� CBAM �
Effective CBAM cost management: Strategic and financial implications
On October 1, 2023, the EU’ s Carbon Border Adjustment Mechanism( CBAM) came into effect. CBAM fundamentally changes global trade in CO2-intensive products. Since October 2023, importers of iron & steel products have to report embedded emissions in their products. Starting with imports in 2026, importers will also have to pay for the emissions contained in the imported products – a development with far-reaching implications for procurement, risk management, and supply chains. The potentially significant financial risks for producers, industry, and traders can be mitigated with forward-looking strategies.
By Simon Göß & Hendrik Schuldt, carboneer
At the end of February 2025, the EU Commission proposed changes to the CBAM regulation, which are not implemented yet, but will likely be adopted during this year. This article incorporates those changes where they are relevant.
The mechanism and scope of CBAM
CBAM aims to reduce the relocation of industries subject to the European Emissions Trading System( EU ETS) to regions with lower environmental regulations. In the EU ETS, companies at risk of carbon leakage receive free emission allowances based on their emission intensity relative to a sectoral benchmark. This mitigates the competitive disadvantage of carbon pricing within the EU. The allocation of free emission allowances in the EU ETS will be gradually phased out by 2034 while CBAM is phased. Protecting EU’ s competitiveness, CBAM currently covers six sectors: iron & steel, aluminum, cement, electricity, fertilisers and hydrogen. CBAMliable goods are classified using the Combined Nomenclature( CN) tariff numbers.
Until the end of 2025, importers or indirect customs representatives introducing CBAM goods into the EU are only required to report the embedded emissions in their products. They rely on producers in non-EU countries for the emission data. The definitive phase of CBAM begins in 2026: Starting then, importers have to either report verified emission data or use higher default values for imported goods. Regardless of the method, they must purchase CBAM certificates for the respective imported emissions. The price of CBAM certificates is linked to the price of emission allowances in the EU ETS, which currently trade between 70-80 euros per ton of
CO2 equivalent. Any CO2 price already incurred in the countries of origin can be subtracted, reducing the number of CBAM certificates to be surrendered. This mechanism aligns the CO2 price for foreign and domestic goods sold in the EU market.
Effective CBAM cost management
From 2026, authorised CBAM declarants must submit annual CBAM declarations instead of quarterly CBAM reports during the transitional phase. The CBAM declarations contain information about the CBAM goods imported in a calendar year and must be submitted by August 31 of the following year. Along with the declarations, importers must hand over CBAM certificates for each ton of imported emissions to the national authorities. The exact number of CBAM certificates depends on either verified emissions of importer products or default values with
12 Green Steel World | Issue 18 | June 2025