CBAM 2026: EU Carbon Border Tax Explained

As of 1 January 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) became a financially binding carbon border tax. It now directly affects companies importing carbon-intensive goods into the EU. This update explains what has changed, who is affected, and how businesses should respond as carbon costs reshape global trade.

What changed on 1 January 2026?

Between October 2023 and December 2025, CBAM served only as a reporting exercise. Importers tracked and reported embedded emissions, but they did not pay.

However, the grace period has ended. From 1 January 2026, every eligible import generates a carbon liability, and importers must purchase CBAM certificates, which link directly to the EU Emissions Trading System (ETS), currently priced around €70–100 per tonne of CO₂.

Although companies will first purchase certificates in 2027, the obligation already applies. Imports made throughout 2026 will require settlement later, so businesses must plan ahead.

Why did the EU introduce CBAM?

The EU created CBAM to prevent carbon leakage. EU producers pay for emissions under the ETS, while many non-EU competitors do not. Consequently, non-EU producers gain a structural price advantage, and global emissions simply shift elsewhere.

CBAM closes this gap by pricing carbon at the EU border. It charges imports based on actual carbon intensity. Therefore, low-carbon production pays less, while carbon-heavy production pays more. This measure balances costs between EU and non-EU producers while promoting cleaner imports.

Which goods and companies are affected?

CBAM currently applies to six carbon-intensive sectors: iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity.

To reduce the burden on smaller businesses, companies importing less than 50 tonnes per year of CBAM goods are fully exempt. This exclusion covers roughly 90 percent of importers.

Companies exceeding the threshold must register as an Authorised CBAM Declarant, track embedded emissions, and submit annual CBAM declarations.

Why supplier data matters more than ever

The legal responsibility lies with the EU importer, but compliance depends heavily on non-EU suppliers.

Importers must report verified, production-specific emissions data. If suppliers cannot provide it, importers must rely on EU default values, which include a markup that increases from 10 percent in 2026 to 30 percent by 2028. Consequently, defaults often overstate real emissions by 30–50 percent, making these suppliers more expensive. As a result, exporters who cannot document emissions risk losing EU customers.

What does this cost in practice?

CBAM costs are significant. Analysts estimate total sectoral costs of €9–12 billion in 2026, with iron and steel bearing the largest share over time.

For instance, importing 1,000 tonnes of hot-rolled steel from China could cost around €40,000 at current ETS prices. Cement and fertilisers face similar pressure, leading to 5–10 percent price increases.

These costs usually pass down the supply chain. Manufacturers, construction companies, and ultimately consumers absorb higher prices, especially in sectors sensitive to input costs.

Key dates to keep in mind

CBAM became financially binding on 1 January 2026. Certificates will be available for purchase from February 2027, and the first annual declaration must be submitted by 30 September 2027, covering all 2026 imports.

Companies importing above the threshold should apply for Authorised CBAM Declarant status by 31 March 2026 to avoid operational risk.

Additionally, free ETS allowances will phase out gradually until 2035, when CBAM reaches full effect and importers will pay the full carbon price equivalent to EU producers.

How should companies act now?

Companies importing CBAM goods should audit their supply chains, confirm which products fall within scope, and quantify annual volumes against the 50-tonne threshold.

For those above the threshold, early engagement with suppliers is critical. Verified emissions data can significantly reduce CBAM exposure. Therefore, companies should build provisional CBAM costs into financial forecasts and prioritise supplier discussions for the highest-risk products.

Exporters outside the EU should treat emissions reporting as a market access requirement, not merely a sustainability metric. Consequently, transparent, verified data becomes a competitive advantage.

Why CBAM matters beyond compliance

CBAM represents a structural shift in global trade. Carbon is no longer an external cost. It now carries a price at the border, affecting sourcing, pricing, and competitiveness.

Other jurisdictions are monitoring closely, with similar mechanisms under development. Therefore, carbon management is no longer optional—it has become a core supply-chain issue.

What’s next?

Managing CBAM compliance requires planning, reliable data, and supplier coordination. For more insights into cross-border compliance and regulatory change, explore our related resources on global trade and entity management.

Klea supports businesses with centralised governance, automated compliance tracking, and secure collaboration across jurisdictions. Companies looking to manage CBAM obligations efficiently can:

• Request a Demo – See Klea in action for your organisation.
• Start a Trial – Experience firsthand how automation reduces workload and improves efficiency.
• Talk to Our Experts – Get tailored recommendations based on your entity management needs.

Company secretarial software plays a vital role in maintaining structured governance and consistent compliance. With Klea, organisations can keep regulatory change manageable, transparent, and under control.

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