From 1 January 2026, the EU Carbon Border Adjustment Mechanism moved from a transitional reporting phase to a live financial obligation. Importers of steel, aluminium, cement, fertilisers, hydrogen, and electricity must now purchase CBAM certificates to cover the embedded carbon in their goods. The UK follows in January 2027. This is no longer about awareness. It is about how much you will pay, and whether you are paying more than you need to.
CBAM is designed to ensure that imported goods carry the same carbon cost as goods produced within the EU. For importers, that cost is determined by the embedded emissions in the goods they bring in, multiplied by the prevailing EU ETS carbon price. The critical question is not whether you will pay, but how much. If an importer cannot provide verified actual emissions data from their supplier, they must use default values published by the European Commission.
These default values are intentionally conservative. They assume the highest realistic emissions intensity for each product and country of origin. On top of that, the Commission applies a punitive markup: 10% in 2026, rising to 20% in 2027 and 30% from 2028 onwards.
The financial impact is substantial. Industry modelling suggests that a mid-sized steel importer bringing in around 3,000 tonnes annually could face approximately £1.2 million in carbon costs under default values. A cement importer at 2,500 tonnes could incur around £1 million.
At volumes of 5,000 tonnes per year, typical for a mid-sized importer of steel or cement, the difference between default values and verified supplier data could amount to approximately £2 million in additional annual costs. These are not theoretical figures. They are the direct consequence of failing to establish a verified emissions data pipeline with your suppliers.
The single most impactful action any importer can take is to move from default values to verified actual emissions data. The savings are significant and immediate.
When a supplier provides verified emissions data that reflects their actual production processes, the embedded emissions figure is almost always lower than the conservative default. The difference translates directly into fewer CBAM certificates to purchase. In practice, importers who use verified data typically see a reduction of 20% to 40% compared to the default-value liability.
To illustrate: a 10,000-tonne shipment of grey clinker from a typical origin could face approximately €270,000 in CBAM costs under default emissions values. The same shipment with verified actual data from the producer could reduce that to around €120,000. That is a saving of €150,000 on a single consignment.
At scale, these differences move into seven-figure territory. And they compound year after year.
Non-compliance with CBAM is not a soft landing. The EU has set clear penalties under Article 26 of the CBAM Regulation:
• Failure to surrender sufficient CBAM certificates carries a penalty of €100 per tonne of CO₂ equivalent, adjusted for inflation.
• Persistent non-compliance can result in exclusion from importing CBAM-covered goods into the EU Single Market.
• Public disclosure of non-compliant importers is provided for under the regulation.
The UK CBAM, due to take effect from 1 January 2027, is expected to apply similarly stringent penalties, administered by HMRC.
The UK scheme covers aluminium, cement, fertilisers, hydrogen, and iron and steel. Unlike the EU scheme, it does not cover electricity.
CBAM certificate prices are directly linked to the EU Emissions Trading System. The EU ETS carbon price has fluctuated between €60 and €100 per tonne in recent years, and forecasts project it reaching €85 in 2026 and crossing into triple figures by 2027.
Longer-term projections point toward €126 per tonne by 2030.
At the same time, free EU ETS allowances for CBAM-covered sectors are being phased out between 2026 and 2034. As free allocations fall, the proportion of embedded emissions that importers must cover with CBAM certificates rises. The CBAM factor, the share of free allocation still deducted from the bill, is 97.5% in 2026, 95% in 2027 and 90% in 2028, and reaches zero in 2034, when importers bear the full cost.
This means that CBAM costs will increase every year through two compounding mechanisms: rising carbon prices and declining free allocation offsets. Importers who delay preparation will face progressively higher costs with less time to establish the verified data pipelines that could reduce them.
The EU CBAM currently covers six sectors: iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity. The iron and steel sector alone accounts for an estimated 88% of all CBAM certificate purchases, representing over 70% of total CBAM-exposed trade value.
The European Commission has proposed extending CBAM to approximately 180 downstream products from 1 January 2028, including machinery, vehicle components, domestic appliances, construction equipment, and metal fabrications.
The direction of travel is clear: CBAM will expand beyond raw materials into finished and semi-finished goods.
The UK CBAM starts on 1 January 2027 and covers five sectors: aluminium, cement, fertilisers, hydrogen, and iron and steel. Glass and ceramics were proposed but left out.
Map your exposure. Identify which of your imports fall within CBAM scope by checking their CN commodity codes against the published CBAM goods list.
Engage your suppliers. Establish data-sharing agreements with overseas suppliers to obtain verified actual emissions data. Suppliers in the European Economic Area and Turkey are generally well-prepared. Those in China and India may need practical support.
Model your costs. Calculate your projected CBAM liability under both default values and actual data scenarios. The difference is your addressable risk.
Register as an Authorised Declarant. For EU imports, registration on the EU CBAM Registry is required. Processing time is four to eight weeks. If you have not yet registered, apply immediately.
Build your MRV capability. Establish the monitoring, reporting, and verification systems that CBAM requires. This is not a one-off exercise — it is an ongoing annual obligation.