The European Union’s Carbon Border Adjustment Mechanism (CBAM) is a significant regulatory measure aimed at addressing carbon leakage and encouraging decarbonisation across the EU and beyond. CBAM ensures that imported goods whose production is carbon-intensive and at the most significant risk of carbon leakage will be subject to a tax levy equivalent to that faced by domestic producers under the EU Emissions Trading System (ETS).
The regulation officially entered its transitional phase in October 2023 to 2025, requiring stakeholders (importers, producers, and authorities) to report emissions embedded in their goods. A full implementation, including financial obligations, is scheduled for 2026. By aligning global carbon costs, CBAM seeks to incentivise cleaner production methods worldwide while preventing businesses from shifting carbon-intensive activities to regions with weaker regulations.
Key Requirements of CBAM
CBAM applies to carbon-intensive sectors, including iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen. During the transitional phase, businesses are required to:
- Report direct and indirect emissions associated with imported goods.
- Provide quarterly reports detailing embedded emissions per tonne of product.
- Maintain accurate records to ensure compliance with EU verification standards.
From 2026, importers will need to purchase CBAM certificates to cover their emissions, mirroring the carbon costs faced by EU producers under ETS. The number of required certificates will be adjusted based on any carbon price already paid in the country of origin, preventing double taxation while promoting fair competition.
Why the change?
By levelling the playing field, CBAM protects EU industries from unfair competition while encouraging trading partners to adopt more sustainable practices. The mechanism supports the EU’s commitment to reducing greenhouse gas emissions by 55% by 2030, aligning with the Fit for 55 package. CBAM also strengthens the economic case for businesses to decarbonise, as cleaner production methods will become increasingly cost-competitive in the global market.
Regulatory impact
The regulation has a multitude of implications for businesses involved in international trade. Importers must improve their capabilities to capture carbon emissions and ensure compliance with the EU’s reporting framework. Companies within affected sectors may face increased costs, requiring strategic adjustments to supply chains and sustainability initiatives.
For businesses exporting to the EU, there is a growing incentive to align with international carbon pricing mechanisms. Non-EU countries with their own carbon pricing schemes may negotiate exemptions or reductions under CBAM, influencing global policy alignment and driving compliance. This regulation signals a broader trend towards carbon pricing as a key tool in climate policy, encouraging industries worldwide to accelerate their transition to low-carbon technologies and alternatives.
Next steps for businesses
Businesses must take proactive steps to ensure compliance with CBAM requirements. Establishing robust emissions-tracking systems to collect accurate data on the embedded carbon of imported goods will help businesses understand their impact. Businesses should also be engaging with suppliers to verify their emissions data and assess any potential cost implications. To avoid higher costs once CBAM Certificates are introduced from 2026, cleaner production methods and low-carbon alternatives should be high on the agenda for heavy contributors.
Companies trading with the EU should integrate CBAM considerations into their sustainability strategies and supply chain activities. By aligning with evolving carbon regulations, businesses can mitigate risks, drive competitiveness, and contribute to global decarbonisation efforts across some of the heaviest emitting industries.
Success Stories: Meridian Steel
Curious about real-world impact? Discover how we helped Meridian Steel be proactive in their compliance journey by aligning with CBAM regulations ahead of 2026.
Meridian Steel is one of the UK’s largest premium stockholders and processors, specialising in strip mill products. The company’s Dudley and Sheffield sites, combined, currently provide over 150,000 metric tonnes of high-quality steel to multiple industries across Europe. Through its ongoing partnership with Positive Planet, the company has been able to prepare for CBAM compliance and embed sustainability into procurement and operations. Ahead of CBAM’s anticipated introduction in 2026, Meridian Steel is now reducing carbon-related costs, and strengthening profit margins for both the company and its customers through a more transparent, efficient supply chain.
Pioneering Change with Positive Planet
Positive Planet plays a vital role in helping businesses adapt to CBAM. With a wealth of experience and expertise in carbon accounting, supply chain engagement, and regulatory compliance, Positive Planet can empower businesses to navigate the regulations confidently, mitigating the financial and operational risks with anticipated carbon pricing and maximising opportunities.
Positive Planet helps businesses not only comply with CBAM but also strengthen their sustainability credentials and attractiveness to customers and investors.
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