Carbon Border Adjustment Mechanism (CBAM)
The EU’s Tool for Fair and Climate-Friendly Trade
The Carbon Border Adjustment Mechanism (CBAM) is the European Union’s response to the
global challenge of carbon leakage. It ensures that imported goods are subject to the same carbon
pricing as products manufactured within the EU, creating a level playing field for industry while
supporting climate targets.
What Is CBAM?
CBAM is a regulatory instrument designed to:
- Prevent carbon-intensive production from shifting outside the EU
- Apply a carbon price to imported goods based on their embedded emissions
- Complement the existing EU Emissions Trading System (EU ETS)
Its core purpose is to ensure that the climate ambition of the EU Green Deal is not undermined by
production moving to countries with less strict climate regulations.
Preparing for CBAM
What Importers Should Do Now
- Understand the reporting requirements under EU rules
- Analyse your supply chain for affected goods
- Choose the appropriate reporting method (EU method, third-country system, or reference
values) - Prepare for quarterly reporting during the transition period
- Plan for certificate purchases starting in 2026
How to Prepare for the CBAM
The introduction of the EU’s CBAM marks a significant change in how carbon emissions are accounted for in international trade. To remain compliant and competitive, companies importing carbon-intensive goods into the EU must take action now. Here’s a structured approach to getting ready.
1. Identify Affected Imports
The first step is understanding where your business intersects with CBAM. The CBAM regulation currently applies to key sectors such as steel, aluminium, cement, fertilisers, hydrogen, and electricity.
Action point:
Establish an overview of all imports potentially subject to CBAM. For each product, document:
- Harmonised System (HS) codes
- Country of origin
- Annual import volumes
This action will help you pinpoint which suppliers and trade routes are impacted.
2. Collaborate with Suppliers to Gather Emissions Data
From October 2023, companies must report embedded emissions for CBAM-covered imports. This requires reliable emissions data from non-EU suppliers, prepared in line with EU standards.
Action point:
Start direct engagement with suppliers to:
- Clarify EU data requirements
- Assess whether partners can deliver accurate and verified emissions figures
- Identify areas where additional support, training, or verification may be necessary
3. Build Internal Capabilities for CBAM Compliance
CBAM Reporting involves product-level emissions tracking, data validation, and digital submission. It will require solid internal systems and clearly defined processes from businesses.
Action point:
- Integrate emissions tracking into procurement and supply chain systems
- Establish quality control measures for emissions data
- Appoint dedicated CBAM contact persons across relevant departments (e.g. procurement, finance, sustainability)
4. Assess Broader Strategic
CBAM does more than impose reporting and cost obligations. It requires new approaches for sourcing strategies, supply chain resilience, and international competitiveness.
Action point:
- Reevaluate global and local sourcing strategies
- Explore switching to low-carbon or CBAM-exempt suppliers
- Consider aligning product development and investment decisions with long-term climate and trade policy trends
5. Anticipate Financial Impacts and Budget for CBAM Certificates
From 2026, companies will have to buy CBAM certificates to cover the embedded emissions of their imports. These certificates effectively apply a carbon cost to imported goods, with financial implications for purchasing, pricing, and profitability.
Action point:
- Develop carbon cost models based on estimated emissions and CBAM certificate prices
- Take into account CBAM costs in supplier negotiations and long-term procurement planning
- Monitor EU pricing trends to adjust forecasts
Need Expert Guidance on CBAM?
We support companies in navigating CBAM with tailored advice on emissions reporting, regulatory compliance, and supply chain strategy. Get in touch to future-proof your operations in the carbon-regulated economy.