The Carbon Border Adjustment Mechanism (CBAM) was originally developed by the European Commission to reduce emissions from imported goods into the EU.
With implementation set for 1 January 2026 for the EU CBAM, and with the UK CBAM coming into effect on 1 January 2027, the mechanism applies a “fair price” levy on carbon-intensive imports, covering a range of goods including aluminium, cement, fertiliser, hydrogen, Iron and steel.
For importers operating in these sectors, this will mean purchasing CBAM certificates for every tonne of CO₂ emissions embedded in the imported goods. This creates a level playing field where carbon emissions carry a financial value, regardless of where goods are produced.
At CFP Energy, we've been helping businesses comply with CBAM since its inception. We provide sector-by-sector insight into preparing for full implementation, as well as instant access to CBAM certificates. To see how we can help, contact our carbon team today.
CBAM works through two simple but powerful mechanisms:
Emissions Reporting
Importers must declare embedded greenhouse gas emissions in their goods. This includes process emissions, such as CO2 emissions resulting from iron and steel production, that use carbon-intensive processes like blast furnace smelting.
Meanwhile, manufacturers and producers must report both direct emissions (i.e. from fuel combustion) as well as indirect emissions (i.e. from electricity use), while providing verified data to show exactly how much CO2 was emitted making each product.
Certificate Purchasing
From 2026, importers buy CBAM Certificates equal to their reported emissions. The certificate price links directly to EU ETS carbon prices.
If your supplier already pays carbon tax in their home country, you receive credits. This helps incentivise sourcing from countries with comprehensive climate policies.
Including tubes, pipes, and basic steel products
Raw aluminium and basic manufactured products
All cement types and clinker
Ammonia-based and other nitrogen fertilisers
Direct imports of electrical energy
Pure hydrogen and hydrogen-based products
The EU plans to apply CBAM to more sectors. Glass and ceramics, plastics and polymers, pulp and paper, and other carbon-intensive products are likely to be affected next.
Inclusion decisions will be based on four clear criteria: CO₂ intensity, trade exposure, leakage risk, and data availability.
Businesses operating in these sectors, such as manufacturers and construction firms, should start preparing now, even if their products aren't currently covered.
Transitional Period (Current Phase)
What's required: Quarterly emissions reporting only. No financial payments yet.
Key actions: Map your supply chain. Identify covered products. Start collecting emissions data from suppliers. File quarterly CBAM reports.
Reality check: Many importers are struggling with data collection. Suppliers often lack the required emissions information. Start this process immediately.
Definitive Period Begins
What changes: Financial obligations start. Importers must purchase and surrender CBAM certificates.
Certificate pricing: Linked to EU ETS carbon prices (currently €85-90 per tonne CO2).
New requirements: Annual CBAM declarations. Verified emissions data from accredited verifiers. Financial guarantees for certificate purchases.
Full Implementation & Expansion
Expected developments: Scope expansion to more sectors. Tighter verification requirements. Integration with other EU climate policies.
Market evolution: Carbon pricing becomes standard in global supply chains. Low-carbon suppliers gain competitive advantages.
Your next annual CBAM report is due October 31, 2025. This falls within the transitional phase, which runs until the end of 2025. Meeting these deadlines is crucial. Failing to submit a report in time can potentially trigger penalties and import restrictions.
Failure to comply will mean import restrictions for companies that don't meet their obligations. CBAM isn't optional – failing to meet compliance will result in penalties and restrict EU market access. Early preparation prevents supply chain disruptions when full obligations begin in 2026.
Carbon costs are now part of the total cost of imported goods. Understanding these costs early enables better sourcing decisions. High-carbon suppliers will become more expensive in the long run, making low-carbon alternatives a must as carbon costs begin to accumulate.
CBAM forces detailed emissions tracking across your supply chain. This visibility identifies efficiency opportunities beyond compliance. Many companies discover significant cost savings through supply chain optimisation.
Proactive CBAM preparation differentiates businesses from reactive competitors. Low-carbon supply chains become unique selling points across sectors like construction, manufacturing and data centres, where many businesses have yet to take steps to reduce their carbon emissions.
Preparation isn't just about meeting regulatory compliance. It's about retaining business advantage, ensuring that your business conforms to stakeholder expectations, as well as the forthcoming changes in the CBAM.
At CFP Energy, we help companies leverage CBAM as an opportunity to decarbonise.
For those importing goods from the UK during the transitional phase, accurate reporting is essential.
Businesses importing goods into the EU, from 1 January 2026, meanwhile, will have to buy CBAM certificates for carbon-intensive products, covering goods such as steel, aluminium, hydrogen and electricity.
To ensure full compliance with CBAM, the time to act is now. To see how we can help your business meet its reporting and certificate obligations, contact our team today.