What is CBAM? The 2026 Carbon Tax
Legislative Context
The Carbon Border Adjustment Mechanism (CBAM) is a pioneering regulatory tool introduced by the European Union (EU) to tax emissions embedded in carbon-intensive imports. Its primary objective is to prevent carbon leakage, which is when production shifts to regions with weaker climate policies, thereby increasing global emissions.
In other words, the EU simply wants to implement a comprehensive carbon price. To ensure fairness and competitiveness against lower-cost imports, this tax must apply equally to both domestic production and imports. To ensure that by 2026 emissions are being correctly calculated, global manufacturers are already required to report them –without any tariff being paid– to their EU clients, which is why a transitional period has been established starting from late 2023.
CBAM Who Must Report It?
CBAM applies to imported iron, steel, aluminium, cement, fertiliser, hydrogen, and electricity products, where the shipment value is equal to or greater than EUR 150. Each product is classified under a specific CN code. For the complete list, consult the official ANNEX 1 of CBAM Regulation or contact ClimEase for tailored guidance.
All European importers falling in this category must report the embedded emissions of their imports in their CBAM Declaration. During the Transitional Phase, lasting until 2026, CBAM reports must be submitted quarterly in the CBAM register specifically created by the EU. CBAM Declarants are divided into three groups:
- Importers lodging a customs declaration
- Importers indicating goods importation
- Indirect customs Representatives
CBAM Timeline: Key Dates to Know
October 1st, 2023
The CBAM reporting period begins, marking the start of a transitional phase where companies are required only to fulfil reporting obligations without paying for CBAM emission allowances.
October 31st, 2024
Importers must start declaring real supplier emissions, which may still be calculated based on any non-EU method.
April 30th, 2025
Importers must start declaring real supplier emissions based on the EU Method, hence according to the official CBAM communication template (excel).
July 31st, 2026
Opening of the CBAM certificate portal. The purchase can begin.
May 31st, 2027
Submission deadline of the first yearly 2026 CBAM report. All suppliers must by then have adopted the official EU Method for CBAM emission measurements. Suppliers also need their CBAM emissions to be 3rd-party verified by an accredited CBAM verifier. Together with the submission of this yearly CBAM Declaration, importers must also surrender the equivalent amount of previously purchased CBAM certificates, officially making CBAM the world’s first carbon tariff on imports.
How the 2026 CBAM tariff comes into place
For CBAM emissions imported in 2026, EU importers will be required to surrender CBAM certificates, which can be bought starting from July 2026. The price of these certificates will be based on the weekly average auction price of EU ETS allowances, ensuring alignment with the competitive conditions faced by EU manufacturers.
The EU ETS employs a benchmarking system to allocate its free allowances, giving more free allowances to sectors that are more difficult to decarbonise or factories with lower carbon intensity compared to their peers. Similarly, CBAM applies a benchmarking system to individual imported products. In fact, the CBAM tariff increases as the gap widens between the imported product’s embedded emissions and its CN code-specific benchmark. Free allowances under the EU ETS will be phased out proportionally to the phasing in of the CBAM tax (see graph below), thereby making the CBAM tariff for the same product and same emissions increase over the coming years:
Contact us to receive a detailed cheat sheet on the CBAM emissions formula as well as some product-specific CBAM Tariff forecasts.
The delayed release of specific CBAM benchmarks, expected around the end of 2025, will present significant challenges for CFOs in planning for 2026 finances and may push the search for green suppliers to the last moment.
Supplier emission calculation in short
Emission calculations for suppliers must be based on actual production volumes and fuel and electricity consumption data from each installation, process or production line. Under CBAM, certain emissions that are usually included in life cycle analysis (LCA) or product carbon footprint (PCF) methodologies—such as transport, heating or office-related emissions—are excluded. This means suppliers must focus specifically on CBAM requirements, as existing emission certifications will only be accepted until January 2025 (Q4/2024 report).
Starting in Q3 2024, at least 80% of the embedded emissions declared by importers must be based on actual data, with default values capped at 20% (the 80/20 rule). As Tier 1 suppliers typically contribute only a small portion of a product’s total emissions, they must collaborate closely with their own suppliers to meet the required 80% threshold. Failure to meet this threshold may result in fines for importers. More importantly, declaring CBAM emissions based on a high rate of default values would increase 2026 CBAM tariffs and reduce product competitiveness. This is because default values are set to be higher than average supplier emission data – to, in fact, stimulate supplier data disclosure. Importers and Exporters must therefore carefully weigh this risk against the involved operational supply chain outreach costs, which our software and CBAM-specialised support team can drastically decrease.
Furthermore, for the CBAM emissions caused in 2026, suppliers must obtain a 3rd party verification from a CBAM-accredited verifier to demonstrate compliance with the EU method. Our previous blog, How to Calculate CBAM Emissions, provides a detailed walkthrough for suppliers and importers.
ClimEase offers a CBAM-specialised software solution to simplify emissions calculation, supplier outreach, automate compliant CBAM reporting and assess the required financials needed for your company to take action now.
Conclusion
As the first comprehensive carbon tariff, CBAM marks a turning point in global trade and climate regulation. Businesses must adapt to its requirements, stay informed about legislative changes, and probably invest in tools to decrease administrative burdens.
At ClimEase, we provide such tool and much more. Get in touch with ClimEase today to ensure you’re prepared for CBAM’s full implementation in 2026.