The European Union's Carbon Border Adjustment Mechanism (CBAM) is now in its definitive phase as of 2026, requiring importers of certain goods to purchase certificates corresponding to the carbon price that would have been paid if the goods were produced under EU carbon pricing rules. Non-EU exporters are urged to act without delay to comply with reporting obligations.
According to the European Commission, CBAM initially covers sectors such as cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. Importers must declare the embedded emissions in their goods and surrender CBAM certificates at a price linked to the EU Emissions Trading System (ETS) carbon price, which has fluctuated around €80-100 per tonne of CO2 in recent years.
The mechanism aims to prevent carbon leakage—where EU companies move production to countries with weaker climate policies—and to encourage global industry to adopt greener technologies. Non-EU producers can deduct any carbon price already paid in the country of origin from the CBAM certificate cost.
Businesses exporting to the EU should urgently set up systems to measure and verify product-level emissions, as penalties for non-compliance can be significant. The European Commission provides guidance and tools for calculating embedded emissions.
