CBAM Regulation: New EU Obligations, CO₂ Costs and Compliance Requirements for Importers

Implementation of the CBAM definitive phase 

Whoever has been importing cement, iron and steel, aluminium, fertilisers, electricity or hydrogen into the EU since 1 January 2026 and has not yet heard of CBAM (Carbon Border Adjustment Mechanism), may well stand at the EU border and rub their eyes in bewilderment. Since then the definitive phase of the CBAM Regulation (EU) 2023/956 has been in force, and what was a simple reporting obligation has turned into compulsory compliance duties that already start with a digital customs declaration (e.g. reporting the correct document codes and any individual registrations). 

By 30 September 2027 at the latest affected businesses must comply with their reporting duties and submit the certificates they previously had to buy. To do this, auditable processes and documentation have to be set up and governance models created.

While in many places a reduction of bureaucracy is being demanded, CBAM is going to result in the short term in more documentation and process requirements. Depending on market conditions, this will push up prices in the long term too. Commission proposal COM (2025) 989 from December 2025 stipulates that the scope of CBAM is to be expanded from 2028 to other goods, especially those using high amounts of steel and aluminium. It names such things as household white goods, cables, industrial robots and automotive parts. For companies that do not yet come directly under the scope of CBAM this is a clear signal that the mechanism is being set up to be permanent and is expected gradually to gain in size. It is therefore recommended to use the current phase as a learning and preparatory phase. 

In this article, we explain the significance of the CBAM, give our initial observations and derive the first recommendations for action both tactically and strategically.

Why CBAM?

CBAM is best described by the frequently cited name the “carbon price on the external border.” Its starting point is the European Emissions Trading System (EU ETS). In the EU, operators of certain industrial and electricity generating installations cover their greenhouse gas emissions with certificates (EU ETS 1). Part of these certificates is currently still assigned free of charge, the rest must be acquired on the market. These free assignment is being gradually reduced and for the included sectors is due to expire in 2034. In future a second area of sectors, particularly fuels for buildings and transport, will be included in EU ETS 2 in a separate pricing system. The EU is thereby expanding carbon pricing overall.

Outside the EU such systems do not yet exist in many third countries or not in such a form. This creates the risk of what is known as carbon leakage. Moving production or steps in the value chain to countries with lower climate protection conditions may save costs in the short time, but from a global viewpoint only result in moving emissions somewhere else instead of reducing them. EU producers are already bearing the costs of the EU ETS and without similar pricing can thereby end up in an uncompetitive position compared to imports from countries without comparable pricing.

CBAM therefore starts with importing. The EU is thereby pursuing a holistic understanding of climate protection – It does not matter where production takes place but that emissions caused by consumption in the EU market are not outsourced at no cost. CBAM and EU ETS are different in their mechanics: the EU ETS is a system at the level of installation operators in the EU and those placing energy products on the market.CBAM, on the other hand, addresses the import of certain goods into the EU and uses its own administrative procedures. But both tools basically follow the same goal of making carbon costs visible, limiting distortions in competition and creating incentives to decarbonisation outside the EU as well.

The particularities of CBAM

In the definitive period this leads to an unusual timeframe for levying. Importation in 2026 triggers the duty under CBAM economically, but the cash outflow only occurs later because acquiring the certificates is only possible from 1 February 2027 at the earliest and the first annual declaration together with submission of the certificates is due by 30 September 2027. The difference between the duty coming about and payment is not merely a detail but is to be understood as a responsibility of governance. Those who only tackle CBAM costs when they actually have to be paid will miss the opportunity to design their prices, budgets and contracts to match. 

What’s more, the certificate holding requirements for importation will begin in 2027. If the de minimis threshold is reached during any given year, the quarterly holding requirement will apply by the end of the following quarter at the latest. Then the CBAM account must contain certificates amounting to at least 50% of the total of grey emissions produced since the start of the year. Consequently, costs for CBAM certificates for 2026 and 2027 may coalesce, thereby placing an additional burden on the business’s bottom line.

CBAM in the test phase in 2025

In the transitional phase that ran until 31 December 2025 importers of CBAM goods were obliged to submit quarterly reports on the emissions related to the imported goods. Exclusions from the reporting requirement included low-value consignments (up to EUR 150 per consignment) and imports from countries included in the rules on exemptions (e.g. Iceland, Liechtenstein, Norway and Switzerland).

The EU Commission has provided certain simplifications for the launch. For the first two quarterly reports reporting standard figures published by the EU Commission was allowed. This simplification was finally ended in the third quarter so that the actual emission figures were to be reported from then on. In practice this exposed a key problem of the transition phase. Many manufacturers in third countries were not able to provide the necessary information in the required detail and format at such short notice, so importers were not able to meet their reporting requirements fully or only at considerable cost. This finding is one of the main points of criticism that went into the subsequent discussions on simplification and adjustment.

New rules as of 1 January 2026 (Omnibus I) 

To import the goods included in Annex 1 of the CBAM Regulation importers must buy certificates and submit them together with the report due on 30 September 2027 at the latest. The CBAM price is coupled to the EU ETS final auction prices (quarterly for imports in 2026, published weekly average from 2027). 

The Basic Regulation (EU) 2023/956 was most recently amended by Regulation (EU) 2025/2083 (“Omnibus I”: simplified/reinforced). The entire CBAM rules currently comprise 14 Directives totalling more than 2,800 pages. A considerable part of the legislation was only published at the end of 2025 and was nevertheless to be applied from 1 January 2026. At the same time some details are still unclear and need clarifying, meaning that subsequent adjustments can soon be expected. 

Based on the transitional phase from October 2023 to December 2025, in dialogues and data analyses the EU Commission identified needs for simplification and strengthening to be able to launch the definitive phase more smoothly on 1 January 2026.  

Key changes relate to the new mass-based de minimis thresholds of 50 tonnes per calendar year per importer (except for electricity and hydrogen). The EU has hereby reduced the burden on 90% of importers and, according to its own statement, continues to cover 99% of emissions embedded in the scope. On the other hand some adjustments were made to deadlines and liquidity. The submission deadline for the CBAM report was now moved to 30 September 2027. For imports from 2027, only 50% of the certificates to be acquired for all imports per quarter are to be held. The purchasing of certificates has been moved from January 2026 to February 2027.

Initial observations from practice

Checking the de minimis threshold

The central and fundamental component of all compliance measures for all importers of CBAM goods is currently checking and assessing the de minimis threshold. This is determined using the importers’ EORI number. This means that the imports of all CBAM goods declared throughout the EU under a EORI number are to be summarised for the whole year. The only exceptions to this principle are electricity and hydrogen, meaning that for them the CBAM rules already apply in their full force from the first importation.

If the de minimis threshold is not already reached for other goods with the first supply, it is in your own interests to keep a close eye on this threshold. As soon as the threshold is exceeded and the importer is not a authorised CBAM declarant, importation will be stopped at the border and any importation will no longer be possible without authorisation. Penalties may also be issued. In the worst case, authorisations applied for later will only be issued later or not at all.

Currently a transitional deadline is in force until 31 March 2026 until which time importers may apply for their CBAM authorisation. CBAM registration is digital by means of the CBAM Register, with access in Germany being technically implemented on the Customs Portal. When the registration process is completed, a APPL number is issued that is to be entered in the customs declaration under document code Y238 application reference number. Since the authorities have 180 days to issue CBAM registration numbers, the reference number will be valid until the end of September. 

It remains unclear how to deal with cases in which businesses only recognise that they are exceeding the de minimis threshold after 31 March 2026. In cases of doubt, as a precaution businesses should apply for registration as a CBAM declarer by 31 March 2026 to avoid disruptions to imports. If the annual amount for 2026 ultimately remains under the de minimis threshold, there are no further CBAM duties according to the current situation.In these cases the CBAM annual declaration duties are not to apply until 30 September 2027. 

Calculation of CBAM costs 

The costs of CBAM are calculated by taking the price of CBAM certificates and multiplying it by the number of the certificates to be submitted. The complexity here lies not so much in the specific calculation as in accurately calculating the parameters and the quality and availability of the underlying data.

Prices are based on the EU ETS. For imports in 2026 the price is set at the quarterly average of the EU ETS auction prices. From 2027 prices are calculated as the weekly average. This creates a price and planning regime that is closer to pricing on the capital markets than traditional customs-duty logic.

The amount components, that is the number of certificates to be submitted, crucially depends on whether actual emission values or default values are applied. Default values are set out in the EU Regulation 2025/2621 including by combined nomenclature code and non-preferential country in which the goods originate. The values of goods of the same kind may vary considerably depending on their country of origin. In this way carbon components will in future become a potential strategic supply chain parameter.

In many cases, using actual values will be more advantageous. But an independent verification by accredited bodies is necessary for this, for which the capacities are currently still in development. It is expected that wider accreditation will be available from Autumn 2026 at the earliest. The first checking bodies already offer pre-checks which allow an earlier determination whether suppliers meet the requirements for the actual values and whether there are still any gaps (data, processes, evidence). This helps to decide in time whether taking the way of actual values makes business sense and whether default values should be used first for calculation and other measures checked at the same time (suppliers, countries, process routes, and with a view to “cheaper” defaults”). CBAM tools and forecast models can already also prove useful here, but don’t replace either the verification or the necessary contractual coverage with suppliers and customers. 

The calculation for products involving several steps is particularly demanding (“complex goods”). Here emission data must be consistently assigned along all the relevant steps of production. If actual values are only available for parts of the value chain, in practice this results in a mixed approach, in which calculations are made partly by actual and partly by default values. 

CBAM basically lays down taking into account the carbon price paid in the country of origin to avoid double liability. To do this payments have to be documented reliably. But in practice this tactic is currently limited because the EU Commission currently does not recognise a comparable regime in the third country. Regarding the future it is worth observing the international developments in order to counter future double liability and interactions early.

A further main difference from the traditional customs is that CBAM is driven by amounts. The decisive thing is the own amount in tonnes (not the value of goods and neither gross profit, which often dominates in foreign trade). Those who want to calculate CBAM costs precisely require consistent data on masses at the position and batch level in the ERP system and traceable and checkable documentation that can still pass test by external bodies years later.

Internal CBAM management 

Unto now, using parameters like purchase prices, transport costs and import duties, depending on the preference treaties to be applied, importers were able to calculate the total costs of the CBAM goods they imported relatively precisely. The coming into force of the CBAM definitive phase now raises significant questions to be able the entire import costs – which suppliers have actual values? In which country is my supplier resident and what is the default value that applies to them if no actual values can be supplied? Can emissions costs be deducted in the land of production? Considering this topic must therefore start with the selection of potential suppliers. A high default value can really disarray the calculation for an offer for a product that looks good. 

Regardless of the size and structure of the business, this will take more than just the customs department to deal with it, which often have direct familiarity with the topic from carrying out imports or from questions on the classification of the imported products for customs. Furthermore, other tasks may come about in other functions or areas of the company – purchasing and supply contracts may have to be amended (legal department), selling prices must be recalculated based on the costs incurred (managerial accounting), purchasing conditions must be negotiated with suppliers (actual figures can be used) and customers have to be informed of price increases to be passed on (sales and marketing), to name just a few of the tasks to be carried out. The crucial thing is coordinating the various areas within the business, assigning responsibilities clearly and ensuring that information flows between the departments. 

Business and tax consideration

Buying certificates and thus the cash outflow for imports starting from 2026 will begin at a delay of 1 February 2027 because it will only be possible to buy CBAM certificates from then. The annual report, including certificates purchased for imports for the whole of 2026, is to be submitted by 30 September 2027. There may be an additional liquidity effect for 2026 and 2027 because alongside the certificates for 2026 it may also be necessary to purchase certificates for 2027.

If these costs are not passed on along the supply chain, arrangements should be made early in accounting and contracting. This particularly includes solid cost planning, checking how prices are to be passed on and amending purchasing and supply contracts, where necessary. Key to this is to clarify who should bear the costs of CBAM long-term. Absent any arrangement, the rise in costs can turn into a significant business risk.

CABM ultimately has an effect on margins and in group structures therefore cannot be considered in isolation. In intercompany supply chains these costs can make themselves felt on the distribution of earnings. Transfer price models and related documentation should therefore be reviewed soon. This particularly applies to questions about where the costs are incurred economically, whom they can be allocated to and how a true-up by period can be designed. Lastly, the price risk should not be underestimated either because the certificate price is coupled to the EU ETS and pricing is typically continued into the future, volatility can come about that may be relevant for planning with regard to high import volumes. Whether and in what form a company tackles this risk with typical capital market instruments (e.g. hedges) is also a decision for governance.

Outlook

The carbon border adjustment mechanism (CBAM) is an interdisciplinary balancing act. It affects companies in a period of economic uncertainty twice – in business more costs and in administration a significant rise in processes and requirements to provide evidence. At the same time, many details are still in flux, which makes planning and prioritising more difficult.

What’s more, the timing is unfamiliar to many – there is a long period between the event establishing the need for submission (imports in 2026) and the cash outflow (certificate acquired from 1 February 2027 at the earliest). The annual report and the certificates are to be submitted by 30 September 2027 at the latest, accompanied by the quarterly holding requirement for imports from 2027.  

Affected companies should therefore act quickly by checking whether their customs and data on materials is up-to-date and correct, considering how to pass prices on along the supply chain, potentially amending contracts and including the expected costs in their financial planning. This requires clear governance with clearly defined responsibilities, including in cross-over areas.