The new European 'tool'
The European Union has adopted the Carbon Border Adjustment Mechanism (CBAM) to support the goal of achieving climate neutrality by 2050 and ensures that imported goods face a carbon price equivalent to domestic production in the EU. CBAM will work alongside other measures in the 'Fit for 55' package and will reduce the risk of carbon leakage as the EU moves towards achieving its climate targets.
Carbon Leakage occurs when companies move carbon-intensive production from the EU to countries where less stringent climate policies are in place than in the EU, or when EU products get replaced by more carbon-intensive imports. CBAM aims to gradually replace existing measures designed to prevent carbon leakage, particularly the allocation of free emission allowances under the EU Emissions Trading System (ETS) . It seeks to establish an equivalent carbon price for both domestic and imported production of specific goods.
CBAM will apply to the following sectors: aluminum, cement, electricity, fertilizers, hydrogen, iron and steel . During the transitional period, the reporting for these sectors includes both direct and indirect emissions, except for electricity, which only includes direct emissions.
Direct emissions are the greenhouse gas emissions released directly during the production process at the installation level, including CO2 emissions from combustion and raw materials used.
Indirect emissions are related to the raw materials, transportation, distribution, previous waste, and to the end of life.
From 1 January 2026 , authorized CBAM declarants (importers or indirect customs representatives) will have to buy and surrender CBAM certificates that correspond to the embedded emissions in the imported goods. The European Commission will calculate the price of CBAM certificates based on the average weekly price of ETS auctions . This ensures that CBAM certificates remain closely aligned with the price of ETS allowances. Additionally, this approach maintains a manageable system for administrative authorities overseeing the process. But for now – you only need to provide information on the emissions.