What is EU CBAM? Regulation, scope and EU ETS explained

CBAM in one minute

CBAM is the EU system for applying an EU-ETS-linked carbon price to emissions embedded in certain goods imported into the EU customs territory. It is based on the goods' CN classification, origin, quantity, embedded emissions, and the regulated actor responsible for the imports — not simply on a commercial product name or supplier location.

For an importer, the safe starting point is to separate four questions: are the goods in current scope, does the annual mass threshold apply, who holds authorised CBAM declarant status, and which emissions method and evidence support the eventual declaration.

Why does CBAM exist?

EU producers of emission-intensive goods pay a carbon price under the EU Emissions Trading System (EU ETS). Without a border mechanism, production could shift to countries with no equivalent carbon cost, and imports could undercut EU-made goods — an effect known as carbon leakage.

CBAM addresses this by putting an equivalent carbon price on the same goods when they enter the EU customs territory. The aim is that a tonne of steel faces a comparable carbon cost whether it is produced in the EU or imported.

How do CBAM and the EU ETS differ?

CBAM and the EU ETS share the objective of pricing greenhouse-gas emissions in corresponding sectors, but they apply at different points in the supply chain. The EU ETS applies to covered EU installations and activities; CBAM applies at the border to covered imports (Regulation (EU) 2023/956).

For an importer, the practical connection is the certificate price: CBAM certificate prices are derived from EU ETS allowance prices. That link does not make the two systems interchangeable or turn an EU ETS allowance into a CBAM certificate.

• Coverage: the EU ETS covers specified EU installations and activities; CBAM covers goods listed in Annex I when they are imported into the EU customs territory.
• Regulated unit: EU ETS operators surrender allowances; authorised CBAM declarants surrender CBAM certificates for emissions embedded in covered imports.
• Price connection: CBAM certificate prices are calculated from EU ETS allowance auction prices under the CBAM rules.
• Phase-in connection: CBAM phases in as free allocation under the EU ETS is phased out for corresponding production.

What changed between transitional reporting and the definitive period?

CBAM did not move from zero to a full annual certificate cycle on 1 January 2026. The transitional period gathered emissions reports without certificate purchases, while the definitive period adds authorisation, annual declarations, certificate liability, and the phase-in linked to EU ETS free allocation.

Which goods does CBAM cover?

CBAM applies to goods listed by CN code in Annex I of Regulation (EU) 2023/956, across six sectors: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. The list also includes certain precursors and some downstream products, such as screws and bolts.

Whether a specific product is covered depends on the CN code it is declared under — not on how the product is described commercially.

Which imports are in current CBAM scope?

Current scope is a combination of the Annex I goods list, non-preferential origin, the act of importation into the EU customs territory, and any applicable exemption. Commercial labels and six-sector summaries are useful orientation, but the legal goods list is expressed through CN codes.

The de-minimis rule covers 50 tonnes of cumulative net mass across the relevant CN codes per importer and per calendar year. If that threshold is exceeded, the obligations apply to all emissions embedded in all covered goods imported in that calendar year. The mass-based exemption does not apply to electricity or hydrogen.

Who does what under CBAM?

CBAM connects customs, procurement, supplier data, emissions calculation, independent verification, and an annual declaration. Keeping the actors separate prevents a supplier estimate, adviser review, or software output from being mistaken for the authorised declarant's official submission.

How does CBAM work from import to annual surrender?

The definitive-period workflow is annual, but the evidence starts at each import. A practical operating sequence is:

• 1. Classify and record the goods: retain the declared CN code, origin, customs procedure, quantity, net mass, and import date.
• 2. Maintain the annual threshold position: aggregate the relevant net mass per importer across the calendar year and keep electricity and hydrogen outside the mass-based exemption test.
• 3. Confirm the responsible actor: establish which EU person holds authorised CBAM declarant status for the imports and how any indirect representative is involved.
• 4. Organise the emissions basis: request installation and production data, then document whether the declaration will use actual emissions or official default values for each relevant goods line.
• 5. Track certificate inputs: retain the official price for the import period, the applicable free-allocation adjustment, and evidence of any carbon price effectively paid in a third country.
• 6. Prepare and review the annual declaration: reconcile customs quantities, embedded emissions, certificate calculations, reductions, and verification reports where actual emissions are used.
• 7. Submit and surrender through the official system: for 2026 imports, the first annual declaration and certificate surrender fall on 30 September 2027. From 2027, the separate quarter-end holding rule also applies.

How are embedded emissions determined?

Embedded emissions cover direct emissions and, where the regulation requires it for the goods, indirect emissions from electricity used in production. Complex goods can also carry emissions from relevant precursors. The calculation boundary therefore depends on the exact goods and method, not a generic sector average.

For goods other than electricity, the amended regulation provides routes based on actual emissions and official default values. Actual emissions come from primary production data; where actual emissions are declared, the total declared embedded emissions require verification by an accredited verifier. Definitive default values are set by Implementing Regulation (EU) 2025/2621 and were corrected by Implementing Regulation (EU) 2026/1740.

How do certificates, prices, and deductions fit together?

One CBAM certificate is an electronic certificate corresponding to one tonne of CO2e of embedded emissions. The final number to surrender is not simply imported tonnes multiplied by a market price: it starts with embedded emissions and then reflects the carbon price paid in a third country and the adjustment for EU ETS free allocation.

Certificate prices follow EU ETS allowance auctions. For emissions embedded in goods imported during 2026, the applicable certificate price is the quarterly average for the quarter of import. From 2027, the Commission calculates and publishes weekly prices. Certificates first go on sale on 1 February 2027.

What goes into the annual CBAM declaration?

Article 6 of the consolidated regulation separates the declaration into traceable inputs. The authorised declarant reports the total quantity of each type of goods, total embedded emissions, and the number of certificates to surrender after the carbon-price reduction and free-allocation adjustment. Where actual emissions are used, the relevant verification reports accompany the declaration.

That makes reconciliation an operational control: customs quantities, emissions records, certificate calculations, carbon-price evidence, and verification documents need to describe the same goods and calendar year. A preparation workbook or adviser review can help organise that evidence, but the authorised declarant remains responsible for the official declaration.

What happens if required CBAM steps are missed?

Where the authorisation requirement applies, customs controls whether the importer is an authorised CBAM declarant before release for free circulation. The Commission reviews declarations and communicates preliminary calculations to the National Competent Authority where a declaration appears incorrect or incomplete; the authority can then determine and notify a correction, giving reasons and information about appeal rights.

The regulation also provides penalties for failing to surrender the required certificates and for introducing covered goods without meeting the authorised-declarant requirement. Paying a failure-to-surrender penalty does not remove the duty to surrender the outstanding certificates. This article intentionally does not quote a monetary penalty: the applicable amount and process require current-law and case-specific review.

A synthetic importer example

Consider a fictional EU company importing steel fasteners from a non-exempt third country. Its customs records use a code that the company checks against current Annex I scope. This example illustrates the workflow only; it does not decide classification or liability for a real product.

• By September, the importer has recorded 48 tonnes of relevant goods. A 4-tonne October shipment takes cumulative net mass to 52 tonnes, above the current 50-tonne threshold.
• Because the threshold is annual, the team revisits all covered goods imported by that legal importer during the year rather than treating only the October shipment as relevant.
• The importer and its indirect representative confirm which EU person is the authorised CBAM declarant for the transactions.
• The supplier provides installation, production-route, precursor, quantity, and emissions information. The team records the data as supplier-reported until the actual-based total is supported by the required accredited-verifier report.
• For each 2026 import quarter, the team records the Commission's official quarterly certificate price and any evidence of a carbon price effectively paid. It does not purchase 2026 certificates during 2026 because sales start in 2027.
• The authorised declarant reconciles the 2026 quantities, embedded emissions, reductions, adjustment, and verification evidence for the declaration and surrender due on 30 September 2027.

What should an importer keep as evidence?

A useful evidence file is organised around each import line and the legal importer, then reconciled to the annual declaration. The supplier data request can start the collection process, but the returned material still needs source, method, period, and review context.

• Customs evidence: declaration reference, date, customs procedure, CN code, product description, non-preferential origin, quantity, and net mass.
• Actor evidence: legal importer, indirect-representative arrangement, authorised-declarant status, National Competent Authority correspondence, and internal owner.
• Production evidence: supplier and installation identity, reporting period, production route, quantities, relevant precursors, system boundary, and calculation method.
• Emissions evidence: actual-data records or the exact official-default source row, units, greenhouse gases, assumptions, and version/effective date.
• Verification evidence: the accredited-verifier report where actual emissions support the declaration; keep supplier statements distinct from verified information.
• Financial evidence: official certificate prices, free-allocation adjustment basis, carbon price effectively paid, rebates or compensation, and supporting payment records.
• Review trail: reconciliations, corrections, unresolved gaps, decisions, source links, and the records retained for the regulation's required period.

Is CBAM expanding?Proposal — not law

The European Commission has proposed extending CBAM to further downstream products from 1 January 2028 (COM(2025)989).

This reflects a legislative proposal (e.g. COM(2025)989) that has not been adopted. Scope, product lists, and dates may change or may not enter into force.

What CBAM does not decide for you

A broad explainer cannot determine the correct customs classification, origin, exemption, responsible declarant, emissions method, evidence sufficiency, carbon-price deduction, or final certificate number for a specific transaction. Those conclusions depend on current law, official systems, the facts, and the competent actors.

CBAM Pulse supports preparation: checking reviewed scope data, structuring supplier questions and evidence references, tracking official prices and dates, and making assumptions visible. It is not an official EU service, does not connect to the CBAM Registry, does not verify emissions, and does not submit or approve a declaration.

What should an importer check first?

Understanding the regulation is only the starting point. Use this sequence to turn the explainer into a bounded preparation task:

• 1. Export the current-year import lines for the legal importer.
• 2. Confirm the declared CN codes and non-preferential origin with the people responsible for customs classification.
• 3. Check current Annex I scope and maintain the cumulative net-mass threshold position.
• 4. Confirm who holds or needs authorised CBAM declarant status for the import arrangement.
• 5. Map each covered goods line to a supplier, installation, production route, emissions method, and evidence owner.
• 6. Record official price, free-allocation, carbon-price, verification, and declaration dependencies without treating an estimate as the official result.
• 7. Put unresolved classification, source, method, and evidence questions into a dated readiness list for qualified review.