AN IMPORTANT STEP TOWARDS PREVENTING CARBON LEAKAGE AND PROMOTING FAIRER GLOBAL CLIMATE PROTECTION
Why did the European Union introduce CBAM?
The European Union has set the ambitious objective of becoming a climate-neutral economy by 2050 and reducing greenhouse gas emissions by at least 55% by 2030 compared with 1990 levels. Achieving these targets requires not only reducing emissions generated within the EU, but also addressing emissions embedded in imported goods. Despite progress in reducing domestic emissions, the risk of carbon leakage remains significant. Carbon leakage occurs when production is relocated to countries with less stringent climate policies or when products manufactured in the EU are replaced by imports with a higher GHG emissions intensity.
In 2022, global greenhouse gas emissions reached approximately 37 billion tonnes. While the European Union accounted for around 6% of global emissions, major economies such as China, the United States and India represented a much larger share. At the same time, the economic growth of countries where climate regulations are generally less stringent has increased concerns over unfair competition and the relocation of carbon-intensive production. These circumstances have reinforced the need for mechanisms capable of protecting both the effectiveness of EU climate policies and the competitiveness of European industry.
What is CBAM and how does its regulatory framework work?
To address these challenges, the European Parliament and the Council adopted Regulation (EU) 2023/956, establishing the Carbon Border Adjustment Mechanism (CBAM). The mechanism forms part of the European Green Deal and contributes to the achievement of the Fit for 55 objectives.
CBAM is designed to ensure that imported goods bear a carbon cost equivalent to that paid by EU producers under the EU Emissions Trading System (EU ETS). It also supports the adoption of more greenhouse gas-efficient technologies by producers outside the European Union. Over time, CBAM will progressively replace the free allocation of EU ETS allowances currently used to address carbon leakage risks, while ensuring compliance with World Trade Organization rules and maintaining a level playing field between imported and domestically produced goods.
Which products are covered by CBAM and which exemptions apply?
The Regulation applies to imports of cement, electricity, fertilisers, iron and steel, aluminium and hydrogen. The products covered are identified in Annex I of Regulation (EU) 2023/956 through specific Combined Nomenclature codes.
CBAM does not apply to imports originating from countries participating in the EU ETS or from countries belonging to the EEA and EFTA frameworks, including Norway, Iceland, Switzerland and Liechtenstein. Certain low-value consignments and goods intended for military activities are also exempt.
What is the timeline for CBAM implementation?
The implementation of CBAM is divided into two phases. The transitional period started on 1 October 2023 and was closed on 31 December 2025. During this phase, importers and customs representatives were required to collect and report information on imported goods and the greenhouse gas emissions embedded in their production. Reporting was carried out on a quarterly basis through the Transitional CBAM Registry. No financial adjustment was required during this period. The transitional phase also serves as a learning period for importers, producers and authorities, while supporting the authorization process for future CBAM declarants.
The definitive phase began on 1 January 2026. From that date, authorized CBAM declarants are required to declare imported quantities and the corresponding embedded emissions. They are also required to purchase and surrender CBAM certificates. One certificate corresponds to one tonne of CO2 emissions, and the certificate price will be linked to the average value of EU ETS allowances. The introduction of CBAM will take place alongside the gradual phase-out of free EU ETS allocations.
CBAM: Embedded Emissions, Verification and Compliance Reporting
The Regulation distinguishes between direct emissions generated during production processes and indirect emissions associated with electricity consumption. It also differentiates between simple goods, whose embedded emissions derive exclusively from their production process, and complex goods, whose calculation must include the emissions associated with precursor materials.
Under the definitive regime, importers are required to submit annual reports of embedded emissions, together with the surrender of the corresponding CBAM certificates. Reported emissions must be verified by accredited verifiers in accordance with the requirements established under the Regulation.
Implications for Companies: Challenges and Opportunities
The introduction of CBAM may lead to additional costs for certain imported goods and has generated concerns among importers and exporting countries. Nevertheless, the mechanism represents an important tool for preventing carbon leakage, preserving the effectiveness of European climate policies and encouraging investment in sustainable technologies outside Europe. By creating a more consistent carbon pricing framework, CBAM contributes to the European Union’s transition toward a low-carbon economy.
How does Bureau Veritas support companies with CBAM compliance?
Bureau Veritas supports organizations in preparing for and implementing CBAM requirements through preliminary verification activities, gap analyses and tailored training programmes. These services help companies assess compliance readiness, strengthen reporting processes and address both technical and administrative aspects of the Regulation.