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What is CBAM and How It Affects Imports from Outside the European Union

As part of its efforts to reduce greenhouse gas emissions and support the transition toward a greener economy, the European Union has introduced several new regulatory measures. One of the most important is the Carbon Border Adjustment Mechanism (CBAM).

This mechanism directly affects companies that import certain products into the European Union from non-EU countries, particularly in industries with high carbon emissions.

What is CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is a policy introduced by the European Union to apply a carbon price to specific goods imported into the EU.

The main objective is to prevent what is known as “carbon leakage.” This occurs when companies move production to countries with less strict environmental regulations to avoid the costs associated with carbon emissions.

Within the EU, many industries already pay for their emissions through the EU Emissions Trading System (EU ETS). CBAM ensures that imported products face a similar carbon cost, creating a level playing field between EU and non-EU producers.

In simple terms, CBAM ensures that the carbon intensity of imported goods is taken into account when they enter the European market.

Which Products Are Covered

In its initial phase, CBAM focuses on sectors with high carbon emissions. The mechanism currently applies to imports of:

  • Cement
  • Iron and steel
  • Aluminum
  • Fertilizers
  • Electricity
  • Hydrogen

These sectors were selected because they represent a significant share of industrial emissions and are at higher risk of carbon leakage.

Implementation Timeline

The implementation of CBAM is being rolled out in stages.

1. Transitional Period (2023–2025)

During the transitional phase, importers are required to report the embedded carbon emissions of the products they import into the EU.

However, no financial payments are required during this period. The goal is to allow companies and authorities to adapt to the new reporting system.

2. Full Implementation (Starting in 2026)

Starting from 1 January 2026, importers will need to:

  • register as authorized CBAM declarants
  • purchase CBAM certificates corresponding to the carbon emissions embedded in imported goods.

These certificates will reflect the carbon price under the EU ETS system.

Who Is Affected

CBAM mainly affects:

  • EU-based importers of certain industrial materials
  • trading companies importing raw materials
  • manufacturers using imported carbon-intensive materials in production

Companies that regularly import these products from outside the EU will need to collect emissions data from their suppliers and report it through the CBAM reporting system.

Why the EU Introduced CBAM

The European Union introduced CBAM to support several strategic objectives:

  • prevent carbon leakage
  • protect the competitiveness of European industries
  • encourage cleaner production globally
  • support the EU’s climate neutrality goals.

By applying a carbon cost to imports, the EU aims to ensure that environmental standards remain consistent across global supply chains.

Official EU Sources

For official information and detailed guidance on CBAM, you can consult the following pages:

These sources provide the latest regulatory updates, reporting requirements, and guidance for importers.