EU carbon border adjustment mechanism

• Regulation Number: Regulation (EU) 2023/956 and Regulation (EU) 2025/2083
• Competent Authority: The European Commission is responsible for overall coordination and policy formulation, while implementation and enforcement are managed by the designated competent authorities of each EU Member State
• Transition Period: October 1, 2023 – December 31, 2025
• Full Implementation: January 1, 2026

During the transitional phase, the CBAM scope encompasses six carbon-intensive sectors: iron and steel (including downstream products such as screws and bolts), cement, fertilizers, aluminum (including its downstream products), electricity, and hydrogen. This regulatory scope is subject to expansion over time. The EU intends to evaluate whether to extend coverage to downstream products highly intensive in steel and aluminum, as well as other sectors currently covered under the EU ETS (with exact timelines and impacted industries awaiting official publication by the European Commission).

Regulated Products and Entities

The EU has released the required reporting templates for CBAM. EU importers will act as authorized CBAM declarants, responsible for collecting data from non-EU installations and uploading it to the CBAM Transitional Registry. Upon full implementation, the submitted CBAM declaration must contain at least the following information:

• Installation Details ( Including producer/installation name, address, identifier, and UN/LOCODE)
• Embedded Emissions (Direct and indirect embedded emissions of the goods, along with applicable emission factors)
• Product-Specific Disclosures
• Carbon Pricing
• Production Technology
• Third-party Verification Reports

CBAM Reporting Data

CBAM requires reporting of product carbon content including:

1. Direct emissions from on-site production processes
2. Indirect emissions from electricity used in production processes
3. Emissions embedded in raw materials and precursors covered by CBAM

CBAM Calculation Scope

Once producers in the exporting countries provide the necessary data to the authorized CBAM declarant (the EU importer), the declarant purchases CBAM certificates from the competent authority. Since the first official declaration must be completed by May 31, 2027, declarants must surrender a sufficient number of certificates in their CBAM registry account to match the embedded emissions of the imported goods before the deadline.

※ Note: CBAM certificates are not required during the transitional period; only reporting obligations apply.

Certificates and Costs

Under CBAM regulations, authorized declarants must ensure that the number of CBAM certificates in their registry account covers at least 50% of the embedded emissions of imported goods at the end of each quarter. Failure to submit the annual declaration for the previous year’s emissions by September 30 will result in substantial penalties. Furthermore, payment of these fines does not relieve the declarant of their obligation to surrender the required CBAM certificates. Severe or repeated non-compliance may lead to the suspension of market access privileges.

Frequently Asked Questions