EU CBAM Has Entered Its Definitive Phase — What UK Businesses Must Do Now

The grace period is over.

After two years of transitional reporting — during which EU importers were required to measure and report embedded carbon emissions but faced no financial consequences — the Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026. From that date, financial liability is real.

This matters directly to UK businesses that export steel, aluminium, cement, fertilisers, hydrogen, or electricity into the EU. If your goods are in scope, your EU trading partners are now paying a carbon price on them. How you respond to that — and how much support you give those partners in meeting their obligations — will increasingly determine your commercial relationships.

What changed on 1 January 2026

During the transitional phase (October 2023 to December 2025), EU importers were required to file quarterly reports on the embedded greenhouse gas emissions in their imported goods. No certificates needed to be purchased, and no carbon price was payable. The transitional phase was, in essence, a rehearsal.

From 1 January 2026, the rehearsal is over. EU importers of CBAM-covered goods must now:

•      Hold authorised declarant status, or have submitted an application for it, before importing covered goods. The deadline for initial applications was 31 March 2026.

•      Track and report the embedded emissions in all CBAM goods imported throughout 2026, using verified actual data from suppliers where available — or European Commission default values where not.

•      Purchase CBAM certificates to cover those emissions, with certificate sales beginning 1 February 2027. For 2026 imports, certificates are priced at the quarterly average of EU ETS allowance prices. From 2027, the price is the weekly average.

•      Submit their first annual CBAM declaration by 30 September 2027, covering all goods imported during the 2026 calendar year.

Quarterly reporting has ended. The rhythm is now annual, but the data collection requirement is continuous —embedded emissions data must be tracked for every import throughout the year.

Key changes introduced by the Omnibus simplification package

Before the definitive phase began, the EU adopted a package of simplifications in October 2025 (Regulation EU2025/2083) that modified several aspects of the original CBAM legislation. These changes are now in force.

De minimis exemption

Importers bringing in 50 tonnes or less of CBAM-covered goods per calendar year are fully exempt from all CBAM obligations — reporting, authorisation, and certificate purchase. This exemption does not apply to hydrogen or electricity. The Commission will review the threshold annually.

Delayed certificate sales

CBAM certificate sales have been pushed back from 1 January 2026 to 1 February 2027. EU importers will therefore acquire certificates in 2027 to cover their 2026 import liabilities. The certificate prices for the 2026 compliance year will be calculated using quarterly average EU ETS allowance prices from throughout 2026.

Adjusted declaration deadline

The annual CBAM declaration submission deadline has been moved to 30 September (previously 31 May) of the year following import. The first declaration — covering 2026 imports — is therefore due by 30 September 2027.

Reduced quarterly certificate holding requirement

Declarants previously needed to hold CBAM certificates covering 80% of embedded emissions in goods imported since the start of the year, at the end of each quarter. This has been reduced to 50%.

Default values: a change importers should not overlook

The European Commission published revised default values for embedded emissions in late 2025. The revision is important: default values were revised downward in terms of methodology, which counterintuitively increases cost exposure for importers relying on them.

Default values are now set at the highest emission intensity observed among countries with reliable data for each product type, or using region-specific benchmarks. For steel, aluminium, and iron, embedded emissions from precursor goods are counted by default, while emissions from finishing processes are excluded.

The practical consequence: importers relying on defaults rather than verified actual data from their overseas suppliers are likely to face significantly higher CBAM costs than those who have invested in proper emissions measurement and verification. See our separate guide on default values versus verified data for a detailed breakdown of the cost implications.

The UK is not exempt — and linkage remains unresolved

Despite discussions between the UK and EU governments about a potential exemption or linkage arrangement between the UK ETS and EU CBAM, the EU has confirmed that the UK is not exempt. UK exporters of covered goods into the EU are subject to the same rules as any other non-EU country.

Approximately £7 billion of UK exports annually are estimated to fall within CBAM scope. The UK government has stated that ETS linkage — which could shield UK businesses from the carbon cost— remains a priority, but formalising that link is expected to take more than a year. In the interim, UK businesses exporting covered goods must provide their EU customers with accurate embedded carbon data to support their compliance obligations.

What UK exporters need to do right now

If you manufacture or export steel, aluminium, cement, fertilisers, or hydrogen to EU customers, your immediate responsibilities are:

Understand your obligation to provide data

Your EU importer needs verified emissions data from you to complete their CBAM reporting accurately. Without it, they will fall back on default values — which may be significantly higher than your actual emissions, making your goods less price-competitive.

Audit your production data

Do you know the embedded emissions intensity of your products? If not, begin a carbon accounting exercise across your production processes to establish a baseline figure.

Respond to requests promptly

EU importers are under obligation to report. Delayed or incomplete data from UK suppliers creates compliance risk for your customers and risks damaging commercial relationships that may be difficult to recover.

Consider third-party verification

Where actual emissions data is to be used in CBAM declarations rather than defaults, it must be verified by an accredited third party. The first verification includes an on-site audit and assessment against a 5% materiality threshold. Verification capacity is tightening — the earlier you engage a verifier, the better placed you are.

The window for preparation has narrowed considerably. 2026 data is already accumulating toward declarations due in September 2027. The earlier you act, the more control you retain over your cost exposure and your value to EU trading partners.

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