Carbon Border Adjustment Mechanism
CBAM
Definition
The Carbon Border Adjustment Mechanism (CBAM) — Regulation (EU) 2023/956 — requires importers of certain carbon-intensive goods to purchase CBAM certificates equivalent to the carbon price that would have been paid had the goods been produced under the EU Emissions Trading System (EU ETS). The definitive phase began on 1 January 2026; first certificate surrender is due 30 September 2027.
What CBAM covers
CBAM applies to imports of six product categories from non-EU countries:
- Cement
- Iron and steel
- Aluminium
- Fertilizers
- Electricity
- Hydrogen
These sectors were chosen because they are the most carbon-intensive and most exposed to carbon leakage — the risk that EU producers move production to countries with weaker carbon pricing.
How CBAM works
- Authorised CBAM Declarant status — importers must be registered. Deadline for existing importers was 31 March 2026.
- Annual CBAM Declaration — submitted by 31 May each year, covering the prior calendar year's imports and their embedded emissions
- Certificate purchase — CBAM certificates are priced weekly, tracking the EU ETS carbon price
- Certificate surrender — certificates surrendered by 30 September each year. First surrender covers 2026 imports (due 30 September 2027)
Importers can deduct carbon costs already paid in the country of production, preventing double-charging where third countries have their own carbon pricing.
The carbon emissions calculation
CBAM covers embedded emissions in imported goods:
- Direct emissions — process emissions from manufacturing
- Indirect emissions — electricity-related emissions (mandatory for cement and fertilizers; voluntary for other categories)
Emissions must be verified by an accredited third-party verifier. The methodology is product-specific and differs from Battery Regulation and ESPR Product Carbon Footprint (PCF) methodology — these are not interchangeable.
Small importer exemption: Importers with less than 50 tonnes/year total of all CBAM goods are exempt from Authorized Declarant requirements (Regulation (EU) 2025/2083).
Relevance to DPP
CBAM and DPP address overlapping data: both require carbon emissions data attached to specific products at the point of import. Companies building DPP infrastructure for iron, steel, or aluminium products will collect emissions data that overlaps substantially with CBAM reporting requirements — though the methodologies differ and the data cannot be directly interchanged without conversion.
Related terms
- Carbon Footprint — product-level emissions data relevant to both CBAM and DPP
- European Green Deal — the policy framework CBAM is part of
- ESPR — the product regulation with overlapping emissions data requirements