How the EU’s Carbon Border Levy Works Now That Importers Have to Pay

For most of its short life, the European Union’s Carbon Border Adjustment Mechanism, known as CBAM, was a paperwork exercise. Between 2023 and 2025, importers of carbon-intensive goods had to report the emissions embedded in what they brought into the EU, but they did not have to pay for them.

That changed on 1 January 2026, when CBAM entered its definitive regime. Importers now carry a financial liability for the carbon emitted in making certain goods abroad. What they will pay depends on how their emissions are measured and on the carbon price in the quarter of import.

What CBAM Is For

The European Commission describes CBAM as the EU’s tool to address carbon leakage by ensuring that the price of imports reflects their embedded carbon emissions. Carbon leakage is the risk that carbon-intensive production moves to countries with looser environmental rules.

CBAM was established by Regulation (EU) 2023/956 and complements the EU Emissions Trading System (ETS), the EU carbon market whose allowance prices set the CBAM certificate price. The idea is that a tonne of steel made outside the EU should carry a carbon cost comparable to one made inside it.

The levy covers imports in six carbon-intensive sectors: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. According to PwC, that amounts to approximately 570 products at the eight-digit level of the EU’s Combined Nomenclature customs codes.

CBAM at a Glance

CBAM covers cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, and its definitive regime began on 1 January 2026. Importers of less than 50 tonnes a year are exempt, except for electricity and hydrogen. Quarterly certificate prices for 2026 so far are €75.36, €75.28 and €82.32 per tonne of CO2 equivalent, and certificates go on sale on 1 February 2027.

Who Has to Comply

The legal obligation sits with the importer in the EU, not the foreign producer. Under the definitive regime, importers need prior authorisation from a national authority, must report the emissions in their goods, and must buy and surrender CBAM certificates matching those emissions.

Small importers are largely exempt. An amending regulation, Regulation (EU) 2025/2083, which entered into force on 20 October 2025, introduced a threshold of 50 tonnes of in-scope goods a year per importer. Below that, importers have no CBAM obligations. The Commission has said the threshold exempts 90% of importers, mainly small businesses and individuals, while keeping 99% of embedded emissions covered. The exemption does not apply to electricity or hydrogen, which are covered regardless of quantity.

Importers above the threshold must become authorised CBAM declarants. From 1 January 2026, only importers who had applied for that status could provisionally bring in CBAM goods until 31 March 2026; after that, confirmed status is required. National authorities can take up to 120 days to decide on an application, with a possible 30-day extension, and in Italy, for example, the authority assesses the company’s financial soundness, its internal controls and its ability to monitor and verify the emissions in its imports.

Customs declarations now carry CBAM codes, and a declaration with the wrong code will be rejected by the customs authorities of the importing member state.

How the Price Is Set

The certificate price is tied to the EU’s own carbon market. The Commission calculates it as the weighted average of the auction clearing prices of EU ETS allowances. In 2026, it publishes four quarterly prices, each applying to goods imported in that quarter. From 2027 onwards, the price will be published weekly.

Three of the 2026 prices are now known. The first-quarter price, published on 7 April, was €75.36 per tonne of carbon dioxide equivalent. The second-quarter price was €75.28 per tonne, and the third-quarter price was €82.32 per tonne. The fourth-quarter price is due on 4 January 2027.

Importers do not pay as goods cross the border in 2026. Certificate sales were postponed to 1 February 2027, when importers will buy certificates covering the emissions in goods imported during 2026. The obligation is delayed, not waived. Once certificates are on sale, authorised declarants must also hold certificates equal to 50% of the embedded emissions of their imports at the end of each quarter, down from 80%, while annual declarations must still cover all of them.

Two adjustments reduce the bill. The number of certificates is reduced to reflect the free allowances that EU producers still receive under the ETS, and importers can deduct a carbon price already paid in the country of origin, where they can provide evidence of it. The phase-in will last until 31 December 2034, with full application from 1 January 2035, as free allocation inside the EU is progressively phased out; the Commission’s trade portal refers to the system being fully implemented in 2034.

The legal obligation sits with the importer in the EU, not the foreign producer.

Why Data From Foreign Suppliers Matters

How much an importer pays depends heavily on how emissions are measured. Importers can report actual emissions, calculated from the producer’s own production data, or fall back on default values set by the Commission. Actual emissions must be checked by accredited verifiers; default values do not need to be verified.

The defaults changed with the definitive regime. During the transitional phase they were specific to each product but the same for every country. Now they are both product-specific and country-specific, according to PwC, and the difference is particularly visible for aluminium and for iron and steel.

The effect can be large. Using default values and the first-quarter price, Fastmarkets calculated that hot-rolled steel coil made by the blast furnace route would carry CBAM costs of €254.13 per tonne if imported from India, €148.03 from Algeria, €100.55 from Turkey and €94.14 from Vietnam. As PwC notes, a high default value can justify the cost of gathering and verifying real emissions data from a supplier; a low one may not.

The Politics Around the Levy

Several trading partners object to CBAM. At the COP30 climate summit in November 2025, developing countries including China, India and Saudi Arabia criticised it as protectionist, and Brazil proposed regular United Nations reviews of the mechanism, which the EU opposed. Russia requested consultations with the EU at the World Trade Organization (WTO), alleging the measure breaches global trade rules, a request the EU declined. WTO members including Brazil, China, India, Indonesia, Japan, South Korea, Taiwan and Turkey have made statements that CBAM is not consistent with the EU’s international obligations.

Other governments are building their own versions or linking to the EU system. The United Kingdom plans to introduce its own CBAM from 1 January 2027, and in November 2025 the Council of the EU authorised the Commission to negotiate linking the EU and UK carbon markets. Swiss exports to the EU are excluded from CBAM because Switzerland’s emissions trading system is linked to the EU’s.

The scope may also grow. In December 2025, the Commission proposed extending CBAM to nearly 200 additional downstream products, such as vehicle components and household appliances, from 1 January 2028. In September 2026, the European Parliament supported extending CBAM to steel-intensive products, and MEPs voted to remove a clause that would have allowed temporary exemptions in the event of price shocks.

Sources

• Carbon Border Adjustment Mechanism (CBAM), European Commission
• Start of the definitive period of the CBAM in the EU, European Commission Access2Markets
• CBAM in focus: Preparing for the definitive regime, PwC Switzerland
• CBAM 2026: obligations, deadlines and impacts for importers, Andersen Italy
• EU CBAM: what’s new and what’s next, CMS
• Price of CBAM certificates, European Commission
• The European Commission has announced the price of CBAM certificates for Q3 2026, GMK Center
• European Commission publishes first CBAM certificate price, Fastmarkets

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