CBAM Basics Explained: What Businesses Need to Know in 2026
CBAM, or the Carbon Border Adjustment Mechanism was first introduced by the European Union on October 1, 2023, as a policy that places a tax on certain carbon-intensive goods imported into the EU.
The product categories covered by this policy include iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen. The precise products depend on the customs classification and the applicable legislation, and not every product that falls within these categories are automatically covered. To determine whether a product is covered, the Combined Nomenclature (CN) codes can be reviewed together with product specifications and applicable exemptions.
With CBAM, the cost induced by embedded emissions are paid in the currency of CBAM certificates, which have to be purchased from the common central platform, via the EU CBAM registry. The certificate prices are linked to the EU ETS allowance prices, and the number of certificates required depends on the embedded emissions and regulatory adjustments. Should carbon pricing be paid in the country of production, a deduction may be available subject to conditions and requirements.
CBAM was implemented in phases, starting with the transitional phase, which began when it was introduced — on October 1, 2023. Importers of goods covered by the policy were tasked with tracking and reporting embedded emissions. During this period, no payments or certificate purchases were required yet. On January 31, 2024, the first CBAM report for quarter 4 of 2023 was due. On July 1, 2024, importers were to transition from using default emission values when reporting to actual verified emissions data for complex goods.
On January 1, 2026, the definitive phase began, with authorised CBAM declarants being the only ones allowed to import goods covered, and certificate pricing being set on quarterly basis based on the EU ETS clearing prices. By March 31, 2026, importers should have applied for Authorised CBAM Declarant status before the deadline. On February 1, 2027, CBAM certificates will be available for purchase, and the pricing will transition from quarterly to weekly. The first annual CBAM declaration as well as the first certificate surrender deadline will be on September 30, 2027, for all embedded emissions from 2026 imports covered by the policy. Following this, the deadline for submitting the annual declaration and surrendering associated CBAM certificates for the previous year will be on September 30.
The EU CBAM represents an important step in the relationship between international trade and climate policy. As this policy takes effect through its phases, businesses have to stay up to date starting with whether their products are covered under CBAM, and what the next steps are.
Disclaimer: This article is intended for general informational purposes only and does not constitute legal, tax or regulatory advice. CBAM applicability and obligations depend on the relevant products, customs classifications, import arrangements and current legislation. Businesses should consult official EU guidance and qualified advisers for case-specific advice.