Europe – Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 – entry into force on 1 January 2026 of the financial part of the Carbon Border Adjustment Mechanism (CBAM)
1. General context and objectives of the regulation
As part of the European Green Deal and the legally binding objective of achieving climate neutrality by 2050, the European Union has strengthened its regulatory framework to reduce greenhouse gas emissions. One of the key instruments in this framework is the EU Emissions Trading System (EU ETS), which imposes a carbon price on the most emission-intensive industrial installations within the Union.
However, the gradual increase in the cost of carbon within the EU creates a risk of carbon leakage, i.e. the relocation of industrial production to third countries with less stringent climate policies. Such a phenomenon would paradoxically lead to an increase in global emissions while weakening the competitiveness of European industry.
To address both these environmental and economic challenges, the European Union established the Carbon Border Adjustment Mechanism (CBAM) through Regulation (EU) 2023/956 of 10 May 2023.
The CBAM aims to align the carbon price paid on imported goods with that borne by EU producers under the EU ETS, thereby ensuring a level playing field and encouraging third countries to reduce the carbon intensity of their production.
2. Scope and fundamental principles of the CBAM
2.1 Products and sectors covered
In its initial phase, the CBAM applies to a limited number of sectors considered highly carbon-intensive and exposed to the risk of carbon leakage, namely:
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Cement
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Iron and steel
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Aluminium
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Fertilisers
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Hydrogen
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Electricity
The mechanism covers both basic materials and certain downstream products, as defined by a detailed list of customs codes set out in the regulation.
2.2 Principle of carbon equivalence
The CBAM is based on a simple principle:
imports into the European Union must bear a carbon cost equivalent to that imposed on EU producers.
In practice, importers are required to declare the embedded CO₂ emissions of imported goods, calculated in accordance with harmonised EU methodologies. These emissions primarily include direct emissions generated during production and, for certain sectors, indirect emissions related to electricity consumption.
Where a carbon price has already been paid in the country of origin, this amount may be deducted, subject to justification and recognition by the European Union.
3. The transitional period (2023–2025)
Prior to full implementation, the EU legislator provided for a transitional period running from 1 October 2023 to 31 December 2025.
During this period:
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importers are subject to reporting obligations only;
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no financial obligations apply;
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companies must:
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report quarterly on imported quantities;
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calculate and disclose the associated CO₂ emissions;
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become familiar with the applicable methodologies and reporting tools.
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This phase is intended to enable a gradual learning process for economic operators, to test the robustness of the mechanism and to improve the overall quality of emissions data.
4. What enters into force on 1 January 2026
1 January 2026 marks a major milestone in the implementation of the CBAM: the end of the transitional period and the beginning of the fully operational phase, including binding financial obligations.
4.1 Obligation to purchase CBAM certificates
As of that date, any importer of CBAM-covered goods will be required to:
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purchase CBAM certificates;
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in an amount corresponding to the embedded CO₂ emissions of the imported products.
The price of CBAM certificates is indexed to the average weekly price of EU ETS allowances, thereby ensuring full equivalence between EU production and imports.
4.2 Annual declaration and surrender of certificates
Operators will be required to:
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submit an annual CBAM declaration;
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declare imported volumes and associated emissions;
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surrender the required number of CBAM certificates.
Robust control, verification and penalty mechanisms are предусмотрed in case of non-compliance, with financial penalties comparable to those applied under the EU ETS.
4.3 Recognition of carbon prices paid outside the EU
Where a producer in a third country has already paid a carbon price (carbon tax, emissions trading system, etc.), the importer may claim a corresponding reduction in the number of CBAM certificates to be surrendered, provided that:
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the mechanism is recognised as equivalent;
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the carbon price paid is effectively demonstrated and verifiable.
5. Interaction with the EU ETS and the gradual phase-out of free allowances
The introduction of the CBAM is closely linked to the reform of the EU ETS. Until now, certain industrial sectors have benefited from free allocation of emission allowances, specifically to mitigate the risk of carbon leakage.
From 2026 onwards, these free allowances will be progressively phased out, in parallel with the ramp-up of the CBAM, according to a staged timetable extending to 2034. This transition is intended to:
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avoid any double protection;
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strengthen the environmental and economic effectiveness of the carbon price signal;
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ensure overall coherence of EU climate policy.
6. Implications and impacts for companies
The entry into force of the CBAM on 1 January 2026 will have significant implications for importing companies, including:
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a potential increase in procurement costs;
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the need to collect reliable emissions data from non-EU suppliers;
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the integration of carbon costs into sourcing and purchasing decisions;
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reinforced regulatory compliance requirements.
In the longer term, the CBAM also represents a strategic lever, encouraging companies to favour lower-carbon supply chains and fostering technological innovation at global level.
7. Conclusion
The Carbon Border Adjustment Mechanism represents a major evolution in EU climate policy. By introducing, as of 1 January 2026, an effective financial obligation on imports of carbon-intensive goods, the European Union is taking a decisive step towards a decarbonised economy while preserving the competitiveness of its industry.
The CBAM is not merely a fiscal measure, but a structural policy instrument, expected to evolve and expand to additional sectors, and to play a central role in the EU’s climate and trade strategy.