Carbon Border Adjustment Mechanism (CBAM)
Overview Summary
The Carbon Border Adjustment Mechanism (CBAM) set by the EU Regulation 2023/956 is designed to place a carbon price on imported goods that are carbon‑intensive. The main purpose is to prevent carbon leakage—the risk that companies move production to countries with weaker climate policies—and to ensure that imported products face the same carbon costs as EU‑made goods.
Scope of Coverage
Primary Sectors impacted by the CBAM were initially selected for their high GHG intensity, exposure to international competition and the risk of carbon leakage:
– Cement
– Iron & Steel (including downstream steel products)
– Aluminium
– Fertilisers (nitrogen‑based fertilisers included)
– Electricity imports
– Hydrogen
Affected Entities
CBAM impacts a wide range of economic actors across EU and non‑EU supply chains. The following entities are required to comply with or are directly influenced by the mechanism:
– EU importers, no matter what size they are: trading companies, wholesalers, industrial manufacturers importing raw materials (steel, aluminium, fertilizers, cement, hydrogen)
– Non‑EU manufacturers and producers
– Customs operators and traders
– EU‑based industrial operators using imported raw materials: Construction (cement, steel, aluminium), automotive and machinery (steel, aluminium), packaging (aluminium), agriculture and agri‑food (fertilizers)
– Energy Market Participants (Electricity Imports)
Applicability & Compliance Timeline
2023–2025 → gradual introduction to align with the phase-out of free allowances under the EU Emissions Trading System (ETS) to support the decarbonisation of EU industry.
2026 → CBAM applies its definitive regime.
What This Means for Companies
Companies must prepare for CBAM by collecting verified, product‑level emissions data from non‑EU suppliers and ensuring they can meet mandatory reporting and CBAM certificate obligations. This requires establishing reliable data‑sharing processes, emissions calculation methodologies and verification workflows aligned with EU rules, which can be complex due to new customs, registry and auditing requirements imposed by the CBAM implementing acts. MCS can help companies set up compliant data systems, perform emissions calculations and support preparation for CBAM compliance (e.g., identifying covered imports, gathering emissions evidence and preparing internal processes for reporting and certificate management).
Status
Active
- *Entered into force on 1 January 2026