In essence, CBAM seeks to prevent an increase in carbon emissions generated outside the EU’s borders, but which are intrinsically linked to consumption and trade flows in the EU. The aim is to put a fair price on the carbon emitted during the production of carbon intensive goods, and to encourage cleaner industrial production. The so-called CBAM goods include cement, electricity, fertilisers, aluminium, iron, steel, and hydrogen. Importers of these goods will need to report the embedded emissions on these, which is basically all the carbon dioxide (CO₂) it took to make and deliver the products.
CBAM forms part of the European Green Deal, which has the ambition of making the EU climate-neutral by 2050. To genuinely contribute to global reduction in emissions, it must be ensured that the transition to a climate-neutral economy does not merely shift the environmental burden beyond Europe’s borders. With CBAM, the EU will complement the existing EU Emissions Trading System (EU ETS), set up in 2005.
Unlike in the EU ETS, CBAM certificates will not be tradable. In fact, unused CBAM certificates will be cancelled by the European Commission without any compensation. However, it will be possible to request a repurchase of excess CBAM certificates by the Member States.
When will the CBAM apply?
The CBAM transitional phase runs from 1 October 2023 to 31 December 2025. During this period, only reporting obligations apply, and there is no need to buy or surrender certificates yet. The transition phase should facilitate the implementation of the CBAM rules and serve as a learning period for stakeholders, including importers, producers and authorities. To support stakeholders during this transitional period, the European Commission has published practical guidelines on its website. The European Commission also collects information on embedded emissions during this period, in order to prepare for the definitive period.
CBAM’s definitive regime will apply from 1 January 2026, when EU importers of goods covered by the scope of CBAM will have to register with national authorities as “authorised CBAM declarants”. Importers will need to buy CBAM certificates that correspond to the carbon price that would have been paid if the goods had been produced under the EU’s carbon pricing rules. If a carbon price has already been paid in a third country, this will be deducted from the CBAM obligation. The number of CBAM certificates to be surrendered each year by the importers will depend on the emissions they have reported for the preceding calendar year.
Simplifying the CBAM?
Following the Omnibus package of 26 February 2025, the European Commission adopted several measures to simplify legislation in various areas, including CBAM. The Commission proposes to simplify CBAM requirements for small importers by introducing a new de minimis exemption for imports below 50 tonnes. This change would still cover approximately 99% of total emissions under CBAM, while exempting around 90% of importers, according to the Commission.
For importers who remain within the CBAM scope, the proposed revisions aim to ease compliance. Key improvements include streamlining the authorisation process for declarants, simplifying emissions calculations, and clarifying the management of CBAM-related financial obligations.
The European Parliament is still analysing this proposal for the regulation amending CBAM, and may propose amendments. It is important to note that, before any CBAM changes are officially adopted, the existing rules of the CBAM regulation and implementing regulations still apply.
