What Is the Carbon Border Adjustment Mechanism (CBAM)?

The Carbon Border Adjustment Mechanism (CBAM) is a regulation that attaches a cost, in effect a carbon levy, to the carbon emitted during the production of certain goods entering the European Union, in other words, goods exported to it. CBAM has long been on the business agenda, yet it still raises many questions.

What Is CBAM and Why Did the EU Take This Step?

You may have heard CBAM loosely described as a “carbon tax,” but it represents a much deeper and more structural shift in trade than a customs duty. The core rationale behind the mechanism is to strike a fine balance between protecting European producers and reducing global emissions.

A producer within the European Union bears a significant carbon cost because of strict environmental policies and carbon (emissions) pricing. A producer outside the EU, for example in Türkiye, can manufacture more cheaply without bearing these costs. This is what the European Union calls “carbon leakage.” CBAM steps in exactly at this point, requiring goods that cross the EU border to bear the same carbon cost as if they had been produced within the EU.

How Does the Process Work in the Definitive Period?

The biggest source of confusion for many professionals is the assumption that the process is merely a reporting exercise. The reporting-only phase, however, was a transitional period designed to get companies used to collecting emissions data. That transitional period ended on 31 December 2025, and the definitive period is now in effect for companies exporting cement, iron and steel, aluminium, fertilisers, electricity or hydrogen to the EU.

The CBAM reporting period follows the calendar year. For goods entering the EU in 2026 and beyond, the process runs as follows:

• Embedded emissions of imports made during 2026 are monitored and recorded. No certificates are purchased during 2026.
• Sales of CBAM certificates start on 1 February 2027.
• The deadline for the annual CBAM declaration and certificate surrender for 2026 imports is 30 September 2027.
• From 2027, declarants must hold, at the end of each quarter, certificates covering at least 50% of the emissions of goods imported that year.

Certificate prices vary in line with the EU Emissions Trading System (ETS) price. For 2026 emissions, a quarterly average price is used; prices announced for the first three quarters range from roughly EUR 75–82 per tonne. From 2027, the price will be set weekly.

What Should Exporters Do Now?

• Check whether your products fall under the customs tariff codes covered by CBAM.
• Build the data infrastructure to calculate embedded emissions at installation and product level.
• Plan the verification process early.
• Agree with your EU customers on what data will be shared, in what format and by when.
• Consider how CBAM costs will be shared between the parties in your contracts.

In short, CBAM is neither a temporary crisis nor a passing bureaucratic hurdle. It does, however, turn the carbon footprint into a direct cost item for companies exporting to the EU. In this new era, staying competitive does not come from calculating how much will be paid at the border; it comes from reducing your carbon footprint by fundamentally transforming production processes, energy efficiency and the supply chain.

To clarify your CBAM obligations, identify carbon risks in your supply chain and develop sustainability strategies tailored to your organisation, get in touch with our experts.