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

The grace period is over.

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

This matters directly to UKbusinesses that export steel, aluminium, cement, fertilisers, hydrogen, orelectricity into the EU. If your goods are in scope, your EU trading partnersare now paying a carbon price on them. How you respond to that — and how muchsupport you give those partners in meeting their obligations — willincreasingly 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 quarterlyreports on the embedded greenhouse gas emissions in their imported goods. Nocertificates needed to be purchased, and no carbon price was payable. Thetransitional phase was, in essence, a rehearsal.

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

•      Hold authorised declarantstatus, or have submitted an application for it, before importing coveredgoods. The deadline for initial applications was 31 March 2026.

•      Track and report theembedded emissions in all CBAM goods imported throughout 2026, using verifiedactual data from suppliers where available — or European Commission defaultvalues where not.

•      Purchase CBAM certificatesto cover those emissions, with certificate sales beginning 1 February 2027.Certificates are priced at the weekly average of EU ETS allowance prices.

•      Submit their first annualCBAM declaration by 30 September 2027, covering all goods imported during the2026 calendar year.

Quarterly reporting has ended. Therhythm 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 orless of CBAM-covered goods per calendar year are fully exempt from all CBAMobligations — reporting, authorisation, and certificate purchase. Thisexemption does not apply to hydrogen or electricity. The Commission will reviewthe threshold annually.

Delayed certificate sales

CBAM certificate sales have beenpushed back from 1 January 2026 to 1 February 2027. EU importers will thereforeacquire certificates in 2027 to cover their 2026 import liabilities. Thecertificate prices for the 2026 compliance year will be calculated usingquarterly average EU ETS allowance prices from throughout 2026.

Adjusted declaration deadline

The annual CBAM declarationsubmission deadline has been moved to 30 September (previously 31 May) of theyear following import. The first declaration — covering 2026 imports — istherefore due by 30 September 2027.

Reduced quarterly certificate holding requirement

Declarants previously needed tohold CBAM certificates covering 80% of embedded emissions in goods importedsince the start of the year, at the end of each quarter. This has been reducedto 50%.

Default values: a change importers should not overlook

The European Commission publishedrevised default values for embedded emissions in late 2025. The revision isimportant: default values were revised downward in terms of methodology, whichcounterintuitively increases cost exposure for importers relying on them.

Default values are now set at thehighest emission intensity observed among countries with reliable data for eachproduct type, or using region-specific benchmarks. For steel, aluminium, andiron, embedded emissions from precursor goods are counted by default, whileemissions from finishing processes are excluded.

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

The UK is not exempt — and linkage remains unresolved

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

Approximately £7 billion of UKexports annually are estimated to fall within CBAM scope. The UK government hasstated 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 ayear. In the interim, UK businesses exporting covered goods must provide theirEU customers with accurate embedded carbon data to support their complianceobligations.

What UK exporters need to do right now

If you manufacture or exportsteel, aluminium, cement, fertilisers, or hydrogen to EU customers, yourimmediate responsibilities are:

Understand your obligation to provide data

Your EU importer needs verifiedemissions data from you to complete their CBAM reporting accurately. Withoutit, they will fall back on default values — which may be significantly higherthan your actual emissions, making your goods less price-competitive.

Audit your production data

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

Respond to requests promptly

EU importers are under obligationto report. Delayed or incomplete data from UK suppliers creates compliance riskfor your customers and risks damaging commercial relationships that may bedifficult to recover.

Consider third-party verification

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

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

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