What is CBAM?

Written By Dr. Shiva Zargar

Carbon Border Adjustment Mechanism (CBAM): What Every Global Exporter Needs to Know to Stay Competitive in the EU Market

The Carbon Border Adjustment Mechanism (CBAM) is an environmental policy instrument designed to apply the same carbon costs to imported products as would be incurred by installations operating in the European Union (EU). In doing so, the CBAM reduces the risk of the EU’s climate objectives being undermined by production relocating to countries with less ambitious decarbonization policies (so-called “carbon leakage”).

The CBAM complements the EU Emission Trading System (EU ETS), which was recently strengthened as part of the EU’s “Fit for 55” legislative package. Under the EU ETS, operators of installations producing emission-intensive goods surrender emission allowances for each tonne of CO2e emissions.

How CBAM Works

ICBAM complements the EU ETS, which requires EU producers of emission-intensive goods to surrender allowances for each tonne of CO2e emitted. Without CBAM, these costs could incentivize companies to shift production to lower-regulation regions, undermining the EU’s climate goals. Under CBAM, importers of covered goods must report embedded emissions and, from January 2026, purchase CBAM certificates priced according to the EU ETS allowance market. This ensures a level playing field between EU and non-EU producers.

Key CBAM Timeline and Phases

  • October 2023 – December 2025: Transitional Phase

Importers must report embedded emissions quarterly, but no financial payment is due yet.

  • January 2026 – 2034: Definitive Phase

Importers will buy CBAM certificates to cover emissions. Coverage will gradually increase until full emissions are priced by 2034.

Products Currently Covered

CBAM initially applies to:

  • Cement

  • Iron and steel

  • Aluminium

  • Fertilizers

  • Hydrogen

  • Electricity 

The EU is considering expanding CBAM to more products over time, so early preparation is essential, even if your products are not currently included.

What Importers Need to Do Now

Step 1: Identify CBAM Goods in Your Portfolio

  • Map products to the official aggregated goods categories under CBAM.

Step 2: Request Data from Producers

You must obtain emissions data from the operator of the installation producing your goods, covering:

  • Direct emissions: from the production process, including heating and cooling.

  • Indirect emissions: from electricity consumed in production.

  • Precursors (optional): embedded emissions from inputs used in producing the goods.

  • Product-specific parameters: e.g., clinker content for cement, nitrogen content for fertilizers.

Step 3: Account for Carbon Pricing in the Country of Origin

  • If the goods’ origin country has a carbon tax or emissions trading scheme, this may reduce the number of CBAM certificates needed.

Step 4: Understand the Reporting Period

  • Data must align with the operator’s production and emissions monitoring cycles.

Step 5: Ensure Accurate and Timely Communication

  • Producers must supply embedded emissions data to the EU importer, who is the reporting declarant under CBAM.

Reporting Requirements

From 2026, the definitive period of the CBAM will apply. That means that from 1 January 2026 onwards, importers will have to bear a “CBAM obligation” in the form of certificates, which you purchase at the average price of EU ETS allowances, for every CBAM good imported into the EU. There will be a phase-in with increasing coverage of embedded emissions by the CBAM obligation from 2026. The full embedded emissions will only be covered from 2034 onwards.

Act Now, Gain the Advantage

CBAM is not just a regulatory challenge; it’s a market signal. The future of global trade is low-carbon, and companies that adapt now will lead the way.

Contact Build Neutral | hello@buildneutral.ca, to start your CBAM compliance roadmap today and protect your EU market access.

We help companies worldwide, from North America to Asia-Pacific.

Our CBAM Support Services

We help companies meet the EU’s Carbon Border Adjustment Mechanism (CBAM) rules so they can keep selling to Europe without delays, extra costs, or compliance problems.

Here’s how we can help:

    1. We handle the GHG calculations for your products, from gathering data to applying the correct EU CBAM methods.

    2. We calculate both direct emissions (from making your product) and indirect emissions (from the electricity and heat you use).

    3. We review and fix any errors in existing numbers.

    4. We prepare the results in the official EU CBAM reporting format, ready to submit.

    1. We set up robust systems to measure, report, and verify emissions for CBAM products.

    2. We design processes ready for EU checks and audits.

    3. Your data stays accurate and always ready for reporting.

    1. We guide you through CBAM registration and official submissions.

    2. We prepare your data so it passes third-party verification without delays.

    1. We create a custom step-by-step roadmap to meet CBAM deadlines.

    2. We identify emission-reduction opportunities that also cut CBAM costs.

    3. We prepare risk-mitigation strategies for your products and supply chain.

    1. We simplify the process so suppliers give the right information without hassle.

    2. We make sure all supplier data is complete, consistent, and ready for submission.

We take care of the complex CBAM work, you get compliance, lower risk, and a stronger reputation in the EU market.

Dr. Shiva Zargar
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Guidelines on Environmental Claims