What Is CBAM?
The Carbon Border Adjustment Mechanism (CBAM) is a key EU policy designed to create fair competition for carbon-intensive goods. It aligns the carbon costs of imported products with those paid by EU producers under the EU Emissions Trading System (ETS). In practice, goods entering the EU from non-EU countries will face a carbon cost on their embedded emissions. This aims to prevent carbon leakage, where production moves to regions with weaker or no carbon regulations.
Why Was CBAM Introduced?
- Prevent carbon leakage: Without CBAM, some industries might relocate to areas with weaker emissions rules, undermining climate progress.
- Protect EU competitiveness: CBAM ensures EU manufacturers, who already pay under the ETS, are not undercut by cheaper, high-emission imports.
- Encourage global decarbonisation: By making carbon-intensive exports to the EU more expensive, CBAM motivates producers worldwide to adopt cleaner methods.
- Phase out free ETS allowances: CBAM complements the gradual removal of free allocations in carbon-exposed sectors.
Phases and Key Updates
Transitional Phase (1 October 2023 to 31 December 2025): Importers must report quarterly on embedded emissions for in-scope goods. No payments are required during this period.
Definitive Phase (From 1 January 2026 onwards): Importers will need to purchase CBAM certificates to cover emissions, with free ETS allowances gradually ending by 2034.
Recent Updates (2025): The EU introduced simplifications, including de minimis thresholds (e.g. exemptions below 50 tonnes per year), reduced administrative requirements, and streamlined reporting for smaller importers.
Who Does CBAM Affect?
CBAM affects importers to the EU, exporters selling to EU clients, and suppliers across global value chains. Sectors currently covered include iron and steel, cement, fertilisers, aluminium, hydrogen, and electricity, with potential expansion to chemicals, polymers, and other goods by 2030.
What Companies Need to Do
Businesses must:
- Collect, verify, and report accurate emissions data (using ‘real data’) across their supply chains.
- Register as authorised CBAM declarants by 2026.
- Purchase CBAM certificates reflecting the EU ETS carbon price.
- Shift towards lower-carbon suppliers and production technologies.
- Integrate carbon costs into business strategy and pricing models.
How Axis Green Supports CBAM Compliance
- CBAM Readiness Assessment: Identify exposure and understand your sector’s scope.
- Emissions Data Strategy: Build reliable systems for accurate measurement and supplier engagement.
- CBAM Registry Support: Manage registration and compliance documentation.
- Certificate Procurement: Plan purchasing and cost optimisation.
- Supply Chain Decarbonisation: Map and partner with lower-emission suppliers.
- Scenario Modelling: Assess exposure to future carbon prices and policy changes.
- Training and Monitoring: Build internal capability and maintain compliance.
Why Act Now?
Carbon regulation is accelerating and compliance is no longer optional. Acting early helps your business stay competitive, reduce exposure, and position for success in the low-carbon economy.
Axis Green helps turn CBAM from a compliance challenge into a strategic advantage, supporting your business in staying ahead of regulation and leading the transition to sustainable trade.
