From 1 January2026, the EU Carbon Border Adjustment Mechanism moved from a transitionalreporting phase to a live financial obligation. Importers of steel, aluminium,cement, fertilisers, hydrogen, and electricity must now purchase CBAMcertificates to cover the embedded carbon in their goods. The UK follows inJanuary 2027. This is no longer about awareness. It is about how much you willpay, and whether you are paying more than you need to.
CBAM is designed to ensure that imported goods carry the same carbon cost as goodsproduced within the EU. For importers, that cost is determined by the embedded emissions in the goods they bring in, multiplied by the prevailing EU ETScarbon price. The criticalquestion 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 valuesare intentionally conservative. They assume the highest realistic emissionsintensity 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 and30% from 2028 onwards.
The financialimpact is substantial. Industry modelling suggests that a mid-sized steelimporter bringing in around 3,000 tonnes annually could face approximately £1.2million in carbon costs under default values. A cement importer at 2,500 tonnescould incur around £1 million.
At volumes of 5,000 tonnes per year, typical fora mid-sized importer of steel or cement, the difference between default values and verified supplier data could amount to approximately £2 million inadditional annual costs.These are not theoretical figures. They are the direct consequence of failing to establish averified emissions data pipeline with your suppliers.
The single mostimpactful 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 theconservative 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-valueliability.
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 toaround €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-compliancewith CBAM is not a soft landing. The EU has set clear penalties under Article26 of the CBAM Regulation:
• Failure to surrender sufficient CBAM certificatescarries a penalty of €100 per tonne of CO₂ equivalent, adjusted for inflation.
• Persistent non-compliance can result in exclusion fromimporting CBAM-covered goods into the EU Single Market.
• Public disclosure of non-compliant importers isprovided 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 a slightly broader range of sectors, including ceramics and glass alongside steel, aluminium, cement, fertilisers, and hydrogen.
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 outbetween 2026 and 2034. As free allocations fall, the proportion of embedded emissions that importers must cover with CBAM certificates rises. The CBAM factor starts at 2.5% in 2026 and increases steadily every year until the full cost is borne by the importer.
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 already includes a broader initial scope than the EU, covering ceramics and glass in addition to the core sectors. Further expansion is anticipated following a post-implementation review in 2028.
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 toobtain 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.