Summary
Details
- European Union
CBAM applies to EU importers (declarants) importing CBAM-covered goods into the EU, including:
- Cement
- Iron and steel
- Aluminium
- Fertilisers
- Electricity
- Hydrogen
From 1 January 2026 (definitive phase), in-scope importers must generally be authorised as CBAM declarants and buy/surrender CBAM certificates based on embedded emissions.
Small importers below the de minimis threshold: imports of ≤ 50 tonnes/year of CBAM goods are exempt (except electricity and hydrogen, which are excluded from this mass-based exemption).
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Background
The Carbon Border Adjustment Mechanism (CBAM) is a carbon border tax devised by the European Union (EU) aimed at reducing carbon-intensive imports. Introduced in 2023, the CBAM complements the EU's Emissions Trading System (ETS) which regulates emissions from industries within the EU by requiring companies to buy allowances for their carbon emissions thereby creating a financial incentive to reduce pollution. As the EU strengthens its climate commitments while some non-EU countries maintain less stringent environmental and climate policies, the CBAM aims to address the risk of carbon leakage which occurs when EU-based companies shift carbon-intensive production abroad to benefit from weaker regulations or when EU products are replaced by more carbon-intensive imports. Empirical analysis of annual carbon emissions data across countries from the Global Carbon Project (GCP) bears this out: between 1990-2018, while carbon emissions stayed flat or declined in many advanced economies which have introduced more stringent emissions reduction policies, emissions have been rising in many emerging market economies, especially in China and India. Carbon leakage ultimately weakens both EU and global climate efforts. The CBAM will help uphold the EU’s high climate ambitions and prevent climate action from being compromised by production moving to countries with more lenient policies.
Reporting Requirements
CBAM requires importers of certain high-emission goods (see next section) to calculate and report the embedded greenhouse gas (GHG) emissions associated with their imported products.
Annual reporting obligation: From 1 January 2026, authorised CBAM importers must submit an annual CBAM declaration covering the previous calendar year. The annual report replaces the quarterly reports used during the transitional phase (Oct 2023–Dec 2025).
What must be reported: The annual declaration must include the total quantities imported of CBAM-covered goods and the embedded greenhouse gas (GHG) emissions (direct and indirect) associated with those goods. Data must be verified by accredited verifiers under the definitive regime.
The annual declaration forms the basis for calculating how many CBAM certificates they have to buy. Each certificate represents a certain amount of carbon. If the importer can show they already paid a carbon price in the country where the goods were made, that amount can reduce how many certificates they need to hand in.
Which companies are affected?
The CBAM applies to carbon-intensive sectors where carbon leakage is most likely. Initially, it covers six product groups: cement, iron and steel, aluminium, fertilisers, hydrogen and electricity, and it may be expanded over time. From 1 January 2026, the CBAM’s definitive phase requires that EU importers (or their indirect customs representatives) be registered as an “authorised CBAM declarant” with their Member State’s competent authority; this authorisation is a prerequisite for importing CBAM goods under the definitive regime and comes before annual reporting and certificate surrender (see previous section). While CBAM obligations legally fall on EU-based importers, non-EU producers exporting covered goods to the EU are directly affected in practice because importers need accurate, verifiable embedded-emissions data from their suppliers to complete CBAM compliance.
Penalties for noncompliance
Importers that fail to submit required CBAM reports, or submit inaccurate or incomplete emissions data, may face financial penalties. Member States may impose fines generally ranging from €10 to €50 per tonne of unreported CO₂-equivalent emissions, with higher amounts possible for repeated or prolonged non-compliance. Authorities typically initiate a correction procedure, allowing importers to rectify errors before penalties are applied. From 2027, authorised declarants that fail to surrender the required number of CBAM certificates by the annual deadline (e.g., 31 May) may face additional fines of around €100 per tonne of uncovered emissions, in addition to the obligation to surrender the missing certificates. Further sanctions, including revocation of authorisation, may also apply.
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