reporting and Verification (MRV) rules, is available therefore largely determines the cost burden.

This card focuses on the calculation formulas for 'direct emissions' and 'indirect emissions' (such as electricity consumption) for the six sectors covered by the EU Carbon Border Adjustment Mechanism (CBAM: Regulation (EU) 2023/956) — steel, aluminum, cement, fertilizers, hydrogen, and electricity — together with the logic for determining the number of CBAM certificates an importer must purchase. Under the CBAM Regulation, operators importing covered goods into the EU are required to calculate the specific embedded emissions (tCO2e per tonne of product) generated in the manufacturing process, for both simple goods and complex goods. In the full application phase, from the calculated total embedded emissions, operators subtract any carbon price already paid in the country of production (such as a carbon tax or emissions trading price) and the equivalent portion of free allocation under the EU ETS for the relevant product; the resulting net figure determines the number of CBAM certificates that must be purchased and surrendered, priced in line with EU ETS allowance auction prices (for 2026, the average of the quarter of importation; from 2027, the weekly average).