The EU Carbon Border Adjustment Mechanism (CBAM): An Essential Guide for Businesses
What is the Carbon Border Adjustment Mechanism (CBAM)?
The Carbon Border Adjustment Mechanism (CBAM) is the European Union’s flagship policy designed to address carbon leakage by placing a carbon price on certain imported goods.Implemented to support the EU’s climate goals, CBAM ensures that products imported into the EU are subject to the same carbon pricing as those produced within its borders.
Why was the EU CBAM introduced?
As a key part of the European Green Deal, CBAM aligns with the EU’s ambition to become climate-neutral by 2050.
Carbon leakage occurs when businesses transfer production to countries with less stringent climate policies, undermining global climate efforts. By adjusting the cost of carbon emissions at the border, CBAM aims to:
- Create a level playing field for EU and non-EU companies
- Incentivise greener production in exporting countries
- Protect the competitiveness of EU industries
CBAM’s introduction follows similar policy discussions worldwide, and it will likely shape the future of global carbon taxation.
💡Link to future reading: Striving to become the world’s first climate-neutral continent by 2050.
Key deadlines and phases of the EU CBAM implementation
CBAM implementation is phased:
- 2023-2025: Transitional period where reporting begins, but payments are not yet required. Importers must submit emission reports, preparing companies for the full CBAM framework
- 2026 Onwards: Full implementation starts, requiring purchase and surrender of CBAM certificates based on calculated emissions
💡The UK has introduced a similar CBAM, and Norway has announced that they will be joining EU’s CBAM
Which goods are covered by CBAM?
Initially, CBAM applies to carbon-intensive sectors where the risk of carbon leakage is highest.
The initial sectors affected include:
- Cement
- Iron and steel
- Aluminum
- Fertilizers
- Electricity
- Hydrogen
Over time, the EU plans to broaden the scope, potentially including additional industries. Companies in these sectors exporting to the EU must report and account for the embedded carbon emissions of their products.
💡The UK CBAM impacts many of the same industries as the EU CBAM, while also extending to others
How does CBAM work?
CBAM operates by assigning a carbon price to imports from non-EU countries based on the carbon content of their goods:
- Carbon Emissions Calculation: Exporters must report the greenhouse gas (GHG) emissions associated with their products
- Certificates for Compliance: Importers purchase CBAM certificates, the price of which aligns with the EU Emissions Trading System (ETS)
- Adjusting for Existing Carbon Costs: If the exporter’s country has a carbon pricing mechanism, CBAM adjustments may reduce or exempt charges to avoid double taxation
Importers are responsible for submitting annual CBAM declarations, ensuring accurate tracking and reporting.
Guide: Mastering CBAM Compliance
Download our CBAM guide, and learn more about:
- Clear explanations of CBAM regulations, timelines, and how they vary between the EU, UK, and Norway
- Practical steps to prepare your business, from supply chain reviews to tools that simplify compliance
- The importance of customs data for CBAM compliance and reporting
How can Emma E-Doc support your CBAM compliance?
Emma E-Doc enables fast and accurate identification of country of origin and tariff numbers; customs data essential for CBAM reporting!
While Emma E-Doc does not handle CBAM reporting directly, it is a customs compliance platform that consolidates all customs data, helping companies:
- Analyse and verify customs information from customs brokers and agents
- Identify CBAM-relevant imports to streamline data management for compliance purposes
- Reduce the risk of errors in customs declarations and ensure accuracy in tracking CBAM-affected goods
Emma E-Doc also offers customisable alerts and dashboards for specific tariff numbers, countries of origin, or other customs data related to CBAM as well as other regulations related to your business.
While CBAM regulations themselves can’t be eased, using the right tools can make managing them much simpler!
Let Emma E-Doc simplify your work
Book a personalised demo to see how Emma E-Doc aligns with your unique needs
Frequently asked questions about CBAM
The Carbon Border Adjustment Mechanism (CBAM) is the European Union’s flagship policy designed to address carbon leakage by placing a carbon price on certain imported goods.Implemented to support the EU’s climate goals, CBAM ensures that products imported into the EU are subject to the same carbon pricing as those produced within its borders.
The EU CBAM initially covers the following goods: Cement, Iron and steel, Aluminum, Fertilizers, Electricity, Hydrogen.
The UK CBAM impacts many of the same industries as the EU CBAM, while also extending to others such as Ceramic and Glass.
Initially, CBAM targets carbon-intensive sectors, but the EU may expand its scope to include more industries in the future.
The EU CBAM implementation is phased:
2023-2025: Transitional period where reporting begins, but payments are not yet required. Importers must submit emission reports, preparing companies for the full CBAM framework
2026 Onwards: Full implementation starts, requiring purchase and surrender of CBAM certificates based on calculated emissions
Since July 2024, UK exporters have been required to report the embedded emissions in products sent to the EU.
As the UK is no longer part of the EU, goods exported from the UK to the EU are treated as third-country imports. UK exporters must comply with CBAM requirements, such as providing emissions data for specific products. Additionally, UK importers bringing goods into the UK are not subject to the EU CBAM but may need to prepare for a similar mechanism as the UK government plans to implement its own carbon border policy.
Norway is not directly affected by the EU CBAM for its domestic products, as they are exempt due to Norway’s alignment with EU climate policies through the EEA agreement. However, Norwegian companies importing goods from third countries may need to comply with CBAM rules for those imports.
Norway has announced that they will be joining EU’s CBAM from 2026.
Suggestions for further reading
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